THE TRIAL BALANCE 77 



(This is the method used in Illustrations 15, 16, and 17.) 

 All other items in the Statement of Resources and Lia- 

 bilities are taken direct from the trial balance before clos- 

 ing. 



The latter method does not serve as a substitute for the 

 process of closing the ledger. It merely permits of the 

 preparation of statements before closing the expense and 

 income accounts into Capital account. The closing of the 

 ledger is performed in exactly the same way (but not at 

 the same time), regardless of which method is used in pre- 

 paring financial statements. Under the first method the 

 ledger is closed before the statements are made ; under the 

 second method after the statements are made. 



For farm accounting, the first method is advocated be- 

 cause of the simplicity of operation when there are several 

 classes of inventories to be considered. Also, in farming, 

 there is seldom any necessity for preparing financial 

 statements for silent partners, directors, stock hold- 

 ers or the investing public as there is in commercial en- 

 terprises. 



Although in commercial accounting the financial state- 

 ments are prepared on loose sheets of paper, which may 

 or may not be filed in permanent binders, it is considered 

 more practical in farm accounting to reserve a number of 

 pages in the back of the ledger for the annual state- 

 ments. 



ILLUSTRATIVE PROBLEMS 



1. From the trial balance presented herewith, prepare a Loss 

 and Gain Statement for the year and a Statement of Resources 

 and Liabilities as of December 31, 1916. 



