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BULLETIN 985, U. S. DEPARTMENT OF AGRICULTURE. 



When the opening balance sheet shows the liabilities, capital stock, and accumulated 

 reserves to be in excess of the total assets, including good will, the surplus account will 

 show a debit balance. When this is the case, it is evident that there has been a loss 

 due to operation which in reality amounts to an impairment of capital . The amount of 

 such debit balance should be debited to an account captioned " Deficit." At the close 

 of each following fiscal year the Loss and gain account should be closed into this account 

 until the deficit is written off. 



The Deficit account is in reality the debit side of the Surplus account, but should be 

 carried under a distinctive caption. For example, if there is no surplus and a loss is 

 sustained dining the year, the loss shown by the debit balance of the Loss and gain 

 account is an impairment of the capital and should be carried to the deficit account by 

 the following journal entry: 



Debit. Credit. 



$1,500.00 Deficit. 



Loss and gain $1, 500. 00 



(To close Loss and gain into Deficit account.) 



If the company makes a net profit of $2,000 dining the succeeding year, the journal 

 entry will be as follows: 



Debit. Credit. 



$2,000.00 Loss and gain. 



Deficit $1, 500. 00 



Surplus 500. 00 



(To close the Deficit and Loss and gain account.) 



Loss and Gain (13). 



Debit: 

 1. At the end of the fiscal year with 

 any debit balances of income ac- 

 counts (showing losses) and with 

 the debit balances of the Expense 

 accounts. 2 (At this time credit 

 such accounts.) 



Credit: 



1. With the credit balances of all in- 



come accounts at the close of the 

 fiscal period. 1 (Debit Income ac- 

 counts.) 



2. With the amount charged to gin- 



ning seed-cotton purchases as cost 

 of ginning such cotton. (See ac- 

 count Pla.) 



At the end of the fiscal period, if the credits to this account exceed the debits, a net 

 gain is shown; but if the debits exceed the credits a net loss has resulted from the 

 year's operations. This account will be closed by a debit or credit, as the case may 

 be, to Surplus account. 



K. GINNING INCOME. 

 Custom Ginning Income (Kl). 



Debit: 

 1. With the credit balance at the end 

 of the current period. (Credit 

 Loss and gain.) 



Credit: 

 1. With the total of the "Ginning 

 charges" during the period. 



This account shows the earning from the ginning of cotton for patrons, usually 

 called custom ginning. 



1 See accounts under Income accounts in the classification. 

 a See accounts under Expense accounts in the classification. 



