The nature of capital and income

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Monograph

Identifikator:: 102659555X

URN:: urn:nbn:de:zbw-retromon-82920

Document type:: Monograph

Author:: Fisher, Irving http://d-nb.info/gnd/118533541

Title:: The nature of capital and income

Place of publication:: New York

Publisher:: The Macmillan Company

Year of publication:: 1923

Scope:: XXI, 427 Seiten

Digitisation:: 2019

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Part III. Capital and income

Collection:: Economics Books

Skc. 2] CAPITAL AND INCOME ACCOUNTS 257 sponding item in the income account. Let us suppose a factory company operating a plant worth $300,000, which is bonded for $100,000. The remainder, $200,000, will represent the capital and surplus of the company If these valuations represent a true and not simply a fictitious book value, and if the rate of interest be taken at 5 per cent, the fact that the plant is worth $300,000 signifies simply that its earning power is $15,000 a year, of which $5000 goes in interest to the bondholders and $10,000 in dividends to the stockholders. The capital and income accounts of such a firm, doing a steady and uninterrupted business, would repeat themselves in monotonous regularity year after year. § 2 If now we suppose that the repairs and replacement of the plant do not occur in equal amounts each year, but that it is necessary, at long intervals, to make large, special, or extraordinary repairs; there will occur during the interme- diate years “depreciations” of the plant, and sudden res- torations in its value when these special repairs are made. Thus, suppose that during the year 1900, the factory pi depreciates by $10,000. The capital account at the begin- ‘ning and end of this year, and the income account during the year, will be given in the following table: — CAPITAL ACCOUNT AT BEGINNING OF Year 1900 Assets Laabilities Factory . . . . . $300,000 Bonds. . . . . . $100,000 Capital and surplus . 200,000 $300,000 $300,000 Carrran Account AT END OF YEAR 1900 Assets Liabilities Factory . . . . . $290,000 Bonds Hogs, Het 8100.000 Capital and surplus . 190,000 $290,000 $290,000

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