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BULLETIN" S65, U. S. DEPARTMENT OF AGRICULTURE. 



Another method of taking care of these expenses for repairs to machinery and equip- 

 ment, aa well as to buildings, is to set up a Reserve for Depreciation on both these assets 

 sufficient to cover all such expenses. This latter method is being recommended by 

 some accountants. 



Depreciation" on [Plant (M 5). 



Debit: 



Credit: 



1. At the close of the period with the 



1. With the debit balance at the close 



proportion of the annual reserve 



of the fiscal year. (Debit Loss 



set aside to cover the estimated 



and Grain.) 



wear, tear, and obsolescence on 





buildings and machinery and 





equipment. 





The periodical proportion of the wear and tear on the plant is an expense and should 

 be very carefully estimated. The question of the proper rate to apply as a charge 

 for depreciation for an entire plant is one that can hardly be covered by a general 

 statement, as local conditions are rarely comparable. In some instances a machine 

 may last five years; in others it may last hardly a year, depending upon its load and 

 care. The rate of depreciation will vary from 3 per cent in some cases to 20 per cent, 

 depending upon the kind of building and machinery in use. 



Tool Replacement (M 6). 



Debit: 



Credit: 



1. With the total amount expended for 



1. With the debit balance at the close 



small tools during the period. 



of the fiscal year. (Debit Loss 



. 



and Gain.) 



Inasmuch as the investment in small tools will remain substantially the same at all 

 times, it is suggested that in order to avoid taking an inventory and setting up a Reserve 

 for Depreciation on Tools, all purchases be carried direct to Tool Replacement ex- 

 pense. This method is believed to be much more simple and satisfactory than that 

 of maintaining a depreciation account as in the case of machinery and equipment. 



N. ADMINISTRATION AND SELLING. 



Express, Freight, and Drayage (N 1). 



Debit: 



Credit: 



1. With any cost of freight, express, 



1. 



With the debit balance at clc se of 



and drayage on inbound goods 





the fiscal year. (Debit Loss and 



when such an expense can not be 





Gain.) 



allocated to a particular inventory 







account. 







2. With any cost of freight, express, 







and" drayage on product shipped. 







All other charges for freight, express, or drayage should be charged direct to the 

 inventory account for the article purchased. 



