2 BULLETIN" 381_, U. S. DEPAETMENT OF AGRICULTURE. 



is assumed that no corporation will engage in business without em- 

 ploying a competent bookkeeper. 



In a large percentage of business failures the cause can be traced 

 directly to defective methods of analyzing the business through the 

 absence of carefully kept records.^ No business can hope to succeed 

 unless its condition is kept constantly before the management in the 

 form of comparative statistics upon which future operations may be 

 based. 



It is important that the system of accounts be adapted to the busi- 

 ness in hand. It should be as simple as circumstances permit, but 

 it must be adequate for the analysis of every phase of the business; 

 the results must be capable of proof by means of double entries, and 

 the facts must be available at all times to the management. 



The form of accounting records depends largely upon the informa- 

 tion desired and the character of the business they serve. It is poor 

 economy to sacrifice completeness and real usefulness for simplicity. 

 Under no circumstances should a system of accounts be adopted 

 until it is certain to meet every demand for information that may be 

 made on it. 



It is impossible to exaggerate the importance of selecting a proper 

 system of accounts. By "system" is meant, not a disconnected 

 mass of notes and memoranda, but a scientific analysis of the busi- 

 ness. Nor should the value of standardization of accounts be over- 

 looked. One of the greatest arguments in favor of adopting a uni- 

 form system of accounts is to enable managers to draw comparisons 

 between theirs and other stores and groups of stores. 



The only essential difference between accounting for cooperative 

 and other retail stores lies in the fact that the former are semipublic 

 institutions, while the latter are private enterprises. In the cooper- 

 ative store the working capital is contributed by a large number of 

 persons, who are entitled to regular reports. The business is man- 

 aged by a board of directors, which requires constant information 

 concerning the conduct of the business. The law creating the asso- 

 ciation prescribes certain methods of publicity. Moreover, the 

 accounting for cooperative associations is complicated by the fact 

 that the net earnings are usually distributed to patrons, frequently 

 to both members and nonmembers, in proportion to their purchases 

 from the store. 



In every corporation organized for profit there are two distinct 

 classes of records: First, those pertaining to its corporate existence, 

 including its articles of association, by-laws, and the minutes, the 

 capital contributions of its members, the distribution of dividends, 

 and the like ; and, second, the records of operation, or trade, and the 

 relation of the business to the public. 



1 Kerr, W. H., aaid Nahstoll, G. A. Cooperative organization business methods. U. S. Dept. of Agr. 

 Bui. 178. 1915. 



