1 BULLETIN" LIS, U. S. DEPARTMENT OF AGRICULTURE. 
This item therefore appears on the balance sheet as follows : 
Machinery $5,000 
Less reserve for depreciation of machinery : 500 
4,500 
The bookkeeper should, however, keep in mind in this connection 
the importance of distinguishing between repairs and improvements. 
An improvement signifies that which adds value to the property. 
This addition may, but does not necessarily, increase the earning 
power of the property. 
Hepalrs involve such expenditures as are necessary to keep the 
property to which they are applied in its original condition or ap- 
pearance. 
If any additions or improvements are made, they are chargeable. 
to the asset account affected. For instance, if a machine costing 
$1,000 is replaced by another costing $1,500. the machinery account 
should be debited with the cost of the new machine and an entry 
should be made crediting "machinery" account and charging "re- 
serve for depreciation " with cost of old machine. 
Repairs are chargeable against earnings. Thus, the first painting 
of a building is considered cost, while a subsequent one is simply for 
the purpose of maintaining it, and is chargeable to repairs. 
The following yearly rates of depreciation can be used in the 
above method of reducing the balance of the asset: 
Per cent. 
Brick and reinforced buildings 21 
Frame buildings well constructed 5 
Office equipment and fixtures 10 
Engines 7 to 12 
Boilers 10 
Shaftings, pulleys, and hangings 5 to 8 
Machinery 7 to 10 
Tools 25 
Tools should be limited on the books to half of their estimated life. 
By making the proper charges each year for depreciation, as out- 
lined above, the true value of the assets is not only shown, but pro- 
vision is made for the replacement of these assets, which is essential 
in such organizations as creameries, cheese factories, canneries, cot- 
ton gins, packing houses, etc., where a considerable amount of the 
assets are subject to wear and tear. 
DIVIDENDS. 
The generally accepted definition of a dividend is a sum set aside 
by formal action of the board of directors out of profits available, to 
be divided among the stockholders and members. The method of 
distribution will depend of course entirely upon the plan of organi 
