CHAPTER II 

 OUTLAY AND INCOME 



19. Proprietary Accounts versus Specific or Valuation Ac- 

 counts. Modern accounting distinguishes two classes of 

 accounts, proprietary accounts and specific or valuation accounts. 

 Proprietary accounts deal with the proprietor or owner's in- 

 terest, and show what his outlay has been, the resulting income 

 already received and the balance which represents net capital. 

 These accounts show the owner as creditor of a business venture, 

 the credit representing his investments. Expenses are debited 

 and income or profits credited. Such accounts normally show 

 a credit balance. The credit items are the plus items of the 

 account. Dealing as it does entirely with outlay and income, 

 it records only actual transactions or past events. 



Specific or valuation accounts deal with the assets or goods 

 for which these expenses are incurred, and from which the income 

 is expected. In contrast to economic accounts, they determine 

 the value of these assets, and may thus introduce elements 

 derived from the future as well as the past ( 9). 



20. Capital Accounts. Outlay or expenditure of capital 

 is undertaken for one of two purposes. Either an exchange 

 is effected by which the proprietor receives goods or property 

 of equal value, or the outlay is in return for services and the 

 equivalent in value must be sought in the effect or results of 

 such services. 



In accounting, these two classes of outlay are rigidly sepa- 

 rated wherever it is possible to do so. The cost of tangible assets, 

 especially of those which have a more or less durable character 

 and permanent value, is entered in a capital account. This 

 account is corrected by entering deductions from cost for forms 

 of capital which depreciate in value and may finally become 

 worthless. This factor of depreciation is common to all forms 



