488 THE HANDBOOK FOR PRACTICAL FARMERS 



Depreciation on buildings and equipment, calculated at three 

 per cent of the former and ten per cent of the latter, is recorded 

 by showing the amounts on the right side of real estate and left 

 side of building expense accounts in the one case, and on the 

 right side of equipment and left side of equipment expense 

 accounts in the other case. 



Finding the profit or loss. — The profit or loss for the year is 

 obtained after taking another inventory at the close of the year, 

 in accordance with the following plan : 



Make two columns side by side headed respectively *' losses" 

 and ' '■ gains. ' ' In the ' 'losses ' ' column record the amount of any 

 balances of equipment expense, building expense, labor, general 

 farm expense, or any other specific expense or repair account. 

 In the *' gains" colmnn record the amount of any balances of 

 miscellaneous income or other specific income account. Then 

 proceed to enter all inventories of livestock, crops and house- 

 hold furnishings as of the close of the year on the right side of 

 the proper accounts, as cattle inventory on right side of cattle 

 account, corn inventory on the right side of corn account, and 

 so on. After recording such inventories in the accounts with 

 livestock, crops and household, the difference between the right 

 and left side of each is listed under ^ bosses" or *' gains" in 

 accordance with the following principle : 



If the left side of any crop or livestock or household account 

 is greater than the right, after including the inventory at the 

 close of the year, place the difference between the two sides of 

 the account in the colmmi headed ''losses." If the right side is 

 greater, place the difference in the ''gains column," writing the 

 proper title (cattle, corn, etc.) to the left of each amount. 



After listing all losses and gains as described above, the dif- 

 ference between the loss and gain columns is calculated. This 

 represents the net gain or loss of the individual for the year. 

 If the gains are greater, add the amount of the net gain to the 

 proprietor's capital as shoAvn in the proprietorship or capital 

 or net worth account. If the losses are greater, subtract the net 

 amount of the loss from the proprietor's capital. Such addition 

 of net gain to or subtraction of net loss from the net worth shows 

 the capital, proprietorship or net worth at the close of the year. 



Proof of the profits. — That the profit or loss calculated is cor- 

 rect may be proved by making a list of assets and liabilities as 

 they appear in the ledger, including inventories recorded for 

 livestock and crops. Thus, the difference between the two sides 

 each of cash, real estate, equipment and other accounts showing 

 assets, added to the several inventories of live stock, and crops 



