Ska. 2] CAPITAL ACCOUNTS 69

The following two balance sheets will show the accumulation
 of “surplus.”

January 1, 1900

Assets Liabilities
Plant « « + « « $200,000 Debts ve wee 03 100,000
Capital . . . . . 100,000
$200,000 ; $200,000

JANUARY 1, 1901

Plant, ete. . . . . $246,324 Debts ele e le ert i8100,000
Capital iis iu ove 2100000
Surplus... an 46,324
$246,324 $246,324

But not only is the book item, capital, maintained intact
as long as possible, but often the surplus also is put in round
numbers and kept at the same figure for several successive
 reports. All the smaller fluctuations have an effect
simply on a third item called “undivided profits.” The
distinction between surplus and undivided profits is thus
merely one of degree. The three items — capital, surplus,
and undivided profits — together make up the present net
capital. Of this, “capital” represents the original amount,
“surplus” the earlier and larger accumulations, and “undivided
 profits” the later and minor. The undivided profits
are more likely to appear in dividends, that is, to become
divided profits, although this may also happen to the surplus,
or even in certain cases to the capital itself.
We see, then, that the capital of a company, firm, or
person is to be understood in two senses; first, as the
item entered by the bookkeeper under that head, — the
original capital; and, secondly, this sum plus surplus and
undivided profits, — the true net capital at the instant
under consideration.
Inasmuch as the stock certificates were issued at the
formation of the company and cannot be perpetually
changed, they ordinarily correspond to the original instead