CHAPTER XV CAPITAL AND INCOME ACCOUNTS §1 Taz last two chapters have their counterpart in accounting. Correctly kept accounts will show that an abnormal increase of income is always at the expense of capital. In the case of a corporation, the distribution among the stockholders of such excessive income is called “paying dividends out of capital.” It is not necessarily or always wrong. A Land Company of California has already been cited as a legitimate case. A case ab the opposite extreme would be one in which the dividends are made unusually small in order that the capital may be increased. There is in New York City a company which has never declared any dividends, but has been rolling up a large surplus for years, and whose stock is for this reason much above par. We have already seen in Chapter VIII, that every item in an income account represents the income or outgo from some item in the capital account. That is, the income ac-“count consists merely in a statement of the income and outgo connected with each item of asset or liability, including that class of assets and liabilities which are alike claims and obligations, such as leases and employees’ contracts. If the income for each item remains steady or standard, the relation between the capital and income accounts is very simple. In such a case (supposing the rate of interest to be 5 per cent), each item in the capital account will constantly stand at twenty times the amount of the corre-266