II. Securities Owned 2. Securities of Proprietary, Affiliated, and Controlled CompaniesPledged (a) Stocks. (b) Funded Debt. (c) Miscellaneous. 3. Securities Issued or Assumed-Pledged Stocks. (b) Funded Debt. (c) Miscellaneous. 4. Securities of Proprietary, Affiliated, and Controlled Companies Unpledged (a) Stocks. (b) Funded Debt. (c) Miscellaneous. III. Investments 5. Advances to Proprietary, Affiliated, and Controlled Companies for Construction, Equipment, and Betterments. 6. Other Permanent Investments (a) Physical Property. (b) Securities. Working Assets: 7. 8. Cash. 9. Loans and Bills Receivable. 11. Net Balance Due from Agents and Conductors. 12. Miscellaneous Accounts Receivable. 13. Materials and Supplies. 14. Other Working Assets. Deferred Debit Items: Deficit: 15. Advances (a) Advances to Proprietary, Affiliated, and Controlled Companies. (b) Working Funds. (c) Other Advances. 16. Insurance Premiums Paid in Advance. 17. Taxes Paid in Advance. 18. Discount on Securities Issued (a) Discount on Stock. (b) Discount on Funded Debt. 19. Property Abandoned, Chargeable to Operating Expenses. 20. Cash and Securities in Sinking and Redemption Funds. 21. Cash and Securities in Insurance and Other Special Funds. 23. Items in Suspense. 24. Profit and Loss-Balance. 27. Stock Liability for Conversion of Outstanding Securities of Constitu ent Companies. 28. Premium Realized on Capital Stock Sold. Mortgage, Bonded, and Secured Debt: 29. Funded Debt (a) Mortgage Bonds. (b) Collateral Trust Bonds. (c) Plain Bonds, Debentures, and Notes. (e) Equipment Trust Obligations. (f) Miscellaneous Funded Obligations. 30. Receipts Outstanding for Funded Debt. 31. Premium Realized on Funded Debt Sold. 32. Receivers' Certificates. 33. Obligations for Advances Received for Construction, Equipment, and Betterments. Working Liabilities: 34. Loans and Bills Payable. 35. Net Traffic, Car Mileage, and Per Diem Balance. 36. Audited Vouchers and Wages Unpaid. 37. Miscellaneous Accounts Payable. 38. Matured Dividends, Interest, and Rents Unpaid. 39. Matured Mortgage, Bonded, and Secured Debt Unpaid. 40. Working Advances Due to Other Companies. 41. Other Working Liabilities. Accrued Liabilities Not Due: 42. Dividends Declared and Interest and Rents Accrued, Not Due. Deferred Credit Items: 44. Operating Reserves (a) Reserves for Replacement of Property. (b) Reserves for Other Purposes. 45. Liability on Account of Special Trust Funds. Appropriated Surplus: 47. Surplus Reserves (a) Reserves Invested in Sinking and Redemption Funds. 48. Additions to Property through Income since June 30, 1907. Free Surplus: 49. Profit and Loss-Balance. Statement of Affairs. The term "balance sheet" is usually applied to a statement of the kind already described relating to the affairs of a solvent company. Supposing, however, that a concern is insolvent or bankrupt, the question of representing its position to the creditors and others arises, and then the problem must be faced whether all that is needed is a plain balance sheet or not. In such a case, it is probable that more details are wanted than those that are afforded by the balance sheet. It is customary, for such conditions, to draw up what is called a "statement of affairs. This statement of affairs lists the liabilities in substantially the same way as would be done on a balance sheet except that now the effort is to indicate also the relative values of the liabilities and the relative degrees of their urgency. It may be shown, for example, whether they are actual liabilities or only contingent, whether they are specially secured or simply "general creditors." "general creditors." So also with the assets the listing will endeavor to show whether they are to be classed as unquestionably realizable or doubtful and to indicate whether they are subject to special claims which will reduce their worth or not. The fixed assets will be shown valued upon a basis supposed to indicate what can actually be realized for the purpose of meeting liabilities. It is clear that in such a statement two classes of knowledge are called for which may or may not be furnished by the accounting system but which probably will not be. These are (1) the character of the liabilities from the legal standpoint-whether preferred or not, and (2) the probable actual value of the assets at immediate sale or disposition. In this case the values assigned to the assets are likely to vary more or less from those which are represented on the books. Moreover, the arrangement of the statement of affairs is different from that likely to be adopted in the balance sheet since it will now be sought to show the amounts of the assets and liabilities respectively in their relative rank. A sample of such a statement of affairs patterned after that furnished as an illustration by Mr. George Lisle* is herewith submitted. (p.183.) The statement of affairs is thus seen to be a variety of balance sheet, differing from the ordinary type of sheet simply in details, the changes being made because of its special uses in showing the realizable value of assets against specified liabilities. In English accounting it is customary to supplement such a statement of affairs by drawing up *Accounting in Theory and Practice. what is called a "deficiency account." The deficiency account is intended to show the summarized results which are generally indicated in the statement of affairs. The credit entries are those which usually appear in capital Liabilities. account-the original capital and the subsequent profits realized in succeeding fiscal periods. In addition to these, is credited the deficiency or shortage which the statement of affairs shows to exist. The debit entries show the various elements of loss, such as shrinkage in the value of assets, the cash drawn out (in the case of a partnership or an individual business), etc. In other words the deficiency account shows the original capital put in and the amount subsequently added through clear profit, while it also shows where this capital has gone, that is, how it has been disposed of. The two sides are balanced by an entry giving the deficiency or shortage as already indicated. A sample of such an account based upon and drawn from the statement of affairs already supplied is herewith furnished. In the earlier part of this volume it was pointed out that the accountant as such performs his service, not as |