54 FARM ACCOUNTING 



which should be noted carefully is represented in the carry- 

 ing down of the balance of Mr. Arnold's Capital account, 

 in both Illustrations 8 and 10. It will be observed that 

 there is a debit entry of $5000, " balance down," on the 

 last line before the total of the debits is recorded. The 

 credit of $5000 to offset this is on the credit side of the 

 same account, below the double lines. Thus, the equili- 

 brium of debits and credits is maintained. These en- 

 tries do not change the condition of Mr. Arnold's Capital 

 account. They merely cause the net capital to be shown 

 by a single amount for the purpose of beginning a new 

 year. The net capital would still he $5000 without per- 

 forming the operations of addition, drawing single and 

 double lines and the making of a debit and credit of $5000 

 as described above. If these bookkeeping operations or 

 abbreviations are not employed, however, it is necessary 

 to add and subtract several amounts from time to time in 

 order to find the net capital. The double lines indicate 

 that everything is in balance above them. The $5000 

 brought down on the credit side below the lines indicates 

 that it is the net result of all the amounts above the dou- 

 ble lines. 



Classification of Accounts. In the course of the com- 

 parison of results discussed in the last several pages it was 

 stated, " under the method used in Illustration 10, that all 

 increases and decreases in capital are recorded in specially 

 named accounts to indicate the nature of the income or 

 expense." These "specially named accounts" are closed 

 into Loss and Gain account, and the latter into Capital 

 account at the close of the year. As previously stated, 

 all the accounts so closed directly or indirectly into Capital 

 account are known as nominal accounts. They are accounts 

 named to represent an increase or decrease of a specific 

 nature in the capital of the business. They do not repre- 

 sent accounts of resources or liabilities. Nominal accounts 



