SYSTEM OF ACCOUNTS FOE FARMERS* COOPEEATIVE ELEVATORS. 17 



an amount which experience would dictate is sufficient to take care 

 of the uncollectible debts of the company. 



While many elevator companies make a practice of furnishing 

 supplies to members and others on credit, all supplies, if possible, 

 should be handled on a strictly cash basis. Any system of extending 

 unprotected credit requires a large capital and often results in con- 

 siderable loss. 



RESERVE FOR SINKING FUND. 



In some States, notably South Dakota, where the cooperative law 

 is in operation, a statutory regulation requires that a certain per- 

 centage of the capital invested be set aside each year in a reserve for 

 sinking fund, so that the company will be in a position to retire its 

 capital stock at the end of a given period. Companies operating 

 under such conditions should set up a reserve for sinking fund in 

 accordance with the requirements of their State laws. 



Where the custom of hedging grain prevails, an account should be 

 opened designated "profit and loss on hedging/' To this should be 

 debited or credited the losses or gains incident to the hedging of grain, 

 the opposite entry being made to the commission account handling 

 the business. 



To determine the profit and loss for the year, all income accounts 

 should be credited and all expense accounts debited to this account. 

 When the amount of profit has been ascertained, dividends may be 

 declared and paid, and the remainder transferred to the surplus 

 account. 



After the books have been closed for the year, any errors discovered 

 affecting the previous year's business should be entered in the account 

 affected and carried to the opposite side of the surplus account, the 

 profit and loss account being reserved for the current year's business. 



The individual needs and the peculiar conditions surrounding 

 elevators in different parts of the United States may require other 

 accounts besides those discussed above, and if such is the case, 

 accounts covering these special requirements may be opened along 

 the same general lines as those previously discussed. 



The following balance sheet is submitted as a guide in the arrange- 

 ment of assets and liabilities. Other asset and liability accounts 

 may appear on the books of an elevator and in such case should be 

 included. 



