Why is "Forgetting to add purchases made during the year" a common mistake in Revaluation Depreciation?

Why it happens: Treating depreciation as just opening − closing. How to avoid it: Add purchases: depreciation = opening value + purchases − closing value. Omitting purchases understates the depreciation. Source: 9706 Examiner Reports

Why is "Reversing the formula (closing − opening)" a common mistake in Revaluation Depreciation?

Why it happens: Not thinking about value used up. How to avoid it: Depreciation is the value USED UP: opening + purchases (value had) − closing (value left). Source: 9706 Examiner Reports

Why is "Using the revaluation method for a single large asset" a common mistake in Revaluation Depreciation?

Why it happens: Applying it too widely. How to avoid it: It is only for numerous, low-value items. A single machine/vehicle uses straight-line or reducing balance. Source: 9706 Examiner Reports

Why is "Treating the closing valuation as the expense" a common mistake in Revaluation Depreciation?

Why it happens: Confusing the asset value with the depreciation. How to avoid it: The depreciation (the fall in value) is the expense; the closing valuation is the asset shown in the SOFP. Source: 9706 Examiner Reports

Why is "Using the wrong opening value in the second year" a common mistake in Revaluation Depreciation?

Why it happens: Not carrying the closing value forward. How to avoid it: The closing value of one year becomes the opening value of the next year. Source: 9706 Examiner Reports

Why is "Confusing the revaluation METHOD with the revaluation MODEL" a common mistake in Revaluation Depreciation?

Why it happens: Similar names. How to avoid it: The revaluation METHOD measures depreciation on small items; the revaluation MODEL (1.3.2/IAS 16) re-measures a non-current asset to fair value. Source: 9706 syllabus

Cambridge International A Levels Accounting (9706)

Revaluation Depreciation

0% Complete

Detailed Study Notes

Detailed notes on Accounting for Non-Current Assets for Cambridge International A Levels Accounting, covering key concepts, explanations, examples, and exam-focused revision points.

Revaluation Method of Depreciation — Cambridge AS & A Level Accounting 9706 Study Notes (2026-2028)

The practical method for lots of small, similar items — loose tools, small equipment, packaging. Instead of tracking each item, the business values the asset at the start and end of the year; the fall in value (allowing for purchases) is the depreciation. Learn the formula, when it is used, and its strengths and weaknesses.

At a glance

Revaluation method: value the asset at the start and end of the year; the fall (after adjusting for purchases) is the depreciation.
Depreciation = opening value + purchases during the year − closing value.
Used for numerous, low-value, similar items — e.g. loose tools, small equipment, packaging, crockery.
Avoids having to track individual items (impractical when there are many).
The closing value is an estimate made by the business (e.g. by inspection/valuation).
Advantage: simple and practical for many small items; disadvantage: relies on a subjective end-of-year valuation.

What you’ll learn

Mapped to the Cambridge International A Level 9706 syllabus (2026-2028).

1.3.2 — Calculate depreciation using the revaluation method (as one approach to measuring the cost of using assets).
1.3.2 — Identify when the revaluation method is the most appropriate.
Note: this is the revaluation METHOD of depreciation (distinct from the revaluation MODEL of measuring non-current assets).

How the revaluation method works

Depreciation = the drop in the asset's value over the year, after adding purchases.

The revaluation method is used when an asset is made up of many small items that are impractical to track individually (e.g. a workshop full of loose tools). Instead of depreciating each item, the business values the whole asset at the start and end of the year.

$\text{Depreciation} = \text{Opening value} + \text{Purchases during the year} - \text{Closing value}$

The logic: the value the business had (opening value plus anything bought during the year) less the value it has left at the year end must be the amount used up — the depreciation.

Example. Loose tools valued at $3,000 at the start; $1,200 of new tools bought during the year; valued at $3,400 at the end.

Depreciation = 3,000 + 1,200 − 3,400 = $800.

Value the asset at the start and end of the year.
Depreciation = opening value + purchases − closing value.
Used for many small, similar items (loose tools, packaging).
Avoids tracking each individual item.

See the full worked example for revaluation depreciation →

When the revaluation method is appropriate

For low-value, numerous items where item-by-item depreciation is impractical.

The revaluation method suits assets that are:

Numerous — too many items to record and depreciate individually.
Low in value individually — e.g. loose tools, small hand equipment, packaging materials, crockery and cutlery (in catering), and livestock.
Frequently bought, used up, lost or broken, so individual records would be a burden.

For such assets, applying straight-line or reducing balance to each item would be impractical and not worthwhile (materiality), so a single end-of-year valuation is used instead.

Contrast: for a single large asset (a machine, a vehicle), use straight-line or reducing balance — there it is practical and more accurate to track the individual asset.

Suits numerous, low-value, similar items.
Items often bought, used up, lost or broken.
Item-by-item depreciation would be impractical (materiality).
Large single assets use straight-line / reducing balance instead.

Strengths and weaknesses

Simple and practical, but the closing valuation is subjective.

Advantages:

Simple and practical for assets made up of many small items.
Avoids the cost and effort of recording and depreciating each item.
Automatically allows for losses and breakages (they reduce the closing value).

Disadvantages:

The closing valuation is an estimate — it depends on the business's judgement (e.g. by inspection), so it is subjective and could be manipulated.
It does not follow a systematic formula like straight-line, so it is less consistent year to year.
It is only suitable for low-value, numerous items — not for major assets.

Concepts: the method still applies matching (the value used up is charged as the period's expense) and prudence (the asset is not overstated), but its reliance on an estimate makes objectivity weaker.

Advantages: simple, practical, allows for losses/breakages.
Disadvantages: subjective closing valuation, less systematic.
Only suitable for low-value, numerous items.
Still applies matching and prudence; weaker on objectivity.

See the full worked example for revaluation depreciation →

Quick recap

Revaluation method: depreciation = opening value + purchases − closing value.
Used for numerous, low-value, similar items (loose tools, packaging, crockery).
Avoids tracking each item; a single end-of-year valuation is used.
Advantages: simple, practical, allows for losses/breakages.
Disadvantage: the closing valuation is subjective (weaker objectivity).
Large single assets use straight-line or reducing balance instead.

Memorise this

Verbatim phrases and definitions Cambridge mark schemes credit.

Revaluation depreciation = opening value + purchases during the year − closing value.
Used for many small, low-value items (loose tools, packaging) where item-by-item is impractical.
Main weakness: the closing valuation is a subjective estimate.

How it’s examined

Tested on Paper 1 and Paper 2 through short calculations (opening + purchases − closing), naming suitable assets, and explaining advantages/disadvantages (2-5 marks, point-based). Examiner reports note candidates forgetting to add purchases or getting the formula direction wrong.

Sources: Cambridge International AS & A Level Accounting 9706 syllabus (2026-2028); 9706 Paper 2 past papers & mark schemes, 2022-2024; 9706 Examiner Reports, 2022-2024. Last reviewed 2026-06-17.

Take this whole topic with you

Step-by-step worked examples — Revaluation Depreciation

Step-by-step solutions to past-paper-style questions on revaluation depreciation, written exactly the way a tutor would explain them at the board.

Question type:

1Basic revaluation calculation (3 marks)
Getting startedDirect calculation• 9706 Paper 1/2 style• revaluation, AO2
Question
Loose tools were valued at $4,000 at the start of the year. During the year$ 1,500 of new tools were bought. At the year end they were valued at $4,200. Calculate the depreciation. (3 marks)
Step-by-step solution
1. Step 1
  Depreciation = opening value + purchases − closing value.
2. Step 2
  = 4,000 + 1,500 − 4,200.
  $= 4{,}000 + 1{,}500 - 4{,}200$
3. Step 3
  = $1,300.
Answer
Depreciation = $1,300.
Examiner tip
Add purchases to the opening value, then deduct the closing value.
2No purchases in the year (2 marks)
Getting startedDirect calculation• revaluation, AO2
Question
Loose tools valued at $2,500 at the start were valued at$ 1,900 at the year end; no new tools were bought. Calculate the depreciation. (2 marks)
Step-by-step solution
1. Step 1
  Depreciation = 2,500 + 0 − 1,900.
2. Step 2
  = $600.
Answer
Depreciation = $600.
Examiner tip
With no purchases, depreciation is simply the fall in value.
3Find the purchases (4 marks)
Building confidenceMulti-step problem• revaluation, AO2
Question
Loose tools: opening value $3,200, closing value$ 3,500, depreciation for the year $900. Calculate the value of tools bought during the year. (4 marks)
Step-by-step solution
1. Step 1
  Rearrange: purchases = depreciation + closing value − opening value.
2. Step 2
  = 900 + 3,500 − 3,200.
  $= 900 + 3{,}500 - 3{,}200$
3. Step 3
  = $1,200.
4. Step 4
  (Check: 3,200 + 1,200 − 3,500 = 900 ✓).
Answer
Tools bought = $1,200.
Examiner tip
Rearrange the formula to make purchases the subject.
4Suitable assets (3 marks)
Getting startedIdentify & classify• revaluation, AO1
Question
State three types of asset for which the revaluation method of depreciation would be suitable. (3 marks)
Step-by-step solution
1. Step 1
  Loose tools in a workshop.
2. Step 2
  Small / hand equipment held in large numbers.
3. Step 3
  Packaging materials, crockery and cutlery (catering), or livestock.
Answer
Loose tools; small equipment; packaging/crockery/livestock.
Examiner tip
Suitable assets are numerous, low-value and similar.
5Effect on the financial statements (4 marks)
Building confidenceWord problem• revaluation, AO2
Question
Using the revaluation method, depreciation on loose tools is $1,100 and the closing valuation is$ 3,400. State where each figure appears in the financial statements. (4 marks)
Step-by-step solution
1. Step 1
  The depreciation $1,100 is an expense in the statement of profit or loss.
2. Step 2
  The closing valuation $3,400 is the value of loose tools shown as a non-current asset in the statement of financial position.
3. Step 3
  So the revaluation method gives both the period's expense and the closing asset value.
Answer
Depreciation $1,100 → expense (SOPL); closing valuation$ 3,400 → non-current asset (SOFP).
Examiner tip
Closing value is the asset figure; the fall in value is the expense.
6Two consecutive years (5 marks)
Building confidenceMulti-step problem• revaluation, AO2
Question
Loose tools: Year 1 opening $5,000, purchases$ 2,000, closing $5,500. Year 2 purchases$ 1,000, closing $5,200. Calculate the depreciation for each year. (5 marks)
Step-by-step solution
1. Step 1
  Year 1: 5,000 + 2,000 − 5,500 = $1,500.
2. Step 2
  Year 2 opening value = Year 1 closing value = 5,500.
3. Step 3
  Year 2: 5,500 + 1,000 − 5,200 = $1,300.
Answer
Year 1 $1,500; Year 2$ 1,300.
Examiner tip
The closing value of one year is the opening value of the next.
7Why use the revaluation method (4 marks)
StretchWord problem• materiality, AO3
Question
Explain why a business uses the revaluation method rather than straight-line for its loose tools. (4 marks)
Step-by-step solution
1. Step 1
  Loose tools consist of many small, low-value items that are constantly bought, used up, lost or broken.
2. Step 2
  It would be impractical to record and depreciate each item individually.
3. Step 3
  By materiality, the effort is not worthwhile for such cheap items.
4. Step 4
  A single end-of-year valuation gives a reasonable, cost-effective measure of the depreciation.
Answer
Loose tools are numerous and low-value; item-by-item depreciation is impractical, so a periodic valuation (materiality) is used.
Examiner tip
Link to impracticality and materiality for the explanation marks.
8Weakness of the method (4 marks)
StretchWord problem• evaluation, AO3
Question
Explain one weakness of the revaluation method of depreciation. (4 marks)
Step-by-step solution
1. Step 1
  The closing valuation is made by the business, often by inspection/judgement.
2. Step 2
  So it is subjective and not based on a systematic formula.
3. Step 3
  This makes the depreciation less reliable and open to manipulation (e.g. overstating the closing value to reduce the expense).
4. Step 4
  It is weaker on objectivity than straight-line or reducing balance.
Answer
The closing valuation is a subjective estimate, so the depreciation is less reliable and could be manipulated (weaker objectivity).
Examiner tip
The key weakness is the subjectivity of the closing valuation.
9Losses and breakages (4 marks)
StretchWord problem• revaluation, AO2
Question
Explain how the revaluation method automatically accounts for tools that are lost or broken during the year. (4 marks)
Step-by-step solution
1. Step 1
  Lost or broken tools are no longer present at the year-end count.
2. Step 2
  So they are excluded from the closing valuation, which is therefore lower.
3. Step 3
  A lower closing value gives a higher depreciation charge (opening + purchases − closing).
4. Step 4
  Thus losses and breakages are automatically reflected in the depreciation, without separate entries.
Answer
Lost/broken tools are absent from the closing valuation, lowering it and raising the depreciation — captured automatically.
Examiner tip
This is an advantage: losses/breakages need no separate recording.
10Choosing between methods (5 marks)
StretchWord problem• method choice, AO3
Question
A workshop owns one large lathe and a large quantity of hand tools. Recommend a depreciation method for each, with reasons. (5 marks)
Step-by-step solution
1. Step 1
  Lathe: a single, high-value asset → use straight-line or reducing balance (practical and accurate to track one asset).
2. Step 2
  If it loses value fast early → reducing balance; if used evenly → straight-line.
3. Step 3
  Hand tools: many small, low-value items → use the revaluation method.
4. Step 4
  Tracking each tool would be impractical (materiality), so a year-end valuation is used.
5. Step 5
  Conclusion: match the method to the nature of each asset — a formula method for the lathe, revaluation for the tools.
Answer
Lathe → straight-line/reducing balance (single asset); hand tools → revaluation (numerous, low-value).
Examiner tip
Match the method to whether the asset is a single large item or many small ones.

Model Answers — Revaluation Depreciation

High-scoring sample answers for revaluation depreciation on the Cambridge IGCSE paper, with examiner-style notes mapping each response to the mark scheme and assessment objectives.

Question 1
9706 Paper 2 style3 marks
Q (3 marks). Loose tools were valued at $6,000 at the start of the year. New tools costing$ 2,000 were bought. At the year end the tools were valued at $6,500. Calculate the depreciation for the year.
Model answer
Depreciation = opening value + purchases − closing value = 6,000 + 2,000 − 6,500 = $1,500.
Why this scores
Marking (point-based, 3). Correct formula (1); add purchases (1); answer $1,500 (1).
Question 2
9706 Paper 2 style2 marks
Q (2 marks). State two assets for which the revaluation method of depreciation is suitable.
Model answer
Loose tools and small/hand equipment held in large numbers (also packaging, crockery, livestock).
Why this scores
Marking (point-based, 2). 1 mark each — numerous, low-value, similar items.
Question 3
9706 Paper 2 style4 marks
Q (4 marks). Loose tools had an opening value of $4,500 and a closing value of$ 4,800. The depreciation for the year was $1,200. Calculate the value of tools bought during the year.
Model answer
Rearranging: purchases = depreciation + closing value − opening value = 1,200 + 4,800 − 4,500 = $1,500.

(Check: 4,500 + 1,500 − 4,800 = 1,200 ✓.)
Why this scores
Marking (point-based, 4). Rearrange formula (1); substitute (2); $1,500 (1).
Question 4
9706 Paper 2 style5 marks
Q (5 marks). Loose tools: Year 1 — opening $8,000, purchases$ 3,000, closing $8,400. Year 2 — purchases$ 2,000, closing $8,100. Calculate the depreciation for each year.
Model answer
Year 1: 8,000 + 3,000 − 8,400 = $2,600.

Year 2: opening value = Year 1 closing value = 8,400. 8,400 + 2,000 − 8,100 = $2,300.
Why this scores
Marking (point-based, 5). Year 1 $2,600 (2); carry closing to opening (1); Year 2$ 2,300 (2).
Question 5
9706 Paper 2 style4 marks
Q (4 marks). Using the revaluation method, loose tools have a closing valuation of $5,200 and depreciation for the year of$ 1,400. State where and how each figure is shown in the financial statements.
Model answer
The depreciation of $1,400 is charged as an expense in the statement of profit or loss for the year.

The closing valuation of $5,200 is shown as the value of loose tools (a non-current asset) in the statement of financial position at the year end.
Why this scores
Marking (point-based, 4). Depreciation = expense in SOPL (2); closing valuation = non-current asset in SOFP (2).
Question 6
9706 Paper 2/3 style5 marks
Q (5 marks). Explain why a business uses the revaluation method to depreciate its loose tools rather than the straight-line or reducing balance method.
Model answer
Loose tools consist of a large number of small, low-value items that are frequently bought, used up, lost or broken.

Recording and depreciating each individual tool under straight-line or reducing balance would be impractical and time-consuming, and by the materiality concept the effort would not be worthwhile for such cheap items.

The revaluation method instead measures depreciation as the fall in the total value of the tools over the year (opening value + purchases − closing value), which is simple, practical and automatically allows for losses and breakages (they reduce the closing valuation). So it gives a reasonable, cost-effective measure of the depreciation for this type of asset.
Why this scores
Marking (point-based, 5). Numerous low-value items (~1); item-by-item impractical / materiality (~2); revaluation simple + allows for losses (~2).
Question 7
9706 Paper 3 evaluation style5 marks
Q (5 marks). Discuss the main weakness of the revaluation method of depreciation.
Model answer
The main weakness is that the closing valuation is subjective. It is made by the business — often by inspection or estimate — rather than by a systematic formula like straight-line or reducing balance.

Because it relies on judgement, the depreciation figure is less reliable and could be manipulated: for example, overstating the closing valuation would reduce the depreciation expense and overstate profit and the asset, while understating it would do the reverse. This makes the method weaker on objectivity.

However, for the type of asset it is used on (numerous low-value items), this weakness is usually acceptable because the amounts are not material and a more precise method would be impractical. On balance, the method is fit for purpose for small items, but its subjectivity means it should not be used for material assets.
Why this scores
Marking (point-based, ~5). Subjective closing valuation (~2); less reliable / open to manipulation, weaker objectivity (~2); balanced conclusion that it is acceptable for immaterial items (~1).
Question 8
9706 Paper 2/3 style4 marks
Q (4 marks). Explain how the revaluation method automatically accounts for loose tools that are lost or broken during the year.
Model answer
Tools that are lost or broken are no longer present when the asset is valued at the year end, so they are excluded from the closing valuation, making it lower.

A lower closing value produces a higher depreciation charge (opening value + purchases − closing value). In this way, the value of the lost or broken tools is automatically included in the depreciation, without any separate entries — which is one of the method's practical advantages.
Why this scores
Marking (point-based, 4). Lost/broken tools absent from closing valuation (~2); lower closing value → higher depreciation, captured automatically (~2).
Question 9
9706 Paper 3 style6 marks
Q (6 marks). A restaurant owns its premises, kitchen equipment (several large appliances) and a large quantity of crockery and cutlery. Recommend an appropriate depreciation treatment for each, with reasons.
Model answer
Premises (buildings). A single, long-life asset → straight-line depreciation over its useful life (the building gives even benefit over many years; land within it would not be depreciated).

Kitchen equipment (several large appliances). These are individual, higher-value assets → use straight-line or reducing balance per appliance. If they lose value faster early and need more repairs later, reducing balance matches better; otherwise straight-line.

Crockery and cutlery. Numerous, low-value items frequently broken or lost → use the revaluation method (opening value + purchases − closing value). Tracking each piece would be impractical (materiality), and the method automatically allows for breakages.

Conclusion. Match the method to the asset: a formula method for the premises and large appliances, and the revaluation method for the many small items of crockery and cutlery.
Why this scores
Marking (point-based, ~6). Premises straight-line (~1.5); equipment straight-line/reducing balance with reasoning (~2); crockery/cutlery revaluation + materiality (~2); conclusion (~0.5).
Question 10
9706 Paper 2 style3 marks
Q (3 marks). Distinguish between the revaluation method of depreciation and the straight-line method.
Model answer
The revaluation method measures depreciation as the fall in the total value of numerous low-value items (opening value + purchases − closing value), relying on a year-end valuation.

The straight-line method charges a fixed, systematic amount each year ((cost − residual value) ÷ life) on a single identifiable asset, without needing a year-end valuation.
Why this scores
Marking (point-based, 3). Revaluation = fall in value of many small items (1); straight-line = fixed systematic charge on a single asset (1); valuation vs formula (1).

Key Formulae — Revaluation Depreciation

The formulae you need to memorise for revaluation depreciation on the Cambridge IGCSE paper, with every variable defined in plain English and a note on when to use it.

Revaluation method depreciation
$Depreciation = Opening\ value + Purchases - Closing\ value$
$Opening value$
valuation of the asset at the start of the year
$Purchases$
value of new items bought during the year
$Closing value$
valuation of the asset at the year end
When to use
For numerous low-value items (loose tools, packaging) valued periodically.
Example
4,000 + 1,500 − 4,200 = 1,300.

Key Definitions and Keywords — Revaluation Depreciation

Definitions to memorise and the exact keywords mark schemes credit for revaluation depreciation answers — sharpened from recent examiner reports for the 2026 Cambridge IGCSE sitting.

Revaluation method (of depreciation)
Examiner keyword
A method that measures depreciation as the fall in an asset's value over the year (opening value + purchases − closing value), used for numerous low-value items.
Opening / closing value
Examiner keyword
The valuation of the asset at the start (opening) and end (closing) of the year; the closing value of one year is the opening value of the next.
Loose tools
A typical asset depreciated by revaluation — many small tools that are impractical to track individually.
Materiality (link)
Examiner keyword
The concept justifying the revaluation method — it is not worth tracking and depreciating each low-value item separately.
Objectivity (link)
The concept the method is weaker on, because the closing valuation relies on the business's judgement.

Common Mistakes and Misconceptions — Revaluation Depreciation

The traps other students keep falling into on revaluation depreciation questions — taken from recent Cambridge IGCSE examiner reports and mark schemes — and how to avoid them.

✕Forgetting to add purchases made during the year
9706 Examiner Reports
Why it happens
Treating depreciation as just opening − closing.
How to avoid it
Add purchases: depreciation = opening value + purchases − closing value. Omitting purchases understates the depreciation.
✕Reversing the formula (closing − opening)
9706 Examiner Reports
Why it happens
Not thinking about value used up.
How to avoid it
Depreciation is the value USED UP: opening + purchases (value had) − closing (value left).
✕Using the revaluation method for a single large asset
9706 Examiner Reports
Why it happens
Applying it too widely.
How to avoid it
It is only for numerous, low-value items. A single machine/vehicle uses straight-line or reducing balance.
✕Treating the closing valuation as the expense
9706 Examiner Reports
Why it happens
Confusing the asset value with the depreciation.
How to avoid it
The depreciation (the fall in value) is the expense; the closing valuation is the asset shown in the SOFP.
✕Using the wrong opening value in the second year
9706 Examiner Reports
Why it happens
Not carrying the closing value forward.
How to avoid it
The closing value of one year becomes the opening value of the next year.
✕Confusing the revaluation METHOD with the revaluation MODEL
9706 syllabus
Why it happens
Similar names.
How to avoid it
The revaluation METHOD measures depreciation on small items; the revaluation MODEL (1.3.2/IAS 16) re-measures a non-current asset to fair value.

Revaluation Depreciation

Detailed Study Notes

At a glance

What you’ll learn

Quick recap

Memorise this

How it’s examined

Take this whole topic with you

1Basic revaluation calculation (3 marks)

2No purchases in the year (2 marks)

3Find the purchases (4 marks)

4Suitable assets (3 marks)

5Effect on the financial statements (4 marks)

6Two consecutive years (5 marks)

7Why use the revaluation method (4 marks)

8Weakness of the method (4 marks)

9Losses and breakages (4 marks)

10Choosing between methods (5 marks)

Revaluation method depreciation

Revaluation method (of depreciation)

Opening / closing value

Loose tools

Materiality (link)

Objectivity (link)

✕Forgetting to add purchases made during the year

✕Reversing the formula (closing − opening)

✕Using the revaluation method for a single large asset

✕Treating the closing valuation as the expense

✕Using the wrong opening value in the second year

✕Confusing the revaluation METHOD with the revaluation MODEL