8. Service Hours Method

Under this method the expected “service hours or running
time is considered as the basis of charging depreciation. For example, a locomotive
engine renders effective service for some definite running hours. In case of aircrafts
“flying hours” are pre-calculated.

Depreciation per Service Hour = Total Cost —Residual Value / Total Running time or Service hours


And Annual Depreciation = Rate of depreciation per hour x service hours rendered during the period.