24 BULLETIN 711, U. S. DEPARTMENT OF AGRICULTURE. 
region, to discuss intelligently their costs of production, especially the 
details. As a result, a feeling has arisen within and without the 
industry that a profitable field of endeavor would be the investigation 
of the basic principles which underlie costs and cost keeping and the 
preparation of a uniform cost sheet. Few question that a standard- 
ized cost-keeping system is practicable and would be of lasting value 
to the logging industry. 
DEPRECIATION. 
Until recently many operators followed the unwise and danger- 
ous practice of taking no account of depreciation. The method of 
handling this account is optional with the operators, no provision 
for depreciation being prescribed by law; but the passage of the 
Federal income tax law has made it desirable for all operators to 
write off on their books a certain amount. 
Depreciation is the shrinkage in value of an asset that results 
from its use. Lessening of the value of assets may be due to ordinary 
wear and tear, to physical deterioration, to inadequacy for the cur- 
rent needs of an operation, or to the exhaustion of available timber. 
The amount of such deterioration is charged against the operating 
profits, and so can be considered as an amount paid out of the pro- 
ceeds of the business. The best concrete illustration is a sinking 
fund withdrawn from the proceeds of the business at regular inter- 
vals, deposited in a special account, and used to pay off bonds as they 
become due. In National Forest stumpage appraisals depreciation 
is reckoned as if charged off and withdrawn from the business at the 
end of the year. It is a sum, prorated over every thousand feet of 
timber cut, which in the course of the operation pays back the re- 
duction in value of the fixed investments. 
The rate of depreciation varies widely with the nature of the 
investment. Improvements are stationary, and so can be used only 
where they are built. They include all buildings, wagon and pole 
roads, railroad grades, bridges, splash dams, etc. The rate of de- 
preciation on each improvement depends primarily upon the amount 
of timber which it can properly be used to log. When all of the 
tributary timber is removed, the improvements have no residual 
value. Improvements located with reference to large supplies of 
timber, like logging railroads, may have a very long life. Their 
rate of depreciation is correspondingly low. Equipment can be 
moved from place to place; so its depreciation depends primarily 
upon wear and tear, or the length of the ordinary working life. It 
includes tools, steam logging machinery, cables, railroad steel, rolling 
stock, etc. The working life given to different equipment in this 
publication is intended to represent current industrial experience in 
the region. 
