76 NATURE OF CAPITAL AND INCOME [Cuar. V 
first statement is made only $60,000 of this stock has been 
subscribed. It would be possible for the bookkeeper to 
enter the capital at that moment as $60,000; but, follow- 
ing his rule of keeping the capital item the same in all sue- 
cessive accounts, he will place the whole $100,000 on the 
liabilities side, and, to offset it, will insert on the other side 
assets of $40,000 in the form of treasury stock, the idea 
being that the company holds, in its treasury, stock cer- 
tificates for $40,000, which are to be regarded as an asset. 
Of course this mode of entering treasury stock is a book- 
keeping fiction, for this sum of $40,000 represents what 
is neither owned by nor owing to the company, except in the 
sense that the company owes itself; yet promoters will 
often impose upon the credulous investor the statement that 
to keep a certain amount of the stock of the company in its 
own treasury increases by that much the property of the 
stockholders. 
After the capital stock has been fully paid in, it is often 
necessary to enlarge it. Let us suppose that before the 
increase in capital the account stands as follows: — 
  
  
Assets Liabilities 
Miscellaneous . . . $300,000 Debts cde ww 3100000 
Capital... . . 100,000 
Surplus and undivided 
profits oi Selbiniin 1 5100,000 
$300,000 $300,000 
Next let new capital to the extent of $100,000 be issued 
and sold to old stockholders at par, in lots proportionate 
to their original holdings. The new stock certificates of 
face value of $100,000 are thus sold for $100,000. The 
accounts will then stand as follows: — 
Assets Liabilities 
Miscellaneous . . . $400,000 Debts . . . . . $100,000 
Capital. -o +. '. 200000 
Surplus and undivided 
profits ena as -1OD000 
$400,000