SO FARM ACCOUNTING 



bookkeeping effects resulting from transactions involving 

 cash, horses, etc., respectively. 



Debit and Credit Balances. Before using the results of 

 the ledger accounts it is necessary to find the balance of 

 each one. 



The balance of an account is the difference between the 

 sum of the debits and the sum of the credits. If the sum 

 of the debits is greater than the sum of the credits, the ac- 

 count is said to have a debit balance. If the sum of the 

 credits is greater than the sum of the debits, the account is 

 said to have a credit balance. If the sum of the two sides 

 is equal, the account is in balance. 



Thus, on pages 20-22, Cash, Mr. Bell, Horses, Cattle and 

 Equipment accounts have debit balances; Mr. Arnold's 

 Capital account has a credit balance, and Mortgages Pay- 

 able and Notes Payable accounts are in balance. 



From a knowledge of the nature of resources, compared 

 with the observation just made concerning balances of ac- 

 counts, one can see that, in this case, all accounts repre- 

 senting resources have debit balances, and those represent- 

 ing liabilities (including liability to the proprietor) have 

 credit balances. When accounts are in balance they do not 

 represent either resources or liabilities. It can be stated 

 as a rule, that all resources are represented by debit bal- 

 ances in ledger accounts, but it is pointed out later that 

 all debit balances are not resources. Likewise all liabili- 

 ties are represented by credit balances in ledger accounts, 

 bwt all credit balances are not liabilities. Up to the j >?>- 

 ent time, however, all accounts considered have represented 

 either resources or liabilities, including the Capital account. 



Statements Prepared from Ledger Accounts. From 

 those ledger accounts, then, we are able to prepare a State- 

 ment of Resources and Liabilities, and a Loss and Gain 

 Statement, as in Illustrations 6 and 7 respectively. 



