SELF-SEEVHSTG IN EETAILING FOOD PRODUCTS. 43 



preparation of this summary is explained in the following para- 

 graphs. 



13. Opeeating Statement. 



The " sales " figures should represent only the actual or net sales ; 

 that is, the money taken in less any allowance to customers for 

 spoiled or unsatisfactory goods purchased or for containers or pur- 

 chases returned. 



Opposite " purchases " should be entered the total billed cost of 

 merchandise bought during the year, less cash discounts received and 

 less allowance recei^'ed from wholesalers for unsatisfactory goods. 



"Inward transportation" should include freight, express, and 

 drayage on incoming merchandise paid by the business. 



The " inventory at end " should show the billed cost of the mer- 

 chandise on hand, less the sum of physical depreciation, market 

 declines below billed cost, and the average percentage of cash dis- 

 count received. Inventories should never be taken at market prices 

 where such prices are greater than billed cost. 



The " inventory at end " is subtracted from the " cost of goods 

 handled," leaving " cost of goods sold." The latter figure is sub- 

 tracted from the " sales," leaving the " gross profit," which repre- 

 sents the difference between the selling and cost price of goods sold 

 during that period. The totals of the various subdivisions of the 

 expense account are added, and this final total is subtracted from 

 the " gross profit," leaving the " net profit or loss." The column at 

 the right may be used to write in the percentages which the items 

 bear in relation to total sales, the latter being 100 per cent. The 

 chief value of these percentages is that reports covering different 

 periods can be more readily compared. 



ASCERTAINMENT OF SHRINKAGE. 



The accounting methods already discussed will enable a manager 

 to see how much profit he has been making, his turnover, volume of 

 business, and the expenditures for each of the several classes of ex- 

 pense. The percentage of expense to sales obtained in this way, 

 however, can not be used alone for determining the average per- 

 centage of sales that is necessary as a mark up in order to meet the 

 expenses of the business. Certain actual losses in the goods them- 

 selves must also be considered. 



Spoilage of goods during handling, evaporation in the case of 

 some goods, thievery, waste, and overweight cause a less quantity of 

 goods to be sold than are bought. It may also be necessary to lower 

 the price originally settled upon in order to meet market declines in 

 the wholesale market or competition. Other goods may be marked 

 down for advertising purposes. 



