30 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 thisis the case, it is evident that there has been a loss 
due to operation which in reality amounts to an impairment of capital. Theamount 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 during 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. 
TS OSS) UIUC ie TINS oe she ai ee es dN Nae eae $1, 500. 00 
(To close Loss and gain into Deficit account.) 
If the company makes a net profit of $2,000 during the succeeding year, the journal 
entry will be as follows: 
Debit. Credit. 
$2,000.00 Loss and gain. 
DERE. Ze Bee EA ee QUIENES" PLR AN aSEIS AAR $1, 500. 00 
UP plus OA aes A Raa Nad Mar Sea Raat eae ~ 600. 00 
(To close the Deficit and Loss and gain account.) 
Loss AND GAIN (13). 
Debit: Credit: 
1. At the end of the fiscal year with 1. With the credit balances of ail in- 
any debit balances of income ac- come accounts at the close of the 
counts (showing losses) and with fiscal period.!. (Debit Income ac- 
the debit balances of the Expense _ counts.) 
accounts.2, (At this time credit 2. With the amount charged to gin- 
such accounts. ) ning seed-cotton purchases as cost 
of ginning such cotton. (See ac- 
count Pla.) 
ne eel 
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 (K1). 
Debit: ; Credit: : 
1. With the credit balance at the end 1. With the total of the ‘“‘Ginning 
of the current period. (Credit charges” during the period. 
Loss and gain.) | 
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. 
3 See accounts under Expense accounts in the classification. 
