ACCOUNTS FOR PRIMARY GRAIN ELEVATORS. 3 



TAKING AN INVENTORY. 



At the end of the business year or at the "cut-off," an inventory 

 should be taken. This should be an actual physical inventory, taken 

 either by measurement of the grain in the bins or by running it out 

 of the bins and through a hopper or automatic scale, thus getting 

 actual weights. The practice of taking estimated inventories by 

 reference to the reports accumulated during the year's business is 

 dangerous and, in most cases, absolutely inaccurate. The average 

 platform scale has a weighing error of from 3 to 15 pounds per 60- 

 bushel load. This weighing error accumulating during a whole year 

 sometimes amounts to a shortage or "overage" of hundreds of 

 bushels. By taking inventories from grain reports, the elevator may, 

 after five or six years, find itself with a book grain stock out of all 

 proportion to the actual grain on hand at the time of inventory. 

 By taking an actual inventory, the shrinkage or ''overage" of each 

 kind of grain is accounted for within the year to which it appUes, 

 and, if abnormal, can be checked up easily if an actual inventory has 

 been taken the season before. 



AUDITING THE BOOKS. 



One of the features in elevator bookkeeping upon which great 

 stress should be laid and to which an important position should be 

 assigned is the auditing of the books as soon as the inventory has 

 been taken. The custom prevaiUng among farmers' elevators of 

 having internal audit committees furnished from the board of direc- 

 tors or the stockholders is commendable only to the extent of its 

 usefuhiess in keeping the directorate in close touch with the business 

 of the elevator. The positive value of such an audit, in so far as it 

 is able to detect errors of principle or even clerical errors, is neghgible, 

 since, as a rule, the men making the audit are not especially trained 

 for such work and use very httle time to complete their reports. It 

 should be apparent, then, that it is good business practice to secure 

 the services of a certified pubHc accountant who has had sufficient 

 practice in elevator accounting to be able to giv« vital information 

 and advice to the manager and directors of the elevator. Internal 

 audit committees may work in conjunction with such an auditor, 

 thus shortening the period of his labors as weU as benefiting them- 

 selves by contact with him. The item of cost in connection with the 

 hiring of pubhc accountants has been the deterrent factor which, to a 

 great extent, has kept the farmers' elevators in the past from avaihng 

 themselves of such services. By banding together, several elevator 

 companies might give an accountant steady employment throughout 

 the year and secure his services at a greatly reduced rate.^ 



1 For further discussion of auditing, see U. S. Department of Agriculture Bulletin No. 178 — Cooperative 

 Organization Business Methods. 



