22 BULLETIN 865, U.°S. DEPARTMENT OF AGRICULTURE. 
SuRPLuS (f 2.) 
DEBIT: CREDIT: 
1. With any debit balance of the Loss 1. With the amount of surplus as shown 
and Gain account at the close of the by the Balance Sheet at the time of 
fiscal year. opening the books. 
2. With the net profit as shown by the 
credit balance of the Loss and Gain 
aecount at the close of the fiscal 
year. ; 
Any balance from the Surplus Adjustment account should be carried to the Surplus 
account at the end of the fiscal year, either as a debit or credit.. In many organiza- 
tions the Surplus account represents the excess of assets over liabilities and capital 
stock. However, when a certain amount, commonly called a Reserve ior Sinking 
Fund (see p. 19), is set aside out of earnings each year to retire the capital stock at 
a definite time, this reserve, together with the Capital Stock and Surplus, equals the 
excess of assets. : 
When the opening Balance Sheet shows the liabilities, capital stock, and accumu- 
lated 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 there has evidently been a loss 
through 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 and the Surplus Adjust- 
ment 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 different caption. For example, if there is no surplus and a Loss i: 
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 Deficit. 
Hossand' Gann). ss. cee Tre ee eee eee $1, 500 
(To close Loss and Gain into Deficit account. ) 
If the company makes a net profit of $2,000 during the succeeding ycar, the Journal 
entry will be as follows: 
DebirT. CREDIT. 
$2,000 Loss and Gain. 
I EY=) CTs ipa iaee Sipe Pic tr sree aie UNL 3 Mahia Oe bee ions 50 $1, 500 
SUEPEUS eet ke ee ee ee 1, 500 
(To close the Deficit and Loss and Gain account.) 
Loss AND Gatn (I 3). 
DEBIT: | Crepit: 
1. With the balance of any account 1. With the balances of all Income 
charged with purchases of raw mater- accounts. 
ial for manutacture. 
2. At the close of the fiscal year or 
other accounting period with the 
debit balance of all Expense ac- 
counts. | 
