CLASSIFICATION OF LEDGER ACCOUNTS FOR CREAMERIES. 



25 



There are two distinct methods of settling with patrons for deliveries of butter fat. 

 The first method is to pay according to the market quotations regardless of operating 

 expense; the second is to pay the patrons the entire net income, that is, the total 

 receipts from product, less the total expense. The second method is to be followed 

 in nearly all cooperative creameries. 



In creameries following the first procedure, the periodical debit to butter-fat pur- 

 chases will be the total of deductions for butter delivered to patrons for hauling, for 

 supplies sold to patrons, for collections on notes, etc., as well as payments in cash or 

 by check, as shown by the recapitulation of patrons' vouchers on the Patrons' Settle- 

 ment Sheet. 



Suppose that the Patrons' Settlement Sheet at the close of the period shows: 



Amount to be paid by check $9, 500 



Butter sales to patrons 450 



Supplies sold to patrons 40 



The entry would be : 



Debit. Credit. 



$9,900. Buj^er Fat Purchases. 



Patrons' Accounts Receivable — Butter Sold $490 



Accounts Payable Patrons 9, 500 



The procedure under the second method is fully described on page 20, U. S. De- 

 partment of Agriculture Bulletin 559, "Accounting Records for Country Cream- 

 eries." However, it has been found desirable to substitute for the account Patrons' 

 Overdrafts, the account Patrons' Accounts Receivable, operation of Avhich is des- 

 cribed on page 7 of this bulletin. 



In some creameries any balance -undistributed is allowed to accumulate and is 

 distributed at a later date in the form of a patronage dividend. When this is done, the 

 undistributed balance should be credited to an account captioned Patronage Dividend 

 account and should not be carried forward to the next Operating Statement. 



A patronage dividend is in reality a deferred payment and is advised against, as it 

 necessitates considerable clerical labor, with no apparent advantage. The Patronage 

 Dividend account would be closed by debit, and the corresponding credit to the 

 Bank account. 



The Undistributed Balance account is not raised in the Ledger, inasmuch as it is 

 immediately closed by a debit, the corresponding credit being carried to Butter Fat 

 Purchases . 



However, in preparing a Balance Sheet, such undistributed balance should be shown 

 as a part of the liabilities as illustrated on page 34. 



Skim Milk Purchases (L 2). 



Debit: 



Credit: 



1. With the amount due patrons for 



1. With the debit balance at the close 



skim milk purchased during the 



of the fiscal year. (Debit Loss 



period. 



and Gain.) 



Underpayments and Overpayments (L 3). 



Debit: 



Credit: 



1. With the amount paid to patrons on 



1. With the amount received from pa- 



account of errors in vouchers. 



trons on account of errors in 





vouchers. 



