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We tell transcribers not to worry too much about matching the exact format of the original document (this includes line or paragraph breaks or spacing). The most important thing is to type the words that you see in the document. For our purposes, the goal of transcription is to enhance searchability. Every word you transcribe helps improve search results for that document. So, whether or not the spacing matches exactly will still return a search for the words in the document. However, it can often help the next reader follow the flow of the document, so you can use your best judgement to see it will help make sense of the document.
Community Manager, National Archives Catalog