The nature of capital and income

Bibliographic data

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

Sec. 5] CAPITAL AND INCOME ACCOUNTS 263 year does not yield the $25,000 which has regularly ap- peared as the net income in the previous accounts, for during this year we have to charge to the factory the special repairs of $31,500. The factory itself, therefore, produces a net deficit of $6500, offset by the large proceeds received from the sale of the repair fund of $31,500, which, less the new investment of $10,000 during the year, shows a net return for the year of $21,500. We see, therefore, that the exist- ence of the repair fund to cover depreciation virtually maintains the capital accounts at a constant level, merely changing from year to year the form of the items, but not affecting either the interest of the bondholders or the dividends of the stockholders. In other words, the repair fund acts as a means of standardizing the stockholders’ income. In ordinary business accounting, such standard- izing is regarded as sound policy. $5 Certain exceptions occur, as in the case of mining com- panies or land companies which necessarily must terminate their operations in the more or less remote future. But even in such instances, the instinct of the accountant toward standard accounting is so strong, that he usually treats the excess or deficiency of real income with relation to standard income in a special manner. Thus, when a company winds up business, the final dis- tribution of the proceeds is not treated as an ordinary dividend; the most of these proceeds are regarded as capital returned to the stockholders. The “company ”’ therefore goes through the form of paying for the shares of its stockholders and enters what it thus pays over to the stockholders as a cost of purchase instead of as a dividend. The reverse operations may oceur if at any time the stock- holders forego their dividends. It is in such a way that a company usually enlarges its capital. It nominally dis- tributes the regular dividends, but allows the stockholders

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