- oe ee ee ee ee 
A SYSTEM OF ACCOUNTING FOR COTTON GINNERIES. 23 
BUILDINGS (B2). 
' 
Debit: 
1. With the cost of the buildings as 
shown by the balance sheet at the 
time of opening the books. 
_2. With the cost of all new construc- 
tions. 
3. With the cost of all additions or 
alterations when such cost in- 
creases the utility. 
4. With the cost of replacements in 
excess of the cost of the part re- 
placed. 
See Reserve for depreciation on buildings. 
Credit: 
1. With the total cost of any buildings 
sold. 
2. With the cost of parts of buildings 
destroyed or replaced. (Debit 
Reserve for depreciation on build- 
ings. ) 
As the land and buildings are frequently purchased at the same time, the purchase 
price will include both assets. 
Care must be exercised that a proper division of these 
assets is made, as depreciation is to be figured only upon the buildings. 
MACHINERY AND EQUIPMENT (B3). 
Debit: 
1. With the original cost of the ma- 
chinery and equipment as shown 
by the balance sheet at the time 
of opening the books. 
2. With the cost of subsequent pur- 
chases of machinery and equip- 
ment including freight or express 
on same, installation, etc. 
3. With the cost of alterations and im- 
provements increasing the efli- 
elency or the capacity of the 
plant. 
Credit: 
1. With the cost value of machinery o 
equipment sold, discarded, 
destroyed, at which time debit 
Cash account for the amount 
realized, if any, and debit Re- 
serve for depreciation on ma- 
chinery and equipment for the 
difference between the cost value 
and the amount realized. 
The balance of this account represents the cost of machinery and equipment in use. 
This account should be charged with the costs of all items of machinery and equip- 
ment which, under ordinary circumstances, will last three years or more, such as 
engines, boilers, motors, etc. 
When any article which has been charged to this account 
is to be replaced the asset account should be credited with the cost value. placed on 
this item at the time of opening the books or at the time of purchase. 
Example: A 
piece of machinery costing $100 was replaced by a new one costing $150, cash Pcs 
paid for the new article, the following journal entry would be made: 
Debit. 
Credit. 
$100 Reserve for depreciation on machinery and equipment. 
Machinery and equipment. . 
By cuales as ole aye) ora ee cya a $100 
(For discarded machine corns $100.) 
150 Machinery and equipment. 
Bank account -“e .. == 22. 
(For purchase of new machine.) 
To the invoice value of any machinery purchased should be added any expense 
incurred, such as freight or installation charged. 
In case the amount set aside as 
reserve for depreciation is not sufficient to cover the original cost of the item replaced, 
the loss sustained should be charged to an account specifically captioned. 
