CHAPTER III 

 SUBDIVISION OF CAPITAL ACCOUNT 



Reason for Subdividing Capital Account. It has been 

 shown up to the present time how to "keep books " consist- 

 ing of only one book, the ledger, with accounts only for 

 each of the several classes of Resources and Liabilities, 

 including the Proprietor's Capital account. Under that 

 method the transactions of any business operated by a sin- 

 gle proprietor can be recorded, and statements of Re- 

 sources and Liabilities and Loss and Gain can be prepared. 

 If the transactions causing an increase or decrease in capi- 

 tal are very numerous, the preparation of a Loss and (Jain 

 Statement is rather tedious, for it requires considerable 

 work in analyzing the capital account of the proprietor. 

 It is principally for that reason that another method of 

 showing increases and decreases in capital is much more 

 common. It is based on the principle that an account 

 which requires much analysis in order to present data in 

 a usable manner should not be created in that way. In 

 order to avoid such analysis, separate accounts are used. 

 For example, under this latter method, an increase in capi- 

 tal due to the sale of corn is credited to Corn account 

 rather than to the Proprietor's Capital account; a sale 

 of oats is credited to Oats account; and expense for labor 

 is debited to Labor account rather than Capital account. 



In this way the total income from corn can be found 

 very easily from the Corn account without the necessity 

 of picking out "corn" items from the Capital account. 

 The total expense for labor can be found directly from the 



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