32 FARM ACCOUNTING 



ILLUSTRATION 7 



Loss AND GAIN STATEMENT PREPARED FROM ANALYSIS OF CAPITAL 

 ACCOUNT FOR THE YEAR ENDING FEB. 28, 1917 MR. ARNOLD 



Expense and Losses Incomes and Gains 



Rent $400.00 Milk sold $300.00 



Labor 300.00 Cora sold 1,200.00 



General expenses .... 300 .00 Oats sold 400.00 



Balance, gain for year 1 ,000 . 00 Miscellaneous Inc . . . . 100 . 00 



$2,000.00 $2,000.00 



This statement shows that Mr. Arnold made a net gain 

 of $1000 during the year. Accordingly his capital is 

 $1000 greater than at the beginning of the year. It has 

 been seen that his cash balance is exactly the same as at 

 the beginning of the year. These facts lead to a very im- 

 portant conclusion, namely, a gain during a year does not 

 necessarily mean an increase of cash on hand at the close 

 of the year; a loss during a year does not necessarily mean 

 a decrease of cash on hand at the close of the year. 



The question probably arises as to how we get the fig- 

 ures shown in the Loss and Gain Statement above. These 

 are obtained from an analysis of Mr. Arnold's Capital 

 account of Illustration 5. The items on the left side of the 

 Loss and Gain Statement, with the exception of the $1000 

 balance, are obtained from the left side of the account. 

 They represent decreases in capital. The items on the right 

 side of the statement are obtained from the right side of 

 the account. They represent increases in capital. For ex- 

 ample, the $300 for milk sold as shown in the statement 

 is obtained from the sum of the items on the right side of 

 the Capital account, labeled "milk." 



The sum of the items on the right side of the statement 

 is $2000, representing gross income or gross increase in 



