THE LEDGER 31 



It will be seen that the Statement of Resources and 

 Liabilities is the same as the one that was assumed as 

 being prepared from Mr. Arnold's books in the discussion 

 of the reason for keeping a record of business transactions. 

 (See Illustration 3.) 



ILLUSTRATION 6 



STATEMENT OF RESOURCES AND LIABILITIES PREPARED FROM 

 LEDGER ACCOUNTS FEB. 28, 1917 MR. ARNOLD 



Resources Liabilities 



Cash $1,000.00 To outsiders (none) 



Owing by Mr. Bell . . 500 . 00 Arnold's Capital $5,000 . 00 



Horses 1,600.00 



Cattle 1,100.00 



Equipment 800.00 



$5,000.00 $5,000.00 



Recalling that Arnold had $1000 in cash at the begin- 

 ning of the year (see Illustration 2), the question arises 

 now, as it did then, "How can Mr. Arnold pay off $1000 

 that he owes and still have the same amount of cash at the 

 close of the year as he did at the beginning ? ' ' The answer 

 is, that he did change his cash balance several times during 

 the year, but that the increase in cash from sale of prod- 

 ucts was just enough to offset the decrease due to payments 

 for expenses, mortgage and note. 



Likewise, Mr. Arnold changed his capital several times 

 during the year, but the net result only is shown in the 

 Statement of Resources and Liabilities. 



One must look to the Loss and Gain Statement of Illus- 

 tration 7 to find out more about the changes in capital and 

 the reasons therefor. 



