This booklet aims to provide relevant background information and guidelines for medical school teachers in clinical departments charged with assessing the clinical competence of undergraduate students. It starts by emphasizing the difference between clinical competence and clinical performance. An approach to defining what should be assessed is outlined. The technical considerations of validity, reliability and practicability are discussed with reference to the ward- or practice-based setting and to the examination setting. The various methods available to assess aspects of competence are described and their strengths and weaknesses reviewed. The paper concludes with a discussion of the important issues of scoring and standard setting. The conclusion is reached that the quality of many current assessments could be improved. To do so will require a multi-format approach using both the practice and examination settings. Some of the traditional methods will have to be abandoned or modified and new methods introduced.