A SYSTEM OF ACCOUNTING FOR COTTON GINNERIES. 29 
In case the entire capital stock is paid at one time, the following method might be 
used. 
Entries to illustrate issue of capital stock and payment thereof: 
Debit. Credit. 
$8, 000.00 Cash. 
2,000.00 Notes receivable. 
Gapprte bsho cle re ys teaches on oa $10, 000. 00 
Representing payment of capital stock issued to the following: 
It sometimes happens that shares of stock are acquired or sold for more or less than 
the par value, and in such cases the premium or discount should be charged or credited 
as the case may be to ‘‘ Premium and discount on capital stock” account. 
For example, if a going concern desires to sell additional shares, the shares being 
above par in value, an entry should be made as follows: 
Debit. Credit. 
$105.00 Cash. © 
Wa pihalistoclesya aie) MMe ues Cay Gi $100. 00 
Premium and discount on capital stock..... 5. 00 
For sale of one share of stock at $5 premium.) 
Likewise, if shares were sold at a discount, there would be a debit to premium and 
discount on capital stock. 
The balance in this account is sometimes written off by periodical charges to the 
surplus account. If preferred, the entry may be made direct to surplus instead of 
opening the account premium and discount on capital stock. 
“ It occasionally happens that capital stock is offered for sale and is purchased by 
the organization, to be held for resale at some future date. While this may seem to 
be in the nature of a retirement of the capital stocks so purchased, and as such should 
be charged to the capital stock account, accountants generally have preferred to treat 
this transaction differently, and charge a purchase made in this manner to an account 
called ‘‘Treasury:stock.”’ In case the purchase was made at par, the entry should be: 
Debit. Credit. 
$100.00 ‘Treasury stock. 
GFZ SI TAS agua ge" SIMARD SN ai a i i ta dt $100. 00 
(For purchase of one share of stock from Chas. Brown.) 
When treasury stock is sold, the total amount received from such sale should be 
credited to the treasury stock account. 
It should be remembered, however, that it is not incorrect to charge par value of 
the stock thus purchased to capital stock, but it is not recommended. 
In case the organization is not a corporation, but a partnership, sole ownership, or 
association, the capital stock account would be replaced by accounts indicating the 
ownership, or membership. 
SURPLUS (12). 
| 
Debit: Credit: 
1. With the amount of dividends de- 1. With the amount of surplus as 
clared by the board of directors. shown by the balance sheet at 
(Credit Dividend account. ) the time of opening the books. 
With any net loss at the end of a 2. With the amount of net gain at the 
fiscal period as shown by a debit end of each fiscal period, asshown 
balance of the Loss and gain ac- | - by a credit balance of the Loss 
count. (Credit Loss and gain.) gain account. (Debit Loss and 
With adjustments decreasing the gain.) 
profits of a previous fiscal period.' | 3. With adjustments increasing the 
With the amount of income and profits of a previous period.! 
excess-profits taxes paid. 
With any appropriation of surplus 
made by the directors. 
In case the liabilities and outstanding capital stock exceed the total assets at the time 
_ of opening the books, the entry to this account will bea debit and will indicate a deficit. — 
ie The same will be true if, atany future time, this account has a debit balance. 
permanent as) es ee ey Boy, 
} Errors and omissions are often found which apply to a previous fiscal period. Adjustment of such items 
_ Will be made through the Surplus account as pied R P 
