SYSTEM OF ACCOUNTS FOE FARMERS COOPERATIVE ELEVATORS. 3 



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 applies, 

 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 prevailing 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 

 usefulness 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 neg- 

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

 trained for such work and use very little time to complete their re- 

 ports. It should be apparent, then, that it is good business practice 

 to secure the services of a certified public accountant who has had 

 sufficient practice in elevator accounting to be able to give vital in- 

 formation 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 well as benefiting 

 themselves by contact with him. The item of cost in connection with 

 the hiring of public accountants has been the deterrent factor which, 

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

 availing themselves of such services. By banding together, sev- 

 eral cooperative elevator companies might give an accountant steady 

 employment throughout the year and secure his services at a greatly 

 reduced rate. 1 



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

 Organization Business Methods. 



