SUBDIVISION OF CAPITAL ACCOUNT 53 



ing his capital on March 1, 1916. Except for the bal- 

 ances at the beginning and at the close of the year, the two 

 capital accounts in question do not have any other figures 

 in common. The one in Illustration 10 has an entry of 

 $1000 on the credit side under date of February 28, 1917. 

 This entry takes the place of all the entries made during 

 the year, as shown in detail in Illustration 8. In other 

 words, using Illustration 8, the sum of all the credit en- 

 tries, except the opening balance of $4000, minus the sum 

 of all the debit entries, representing decreases in capital, 

 gives $1000 as a result. Under this method all increases 

 and decreases in capital are recorded in the Capital ac- 

 count. Under the method used in Illustration 10, all in- 

 creases and decreases in capital are recorded in specially 

 named accounts to indicate the nature of the income or 

 expense. Then the results of these accounts are trans- 

 ferred to the Capital account through the Loss and Gain 

 account, so that only the net increase in capital is entered 

 in Mr. Arnold's Capital account. 



This latter method is the one which will be followed 

 more often in practice and in subsequent problems, exer- 

 cises and discussions in this book. It gives an opportunity 

 for analyzing the transactions more fully in the ledger as 

 the transactions occur, and also reduces the number of en- 

 tries in the Capital account. On the other hand, when the 

 Capital account receives an entry for increase or decrease 

 of capital, only at the close of the year one cannot find the 

 net capital of the business as easily at any time as he can 

 under the other method. This, however, is a very minor 

 objection to the method, for one seldom has occasion to 

 find the net capital of the business at any time except the 

 close of a fiscal year, while he does have occasion from 

 time to time to find the expenses or incomes of various 

 classes. 



Balance Brought Down. A point of bookkeeping form 



