and that of the liabilities is the balance, which is profit, and is available for distribution as dividend or allocation to reserve, or to be carried forward to next year. It is added to the figures of the liabilities to make the two sides agree. If the company has made a loss, the assets are less than the liabilities in value, and the balance appears on the assets side.
It is sometimes disconcerting to the uninitiated to find the company's capital and reserves among its liabilities, because they think that these are items which it must have got and must possess and that therefore they ought to be among the assets. But a moment's thought makes it clear that the capital is the money subscribed by the original shareholders and is consequently owed, and has to be accounted for by the company to them, which it does by showing assets on the other side, in which the money has been sunk; and likewise the reserve fund has been built up out of sums reserved out of profits, or received by the issue of shares at a premium, and similarly is owed to the shareholders.
The sum put down under capital sometimes includes shares that have been issued, not against money subscribed, but in part payment for the business acquired, if the company bought an existing business, or for services
