270 FARM ACCOUNTING 



ILLUSTRATION 55 



Loss AND GAIN ACCOUNT WHEN INTEREST ON INVESTMENT HAS 



BEEN CHARGED AS A COST OF PRODUCTION 

 (OTHER CONDITIONS SAME AS IN ILLUSTRATION 54) 



Loss and Gain 



Illustrations 54 and 55 show Loss and Gain accounts of 

 a farm at the close of a fiscal year, bringing out the differ- 

 ence in results when interest is not charged as a cost of 

 production and when it is so charged. 



The Interest on Investment income item of $305 in 

 Illustration 55 arises as a result of entries charging crop 

 and livestock accounts and crediting Interest on In 

 ment. The charge to the productive elements is made 

 through Equipment Expense, Building Expense and Gen- 

 eral Expense accounts. 



A comparison of the figures in Illustrations 54 and 55 

 shows that the net income from each of the various produc- 

 tive elements is less in the latter case when interest is 

 charged as an element of cost. The total decrease in in- 

 come from the productive elements is exactly offset by a cor- 

 responding increase in another nominal income called ' ' In- 

 terest on Investment." The total income, however, is the 

 same, $1600 in each case. Examining the figures further, 

 it appears that the interest charges over the several pro- 



