SYSTEM OP ACCOUNTING FOR COOPERATIVE ASSOCIATIONS. 19 



Inventory. — The debit balance appearing on this account measures 

 the cost of goods on hand at the beginning of the fiscal year. 



Merchandise. — The Merchandise account is divided into two 

 accounts: Merchandise Purchases and Merchandise Sales. 



Merchandise purchases. — This account is debited with the cost of 

 the merchandise and freight on the same. It is credited with the 

 cost of goods returned by the organization. The debit balance appear- 

 ing on this account represents the cost of merchandise purchased. 



Merchandise sales. — This account is credited with the total sales 

 and is debited with the total amount of goods returned by customers. 

 The credit balance of the account measures the total net sales. 



Trading account. — This account is a subdivision of the profit and 

 loss account and is used only when the books are being closed. It 

 shows how the gross profit on sales is arrived at. The use of this 

 account is more fully explained under the heading " Closing the 

 Books" (page 20). 



Fruit. — An account is opened under the captions of "Fruit" or 

 "Produce," according to the product handled. This account is 

 credited with the remittances received for the shipments and charged 

 with the gross amounts paid to the growers — that is, the net plus 

 commission. The two sides of this account should balance at the 

 end of the season, showing that full returns have been made to the 

 growers. 



Fruit profit and loss. — An account under the caption "Fruit Profit 

 and Loss," or "Produce Profit and Loss" is carried only when a 

 portion of the products are bought outright from the growers instead 

 of all being handled on a strictly commission basis. This is explained 

 in detail under the description of the journal (page 10). This account 

 measures the profit made or loss sustained on products bought from 

 the growers. 



Commission. — The credit balance appearing on this account will be 

 the amount of the com mission earned. 



Expense. 1 — To this account are debited all disbursements on account 

 of expense. The account can be further subdivided into salaries, 

 rent, insurance, etc., but in a small business it is perhaps just as 

 practical to have the one expense account showing the distribution 

 of the various items in the explanation column on the ledger. At the 

 end of the year, the account is analyzed and a statement made up 

 showing the distribution of the items under various subheadings. 

 If a large amount of office supplies and stamps is carried over at the 

 end of the year, it should be taken into consideration in order to 

 arrive at the true profit or loss. 



i A method for segregating expense items by means of an expense distribution book is explained in U. S. 

 Department of Agriculture Bulletin No. 178 — "Cooperative Organization Business Methods." This will 

 be found a much shorter and preferable method for the larger organizations than the one here given. 



