6 FARM ACCOUNTING 



28, 1917, as shown in Illustrations 2 and 3, that he is worth 

 $1000 more on the latter date than on the former. 



Upon closer examination of the two statements we no- 

 tice that the resources are exactly the same in every de- 

 tail, while the liabilities of $1000 at February 29, 1916, 

 do not exist at February 28, 1917. Evidently, Mr. Arnold 

 during the year has paid off the $700 mortgage on the 

 equipment and the $300 loan at the bank. How, then, do 

 his resources remain the same? He probably paid the 

 two obligations in cash. Why, then, is the cash balance 

 the same at the end of the second year as it is at the end 

 of the first? Is it not probably due to the fact that Mr. 

 Arnold, as a result of his farming operations during the 

 year, received $1000 in cash over and above his expendi- 

 tures for labor and other items, which $1000 he used to 

 pay off his existing liabilities amounting to $1000? In 

 other words, did he not make $1000 profit? This is the 

 most natural assumption as to what the transactions were 

 which resulted in the decrease of the liabilities at February 

 28, 1917, compared with February 29, 1916, without caus- 

 ing a change in the resources at the two dates mentioned. 

 A change in the resources occurred during the year, per- 

 haps several times, but the statement of resources and 

 liabilities does not show the changes or progress during 

 the year. It shows only the conditions at the close of a 

 year. Comparing it with the close of the preceding year 

 we see that the Net Worth is $1000 greater. 



If we are to form a general idea of what changes took 

 place during the year to cause the $1000 increase in Net 

 Worth, as reflected in the Statement of Resources and 

 Liabilities, it will be necessary to have further details 

 concerning the operation of Mr. Arnold's business. 



This brings us to the third reason, mentioned for want- 

 ing certain aggregate results of the year's operations 



