Sec. 5] CAPITAL AND INCOME ACCOUNTS 263

year does not yield the $25,000 which has regularly appeared
 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 existence
 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 standardizing
 is regarded as sound policy.

$5

Certain exceptions occur, as in the case of mining companies
 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 distribution
 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 stockholders
 forego their dividends. It is in such a way that a
company usually enlarges its capital. It nominally distributes
 the regular dividends, but allows the stockholders