SPECIAL ACCOUNTS ANI) ENTRIES 133 



regularly and receiving board and lodging might be made 

 under either of two methods. Assume the contract with 

 John Morningstar is for $30 a month with board and lodg- 

 ing, the latter being valued at $15 a month. 



Method I 



Labor $45 



John Morningstar . . . $30 



Household 15 



Method II 

 Labor $45 



John Morningstar . . . $45 



John Morningstar 15 



Household 15 



Method I interprets the transaction as meaning that the 

 total cost of labor is $45, and that a liability of $30 to John 

 Morningstar is to be created showing that that is all which 

 is owing to him at the end of the month. He is really 

 paid the other $15 in installments of board and lodging by 

 the household each day as he is earning it. Method II is 

 quite similar to Method I, but it requires two entries, one 

 to credit the hired man with the full amount that he earns 

 during the month and the other one to show immediately 

 that he has been paid $15 of it by the household in the 

 form of board and lodging. Either method shows the same 

 net results. For that reason Method I is preferable on 

 account of its simplicity. 



Labor of the Farmer's Family. The value of the labor 

 of the proprietor and other members of the household 

 should be charged to Labor account at a reasonable average 

 rate at some time before closing it into Loss and Gain ac- 

 count or before distributing labor over the various farm 

 accounts, as is done in cost accounting. The entry for 

 such labor can be made in a lump sum at the close of the 



