THE LEDGER - 23 



Analysis of the Entries, Without stating any conven- 

 tional rules, it is essential that the entries in the accounts 

 should be examined further and analyzed in such a way as 

 to lead to the conclusion that they are made in accord- 

 ance with some well defined customs, or principles. 



Taking up the first transaction presented on March 1, 

 1916, in Mr. Arnold's narrative of events as given on 

 pages 14 and 15, we find that Mr. Arnold invests cer- 

 tain properties in the business. In deciding on a way of in- 

 terpreting this transaction in the ledger, we must decide 

 what accounts are affected, and in what way they are af- 

 fected. Obviously, in this transaction, Mr. Arnold's Capi- 

 tal account is affected because he is contributing capital 

 to the business. Each one of the property accounts would 

 be affected in so far as they designate a specific kind of 

 property invested. Also, the accounts representing lia- 

 bilities to other parties would be involved, since they are 

 considered in the determination of the original capital 

 invested. 



In brief, this transaction gives rise to the opening entry 

 for the purpose of .opening a double entry set of books. It 

 is called double entry because of the twofold effect of each 

 transaction. This is illustrated in the following discussion 

 of entries. 



The net amount of Mr. Arnold's investment, $4000, is 

 placed on the right or credit side of his Capital account 

 and is offset by the entries to the property and liability 

 accounts which make up his investment. The item $1000 

 is placed on the left or debit side of Cash account, to show 

 cash received into the business. On the left or debit side 

 of Mr. Bell's account is placed the item of $500 to indi- 

 cate the investment of property which is really a legal 

 right to $500 worth of the property of Mr. Bell. Mr. 

 Bell owes the business $500. Horses, Cattle and Equip- 

 ment accounts have $1600, $1100 and $800 respectively 



