24 FARM ACCOUNTING 



placed on the left or debit side to indicate specific types 

 of property received into the business. On the right hand 

 or credit side of Mortgage Payable and Notes Payable ac- 

 counts are placed the items of $700 and $300 respectively, 

 to indicate amounts owing by the business. 



It appears, then, that in opening a set of books, all 

 resources are placed on the left or debit side of the appro- 

 priate ledger accounts and all li<ibilifi<* on the right or 

 credit side. The difference is credited to the capital ac- 

 count of the proprietor. This last amount is really a lia- 

 bility of the business to the owner, or the owner's claim 

 against the property of the business. The claim of the 

 owner is, of course, a secondary claim to be settled after 

 the others have been paid. 



It should be noticed that in the transaction, just dis- 

 cussed, the sum of the amounts placed on the left or d hit 

 side of the various accounts is $5000 ($1000 Cash, $500 .Mr. 

 Bell, $1600 Horses, $1100 Cattle, $800 Equipment) and the 

 sum of those placed on the credit side is $5000 ($4000 Ai 

 nold's Capital, $700 Mortgage Payable and $300 Notes i 

 able). In other words, the sum of the debits resulting from 

 the transaction is equal to the sum of the credits. This 

 should be true o{ every transaction recorded in the books. 



The next transaction of Mr. Arnold's as given on page 14 

 is the payment of $300 to redeem his note held by the bank 

 and a payment of $6 for interest thereon. As for the $300 

 payment, it decreases a resource in the form of cash and 

 decreases a liability in the form of notes payable. Ac- 

 cordingly, the entries should involve these two accounts in 

 such a way as to show a reduction of $300 in each. The 

 bookkeeping form requires these to be made on the credit 

 or right hand side of Cash account and on the left hand 

 or debit side of Notes Payable account. (See pages 21 

 and 22.) 



If we were not required to conform to the universal 



