COST ACCOUNTING 



269 



ILLUSTRATION 54 



Loss AND GAIN ACCOUNT WHEN INTEREST ON INVESTMENT HAS 



NOT BEEN CHARGED AS A COST OF PRODUCTION. 

 (OTHER CONDITIONS SAME AS IN ILLUSTRATION 55) 



Loss and Gain 



determined after considering all elements of expense ex- 

 cept interest on investment. 



The application of either of these principles gives the 

 same result in the end as far as the 'net addition to the 

 Proprietor's Capital account is concerned. The difference 

 between the two methods appears in the relative costs of 

 conducting the several productive elements of the farm. 

 If all productive elements required the same capital in- 

 vestment in land, equipment and buildings or other prop- 

 erty, to produce a given net income, a consideration of 

 the element of interest would be unnecessary as a basis 

 for determining which farm element was the most profit- 

 able. 



As a matter of fact, a greater investment in land, build- 

 ings or equipment is required to produce commodities of 

 a given value from one productive element than from 

 another. This being the case, it is reasonable to consider 

 that the productive elements requiring the greatest invest- 

 ment should be charged with some amount to represent its 

 relatively greater requirements in the way of capital. 



