40 FARM ACCOUNTING 



Labor account. In fact, the Loss and Gain Statement can 

 be prepared from the results obtained from the various 

 accounts showing expense and income. 



A Comparison of the Two Methods. A comparative 

 study of the two methods of treating transactions that 

 cause increases or decreases in capital tends to show the 

 advantages or disadvantages of each. For this purpose, 

 the transactions of Mr. Arnold are used as stated in narra- 

 tive form on pages 14 and 15. Since this different 

 method of recording increases and decreases in capital 

 does not change, in any material way, the other accounts 

 as Cash, Horses, etc., of Illustration 5, they are not repro- 

 duced here. 



The Capital account of Mr. Arnold is reproduced here 

 exactly as shown in Illustration 5 to assist in the compari- 

 son. 



When all increases and decreases of capital are entered 

 directly into the Capital account as in Illustration 5, the 

 account appears as in Illustration 8. 



Expense and Income Accounts. When increases and 

 decreases in capital are recorded in the appropriately 

 named accounts of income and expense, the group of ac- 

 counts presented in Illustration 9 is required to take the 

 place of Mr. Arnold's Capital account as shown in Illus- 

 tration 8. 



ILLUSTRATION 9 



EXPENSE AND INCOME ACCOUNTS AND CAPITAL ACCOUNT 

 Mr. Arnold's Capital 



I 



1916 



Mar. 1 Capital invest- 

 ed 14000 



Rent 



1917 



Feb. 21 Cash.. $400 



