52 FARM ACCOUNTING 



close it. In this specific instance, the credits exceed the 

 debits by $1000, so it is necessary to transfer $1000 to the 

 credit side of Mr. Arnold's Capital account. It is not re- 

 quired that the total debits should be transferred to the 

 debit side and the total credits to the credit side of Mr. 

 Arnold's Capital account. A transfer of the difference 

 between the debits and credits closes the Loss and Gain 

 account just as effectively and shows the net results in a 

 more concentrated form in Mr. Arnold's account. In the 

 case at hand the result is a net pain. If the result had 

 been a net loss, the debits in the Loss and Gain account 

 would have exceeded the credits before closing. The en- 

 try transferring the loss would then have been a credit 

 to Loss and Gain and a debit to Arnold's Capital account. 



After closing the nominal accounts into Capital account 

 through Loss and Gain account any balances remaining 

 in the ledger are balances of accounts representing re- 

 sources and liabilities. A statement of r s and lia- 

 bilities, then, can be prepared quite easily from the bal- 

 ances remaining in the ledger after closing the expense and 

 income accounts. 



Comparison of Results. From a study of Mr. Arnold's 

 Capital account as it appears in Illustration 8, when each 

 expense and income was entered on the debit and credit 

 sides respectively as they occurred; and from a further 

 study of it in Illustration 10 when only one entry was 

 made in his account at the close of the year for the amount 

 of the net gain, one may draw some conclusions concern- 

 ing the results. In brief, the result is the same. Mr. Ar- 

 nold's Capital account under the first method shows a bal- 

 ance brought down on March 1, 1917, of $5000, which is 

 the same balance brought down under the second method. 



Continuing the comparison of Mr. Arnold's Capital ac- 

 counts as reflected in Illustrations 8 and 10, it is seen in 

 each case that there is a credit entry of $4000 represent- 



