Substantially everything depreciates, and buildings are no exception, the rates varying according to the construction from 2% to 25% a year. Assume that this bank building costing $36,-000 will have a life of thirty years: That would imply that it depreciates at the rate of $1,200 a year, or $100 per month. Good accounting would require that a charge of $100 per month be made to show this depreciation. That is done by the following general ledger entries as at the close of each month:

At this rate, at the end of the thirty-year period, there would be $36,000 in the reserve for depreciation account, and the grand total of profits would have been reduced by exactly that sum. Assume that the building is substantially worthless at that time and that it is destroyed to make room for another; the entries to show that situation should be in effect:

By virtue of the accumulation in the reserve for depreciation account of the $36,000 the bank's assets have been conserved to that same extent. Foreseeing the need for a new building, the directors would doubtless have invested in desirable securities to cover the new building cost. At the proper time these would be disposed of to furnish cash for the new building which we will assume costs $50,000. The general ledger entries to cover the cost of the new building would be:

Circulating Notes Outstanding (36)

This account was explained, and the entries in it were illustrated under discussion of accounts No. 13 and No. 17 among the debit balances, so that there is no need of a repetition of these illustrations at this time.