AbstractThis paper gives a new organization of the theoretical results of the Generalized Transportation Problem with capacity constraints. A graph‐theoretic approach is utilized to define the basis as a one‐forest consisting of one‐trees (a tree with an extra edge). Algorithmic development of the pivot‐step is presented by the representation of a two‐tree (a tree with two extra edges). Constructive procedures and proofs leading to an efficient computer code are provided. The basic definition of an operator theory which leads to the discussion of various operators is also given. In later papers we will present additional results on the operator theory for the generalized transportation problem based on the results in the pres