Capital Account.

Capital Account. Such is the name given to what concerns the capital stock of a railway or other public company. In authorising a railway company, parliament or congress gives power to raise so much money by shares, and so much by borrowing. This money forms the capital of the company; and constitutes the Capital Account. On this fund the directors of the company make drafts to pay for the land, and all the works connected with the line, as also rails, locomotives, carriages, and, in short, everything involved in perfecting the railway up to the point of working. After the railway is opened, all working expenses and renewals of line and plant should be charged to Revenue Account, but extensions of the line and additional plant should be charged to Capital Account. The same principle applies to all joint-stock companies. It is of the utmost importance that these two accounts be kept quite distinct, and that nothing be charged to capital which ought to be defrayed by revenue. It is by neglecting this precaution that an appearance of fallacious prosperity has often been produced, which has ultimately ended in ruin.