28 BULLETIN 985, U. S. DEPARTMENT OF AGRICULTURE. 



Reserve for Doubtful Accounts (H4). 



Debit: 



Credit: 



1. With the amount of outstanding 



1. 



"With the amount reserved as accu- 



accounts found to be uncollect- 





mulated losses not charged off as 



ible. (Credit accounts receiv- 





shown by the balance sheet at 



able.) 





the time of opening the books. 





2. 



With an amount estimated to cover 

 the probable losses due to uncol- 

 lectible accounts during the fiscal 

 period. (Debit loss from bad 

 accounts.) 



Any collections made on accounts ^hich have previously been charged off as worth- 

 less should be credited to this account. 



I. NET WORTH. 



Capital Stock (II). 



Debit: 



1. With the par value of shares retired 

 or canceled. 



Credit: 



1. With the par value of all shares is- 



sued as shown by the balance 

 sheet at the time of opening the 

 books. 



2. With the par value of all shares 



sold subsequently. 



The capital stock of a corporation is divided into shares, each share usually having a 

 designated par value. These shares may be transferred from one individual to another 

 without affecting the capital of the corporation. The ownership of a share of capital 

 stock is evidenced by a stock certificate. 



In organizing a corporation, a subscription list should first be prepared, the signers 

 of which by law bind themselves to purchase the number of shares subscribed. No 

 certificate of stock should be delivered to a stockholder until his subscription has been 

 fully paid. Until such payment is made a temporary certificate may be given to the 

 subscriber to be exchanged* for the regular stock certificate on completion of payment. 



When a subscription list has been prepared and the corporation formed on this basis, 

 it is often provided that the subscription may be paid in installments. It is not desir- 

 able to credit these partial payments direct to the capital stock account. In view 

 of this, when the subscription list has been completed an entry should be made debit- 

 ing ' ' Subscription account ' ' and crediting ' ' Capital stock ' ' account for the amount sub- 

 scribed. When payments of the subscription are made, either by cash or note, in 

 full or in part, these payments should be credited to "Subscription account" and not 

 to "Capital stock" account. The following entries will illustrate: 



Debit. Credit. 



$10, 000. 00 Subscription account. 



Capital stock $10, 000. 00 



For subscriptions shown on subscription list Xo. 1. 



Credit. 



Debit. 

 §4, 000. 00 Cash. 

 1, 000. 00 Notes receivable. 



Subscription account $5, 000. 00 



50 per cent payment of the following subscriptions: 

 (List those making payment.) 



