2) BULLETIN 865, U. S. DEPARTMENT OF AGRICULTURE. 
should be arranged in the form known as a Balance Sheet, with assets 
on the left and habilities on the right. (See illustration on p. 34.) 
The difference between the total assets and total habilities will repre- 
sent the net worth, either as capital stock, surplus, deficit, or good 
will. These accounts are described at length under their respective 
captions. ‘The assets should be arranged in the order of their prob- 
able cash realization and the habilities in the order of their probable 
priority as to liquidation. A set of Ledger sheets should be headed 
with the account captions as shown herein. 
The items appearing on the Balance Sheet should then be entered 
in the Journal,! the amount of each item being posted from the 
Journal to the proper Ledger account. As succeeding transactions 
are classified, entered in the Journal, and posted to the proper Ledger 
accounts, the Ledger will contain a summary of the financial facts of 
the business, arranged under their proper designation, each summary 
bemg known in bookkeeping as an account. The various accounts 
should be classified according to their nature into the following groups, 
which are defined in order that 1t may be clearly understood how they 
differ from one another. 
Current Assets are items of cash and those which can be readily 
converted into cash or its equivalent. 3 
ized Assets are those of a permanent nature which are used in 
conducting the business, such as land, buildings, machinery and 
equipment. 
Prepaid Expense is that which is paid in advance of usage. 
Current Liabilities are obligations which are due, or about to become 
due, or are those which are increasing daily but are not payable until 
some future date. 
Reserve accounts are those by means of which a certain amount is set 
aside out of the earnings of the company for some specific purpose. 
Net Worth accounts are those which represent the ownership, 
including any accumulated profits or losses of the company. 
Income accounts are those through which the revenue of the com- 
pany is reflected. 
Hzpense accounts are those which reflect the cost of conducting 
the business. It should be remembered that the cost of conducting 
the business may not be actually paid in cash during the period in 
which the expense is incurred. 
Index tabs labeled with the above headings will be found convenient 
in locating the various Ledger accounts. 
The necessity of making the complete segregation of accounts 
shown in the following charts may be questioned by those who have 
1 fee U.S. Department of Agriculture Bulletin No. 559, Accounting Records for Country Creameries, 
by John R. Humphrey and G. A. Nahstoll. 1917. 
PP ae ee ee 
