I'll start off with probably the most important qualifier related to this topic- there is no perfect process when it comes to evaluating bias and value in ancient sources, and ideas of how to go about doing that are continuously evolving. Somebody from 1814 would likely give very different answers on this subject than myself, and accordingly in 2214 you'll likely find the same.

With that established, I'm very happy to talk about the general principles that I tend to use. However, I will also point out differences that involve different types of documents, as whilst your clarifying text said 'author of an ancient book', your initial question said 'historical sources/documents', and those are not always the same thing.

To clarify, when you talk about the author of an ancient book, you're generally then talking about literature i.e poetry and prose artworks. This is a different exercise to somebody having an inscription engraved on a tomb, or a papyrus recording financial affairs, or a private letter sent from a King to one of his vassals, but all of these can also function as historical sources as well.

However, I'll begin with literature as that's the area you are most likely to personally encounter. When it comes to ancient texts of all kinds, one of my first instincts is to assume that all such sources lack objectivity, all of them. It is sometimes the case that a text may be relatively objective on a particular point, or regarding particular events- that's difficult to predict ahead of time, and usually that conclusion can only be reached by comparison with others. In ancient Greek history, where we're aware of many more literary texts than have actually come down to us, this can be something of a problem- limited pools of comparison. If we can directly establish a difference in narratives and how an issue is dealt with, that's tremendously helpful. But since in a number of ancient contexts this is not seriously possible, it is unfortunately true that one sometimes has to go with gut instinct and a sense of plausibility.

How you evaluate plausibility is another issue in itself. Knowing the background of the author, their relationship to their subject, and their audience; this is what I'd argue is the building blocks of establishing what is plausible within a text. You may also find slightly more indirect supporting evidence that indicates something as more or less plausible, which can include archaeology. Claims that seem embarrassing to the author's point of view are often considered more plausible, because it's a reasonable principle that fabrications or made-up elements are not going to be stuff that makes the author, or their community, or their heroes look bad. There's also one of my favourites- incidental information, which is stuff that's mentioned almost casually because it's so fundamentally obvious to the author and the audience that it's not actually the focus of the conversation. This is where you tend to find bits and pieces that the author didn't regard as historical information, but we in our incomplete observation of these ancient periods do. This area of plausibility, as you might imagine, is never exact and is frequently debated.

Now, this is a general point about ancient textual evidence but it certainly applies to ancient literature- the valuable information that can be taken from a text is not solely that of working ut narrative events. In other words, Herodotus' value is not solely determined by what he can tell us about the events of the history he describes. His text is not a straightforward historical work as we'd understand it anyway, and a number of his claims are likely (or known to be) incorrect. But the texts themselves are historically important, and the authors behind them. Herodotus' work is also valuable as representing the perspective of a Greek in the early Classical era (the Classical era being c.480-323 BC) from Anatolia, rather than the plethora of Athenians that we have from the rest of that period or Romanised Greeks from afterwards. Many of the myths that he espouses are to be ignored as truthful events, but still provide us with information about stereotypes, mythology, cultural history, and how certain cultures wished to present themselves to the world. Even a piece of literature that is directly lying or misrepresenting the truth (so far as we can observe it) is thus still useful for what it tells us about the author, and about the environment they were operating in.

In other words, there is no ancient textual source that is totally valueless. But some are better at providing useful information in certain areas.

When it comes to other ancient texts that are not literary, they can often only provide much more specific information. But that does not stop them being valuable, and are also what sometimes contradicts the literary sources. Each genre of text in a particular ancient society or state tends to have different types of useful information to impart, and it's difficult to summarise all of those at once as it varies from culture to culture. Suffice to say that when we have access to them, truly private correspondence tends to have a lot to say to us that we consider accurate. The main reason for this is that whilst they still have an audience, their aim is rarely to entertain and is generally to impart accurate information to the receiver very quickly. Cultures that used media like papyrus and parchment, in ancient periods, rarely tend to have these articles survive. But in those cultures who used clay tablets as their preferred medium, we actually have a number of genuinely private letters. Some of them are extremely sensitive, as they are between Kings and their governors, or between multiple Kings, or are diplomatic instructions, or are calling for help in an emergency. Thus, within ancient cultures, there tends to be much more certainty over events that these sorts of private letters can inform us about, as opposed to events where we solely have an authored literary account. This also tends to give historians of those cultures a lot more material to work with generally; biographies of Hammurabi, King of Babylon during part of the 18th century BC are working with more certain information than biographies of Alexander the Great from the 4th century BC, and it's because Mesopotamians recorded their information primarily on clay tablets rather than papyrus, parchment or similar.

Likewise, economic documents when we find them are very boring but very very rarely a source of fabrication. The goal of economic documents, like a supply list, or a record of a loan, or an survey is to generate accurate information for those who have need of the document. The disadvantage of economic documents is that they are extremely dry, and also can sometimes be difficult to fully translate if you are not in a position to recognise lots of proper nouns and official terminology rarely encountered elsewhere- it's no good being able to read that somebody took delivery of 7 madeupweightii of flour if you do not know how much a madeupweightii actually weighs. But they can often provide very detailed insights into ordinary lives in a way that a big historical narrative often can't. Economic documents are accordingly among the most directly reliable sources we have, but their problem is that they usually provide very specific information, and getting to the point of understanding exactly what it's telling you is not always easy.

Then you come to inscriptions and graffiti. This is the area of most unpredictability and variability from culture to culture, and between different examples within the same culture at that. This is because they are done for so many different reasons- an inscription on an ordinary person's tomb is totally different to graffiti, and both are different to a royal inscription. We then come onto the same territory as with literary texts- who wrote it, why did they write it, who is intended to read it. In the case of the royal inscriptions it can be very tricky indeed to then work out what is actually direct information (but even the ones that are likely inaccurate are informative for the reasons I mentioned before). They often have more to say about how that king, or state wanted to present themselves as they do about historical events. Graffiti and tomb inscriptions, to keep using those two examples, do not usually directly impart us with narrative history. But they are some of our best sources to gain insight into wider pictures of society than that provided by literature- comparing Roman graffiti to Roman literature is an interesting exercise, for example. Likewise, the tomb of an ordinary weaver is not usually going to tell you about whether or not the Romans conquered the city of Somewhereinasiaopolis 400 miles away, but it can usually tell you a lot about that weaver, tell you a lot about weavers in that society in general, and about how an ordinary family might want to present themselves.

To finish, evaluating ancient sources is difficult, which is why it's totally understandable that you'd want to ask about it. It is something that, when it comes down to it, really needs some kind of training to really get your head around. And even then, as I said at the start, it's not an exact science and how we approach this sort of activity changes constantly. There are many cultures with textual sources, each with their own changes over time and little quirks. But speaking for myself, I've explain a number of methods that I'll use to evaluate some particular ancient sources that I deal with a lot. A full explanation of any one of these would be a book's worth, so if there's anything you'd like me to expand on I'll do my best as I've been summarising a lot of different things.

I was always taught to evaluate sources through CATPAD.

C-Content - What's in the source? How reliable are the facts? Do other historians agree? Does it follow a logical argument?

A-Author - Why is the source being written? Does it have a motivation? Is it politically motivated?

T-Tone - This one is more vague. It's about the style of the writing. How does the author write? Is it aggressively pushing one thing? Hard to describe really.

P-Purpose - This one synchronises with the author evaluation. Who is writing it and why? Is it the government trying to maintain order? etc.

A-Audience - Who is it intended for? Does the style of writing reflect who it is intended for? I.e writings intended to fanaticise a group will be more inflammatory, the opposition murdered babies etc.

D- Date - Is it contemporary or secondary? If it is contemporary think about why it's being written, and what limitations the author would have suffered writing at the time.

I find it's a basic but effective way of looking at sources, especially if you don't have much background in reading history.

I wouldn't normally touch the theory of historical methodology, but as it happens I was reading a book the other day that dealt with the subject unusually fully (unusual for a book by a "classicist", that is) -- Jonathan Hall's History of the Archaic Greek World, ca. 1200-479 BCE, 2nd edition. In his second chapter he outlines the following tests for reliability of ancient sources:

1. Temporal proximity. An eyewitness source is great (though very rare); a source that's close in time is nice, but that's not the real point of this test. The real point is that data gleaned from isolated references in sources post-dating the events they describe by centuries are not as good as data coming from a dedicated monograph on the subject.

   But I'd say Hall has misnamed this test: traceability in source criticism is really what it's about. Diodoros writing a lengthy, well-researched account of the Persian Wars 400 years after they happened is one thing; an allusion made in passing by Cicero is quite another. In the former case we can make an awful lot of deductions about the material Diodoros was drawing on. In the latter, it may just be an urban legend. Or another example: Plutarch and Pausanias lived in the same century, but we can often tell that Plutarch's choice of source material was hopelessly bad, while Pausanias' is very often rock-solid. So I don't think this is really about anything temporal.

2. Contextual fit. How well the source fits the period it's describing, the period in which it was written, other writings by the same author, etc. (Where Plutarch has value, it's mainly on the basis of this test! -- though sometimes it's because we know things that Plutarch didn't, which make his stories more plausible than they might otherwise seem.)

3. Intentionality. What it is that the source wants to communicate, what presuppositions are taken for granted, etc. Hall's example is Herodotos' and Thucydides' oddly emphatic insistence that it wasn't the assassination of Hipparchos that ended the tyranny in 6th century Athens, but the Spartans' expulsion of Hippias in 510: either (1) they're working to dispel what they perceive as an urban legend, or (2) they both have an agenda of their own. Either way, they both indirectly reveal what popular opinion on the matter was.

This isn't as fine-tuned as the six-part test that /u/treebalamb describes, but it's for a specific field where the nature of the sources we have is fairly tightly constrained. I find it a nice boiling-down, anyway.

When I was in school, I dealt with the medieval time period. Not lot of hard evidence for anything(some stuff, but mostly not)

Treebalamb pretty much nails it.

i will add only a few other things. how much of the book can be validated by archeology(basically, if it says there was a battle here and we find 1000 bodies of the time period)

or validated by cross referencing across other sources, usually "opposing" nations/ideal/religion work really well.

http://en.wikipedia.org/wiki/Mercia

This is some of what i studied. So it is interesting to have pagan and christian states writing about each other. so, they might both call each other bad but if they both say a battle happened - it probably happened.

Well, I WAS going to throw my two bits in, but now - after all the great replies - it would seem pedantic and superfluous.

Suffice it to say that a) it is not a perfect system and b) peer review tends to keep us honest and c) history relies upon a lot of other disciplines (anthropology, geography, archeology, etc.) to help refine what we know, what we don't know, and what we can surmise.

We were taught in 7th Grade that firstly look at who was writing it, what their motive for writing it was, how were they connected to the event, who they were writing for and when they wrote it.

Secondly try to find any other sources from the same time and/or corrborating evidence such as physical artifacts.

forgive me if this next bit is not an apropriate comment for this subread;

But I am deeply troubled that this is not taught in school history class. This should be the number one thing to learn for history. History is not name the 12th President or the year california joined the union off by heart but critical analysis is vital.