The study is concerned with the conception of capital and income in the changing economic circumstances of the late nineteenth century. This issue arises as a matter of interest from the confusing accounting for capital assets then followed, and which has become the subject of a small but significant literature.  Methodologically the issue, and the literature it has provoked, provide a &#039;set&#039; in which an accounting calculation is identified, its context considered and consequences evaluated. It introduces the idea that accounting had macroeconomic implications, and meets Hopwood&#039;s (1983) injunction that accounting ought to be considered in the context in which it arises. The study illustrates the significance of a flawed accounting founded on an inadequate definition of capital to adversely affect economic life by reference to the legal debate and litigation in English courts about the definition of profit available for distribution as dividends that occurred at the end of the nineteenth century.   The study explores nineteenth century understanding of the concept of capital in economic philosophy on the basis that it would be in that body of philosophic literature that such ideas would have to be examined. The study finds that, for most of the nineteenth century, understanding of the nature of capital and income derived from the works of William Petty and Adam Smith. It held that capital and income were separate states of wealth. This conception of capital continued in the work of David Ricardo, Marx and J. S. Mill, and is evident also in the work of Alfred Marshall. The modern, twentieth century, understanding of capital and income as antithetical states of wealth is identified in the study as deriving from the work of the American economist Irving Fisher in 1896.   The contribution of this thesis is to • Establish that the crisis in late nineteenth century financial reporting derived from the prevailing conception of capital and its relationship to income, • note that the conception in legislative requirements determining profit were consistent with that definition, and • identify the origin of the modern, twentieth century understanding of capital and income as antithetical states of wealth.   The study provides an in-principle view that nineteenth century capital accounting had the capacity to cause misallocation of resources within an economy