28 BULLETIN 865, U. S. DEPARTMENT OF AGRICULTURE. 
Another method of taking care of these expenses for repairs to machinery and equip- 
ment, as 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 Piant (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 Gain.) 
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. 
Toot 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 close 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. 
