CLASSIFICATION OF LEDGER ACCOUNTS FOR CREAMERIES. 39 
ASseTS= LiaBinirres+ Net WortTsH. 
Ali accounts being included in one of these groups, it is evident that all transac- 
tions must be considered in the hght of their effect on the respective groups. 
It is also evident that any transaction affecting one of the groups must likewise 
produce an equal net change in the other groups, except in a few instances when 
the transaction by its nature effects a change in the detail of one of the three groups 
and does not change the total of the affected group. Wemay classify these changes as: 
Increase or decrease in assets. 
Increase or decrease in Habilities. 
Increase or decrease in net worth. 
Transfer between items within any one group. 
The customary bookkeeping names for these changes are ‘“‘debit’’ and “credit.” 
These same titles are used to show the side of the account on which the entry is made, 
debit being used for the left-hand side and credit for the right-hand side. Keeping 
these names in mind, the statement changes may be classified as follows: 
Desir: CREDIT: 
(1) Increase in assets. (la) Decrease in assets. 
(2) Decrease in labilities. (2a) Increase in abilities. 
(3) Decrease in net worth. (3a) Increase in net worth. 
It may be well to consider some of the more usual transactions which will arise in 
a business, and to note the way in which they affect our statement, and the classi- 
fication shown above. 
(1) Capital stock issued upon payment of cash. The result is an increase in the 
asset Cash and a corresponding increase in the Net Worth account Capital Stock. 
Using the above table, the transaction would be entered by a debit to Cash (1) and 
a credit to Capital Stock (3a).§ 38 
(2) Capital stock paid for by a note. The result is an increase in the asset Notes 
Receivable, and an equal increase in the Net Worth account, Capital Stock. There- 
fore, debit Notes Receivable (1) and credit Capital Stock (3a). 
(3) A note receivable is paid in :ash, without interest. There is an increase in 
the asset Cash and a decrease in the asset Notes Receivable. This is one of the 
transactions described as being a transfer affecting the detail of one of the three 
parts of the business statement, and not in any way changing the totals of the part. 
Being both an increase and a decrease in asset values, we must debit Cash (1), the 
asset increased, and credit Notes Receivable (1a), the asset decreased. 
(4) Purchase of merchandise for cash. The asset Merchandise has increased; 
the asset Cash has decreased. Applying our table we have a debit to Merchandise 
(1) and a credit to Cash (Ja). 
(5) Purchase of merchandise on account. We have an increase in the asset Mer- 
chandise and an increase in the Hability Accounts Payable; therefore, we will debit 
Merchandise (1), and credit Accounts Payable (Za). 
(6) Merchandise sold for cash. There isan increase in the asset Cash and a decrease 
in the asset Merchandise. Debit. Cash (1) and credit Merchandise (1a).’ 
(7) Merchandise sold on account. There is an increase in the asset Accounts 
Receivable and a decrease in the asset Merchandise. Debit Accounts Receivable 
(1) and credit Merchandise (1a). 
6 All numbers shown in parentheses thus (37) refer to the number of entry in the table. 
7Sales of merchandise or product actually affect two parts of our statement; i. c., that part of the 
sale price which represents the actual cost of the merchandise is a decrease in the asset, while the part 
representing profit is an inerease in the net worth. These sales in actual practice are credited to 
Merchandise Sales and closed into Loss aud Gain account at the end of the fiscal period. 
