epresenting a mere reshuffling of
assets and liabilities, involve an increase in or a reduction of the
amount invested in the business, i.e. a profit or a loss. Transactions
representing profits are recorded upon the _Cr._ side of nominal
accounts, and those representing losses (including expenses) upon the
_Dr._ side. This is consistent with the rules already laid down in
connexion with real and nominal accounts, inasmuch as expenditure which
does not result in the acquisition of an asset is a loss, whereas
receipts which do not involve the creation of liabilities represent
profits. All debit balances therefore that are not assets are losses,
and _per contra_ all credit balances that are not liabilities are
profits. So that, inasmuch as double-entry provides _inter alia_ a
complete statement under suitable headings of all profits and all
losses, it is possible by aggregating these results to deduce therefrom
the net profit or loss of carrying on the business--and that by a method
entirely distinct from that previously described in connexion with
single-entry, thus constituting a valuable additional check. Taking the
trial balance shown above, the following represent the _trading
account_, _profit and loss account_, and _balance sheet_ compiled
therefrom. The trading account may be variously regarded as the account
recording the movements of goods which represent the stock-in-trade, and
as a preliminary to (or a subdivision of) the profit and loss account.
The balance sheet is a statement of the assets and liabilities;
but--inasmuch as, by transferring the balance of the profit and loss
account to the capital account, it is possible to bring the latter
account up to date and to show the credit balance representing the
surplus of assets over liabilities to date--the balance sheet, instead
of showing a difference, or a "balance," representing what is _assumed
to be_ the amount of the capital to date, shows an absolute agreement of
assets upon the one hand and of liabilities _plus_ capital upon the
other. The two sides of the account thus balance--hence the name.

_Dr._ TRADING ACCOUNT for the Year ended 31st December 1906 _Cr._
------+-------------------------------------+-------------++-------+-----------------------------+-------------
| To Stock on hand, 1st Jan. 1906 | L4,078 16 4|| | By Sales |L48,732 4 9
| " Purchases