There are several distinct methods of calculating depreciation on the buildings;

1. By dividing the cost of the building by the number of years it is expected to last, and writing off each year an amount equal to the quotient, or by writing off some fixed annual sum arrived at after considering the facts of the particular case.

2. By writing off each year a fixed percentage on the diminishing values.

3. By writing off each year a fixed percentage on the original cost.

4. By adding to the cost its annual interest at an agreed rate, and at the same time writing off each year an amount which will reduce the value of the building to zero or to scrap value at the end of a given term; this is usually known as the "annuity plan."

5. By periodic appraisals of the buildings.

6. By following some of the recognized tables of depreciation; a method similar to 2.

The second method is probably the one most generally adopted, and mainly for two reasons:

First, it tends to equalize the charges of maintenance, as the heaviest deductions are made at the beginning when repairs are light, and diminish as the expense of repairs grows heavier.

Second, the requisite data for its calculations can always be quickly and easily obtained.

Whatever method is selected, the chief difficulty lies in determining the proper percentage to apply. Those in general use vary from 1 ½% for such buildings as stone churches, to 10% for frame tenements. An average figure would probably be about 5% for good frame buildings, and 2 ½% or 3% for brick, stone, or concrete structures. As a matter of fact, this question can only be settled by that which is the basis of good law and of good accountancy - common sense. It must not be forgotten that, while an insufficient amount may cause an unexpected loss, an excessive amount tends to create something in the nature of a secret reserve.