24 BULLETIN 59, U. S. DEPARTMENT OF AGRICULTURE. 
and are afterwards found to be uncollectible. . To charge these uncol- 
lectible items off during the succeeding year would throw the full 
burden of loss upon the business of a year in which it was not incurred. 
A better policy is to set aside out of each year’s profits a sufficient sum 
to cover the estimated losses on bad debts. The balances of the 
accounts found to be uncollectible are then charged to this account. 
Should any of the past due items thus charged off be collected later, 
they will then be credited to surplus. By showing the name of all 
uncollectible balances on this account a very definite record of them 
is established. The credit balance appearing on this account is the 
available amount reserved against losses from bad debts. On the 
balance sheet it should not appear as a liability on the credit side 
but as a deduction from the total amount due from growers on the 
asset side. 
Packing-house closing account.—This account is raised on the books 
at the end of the year for the purpose of assembling in one account 
the expenses and revenue derived from packing-house operations, so 
that these may be shown in their proper relations. The balance 
appearing on this account is transferred to the profit-and-loss account 
at the time of closing the books. 
The same procedure is followed for the closing of the warehouse 
operations into the warehouse closing account. 
Profit and loss.—The accounts containing profit-and-loss elements 
are brought together in this account at the end of the year for the 
purpose of determining the net profit or loss for the year. 
Surplus.—The credit balance appearing on this account measures 
the amount of undivided profits remaining in the business. The net 
profit or loss at the end of the year is transferred from the profit and 
loss account to the surplus account. The operation of a business 
at a net loss will result in a debit balance, or deficit, in the surplus 
account. 
