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BULLETIN 1150, U. S. DEPARTMENT OF AGRICULTURE. 



At the end of the month, the totals of all the columns are brought 

 clown on the same line and are carried forward to the end of the 

 year. However, in preparing the statement of resources and liabili- 

 ties at the end of each month, the balances in the different accounts 

 should be determined and only these used. (See statement of re- 

 sources and liabilities for November 31, 1921, on p. 49.) 



INFORMATION NEEDED TO DETERMINE THE BUSINESS STANDING. 



The records of many associations go no further than the prorating 

 sheet, and information as to their business standing or the condition 

 of their different accounts is not available. It is necessary, if proper 

 accounting is to be done, that the results of the individual shipments 

 be accumulated until the final reckoning at the end of the fiscal 

 period, or oftener. As the estimates for insurance and overhead 

 expenses are often intentionally made high or low, this final reckon- 

 ing will reveal the excess or deficiency of such estimates and bring 

 to light other items which may have been overlooked. Proper dis- 

 position can then be made of the excess reserved, or provision made 

 for taking care of the deficiency. 



Furthermore, every association transacts some business which has 

 reference to no particular shipment. Equipment is bought, claims 

 are collected, money is borrowed or a note paid, office supplies are 

 purchased, the premium on the manager's bond is paid, or farm 

 supplies are shipped in. These transactions affect the standing of 

 the business just as much as those which relate directly to specific 

 shipments. 



All of the business transacted, whether it affects cash or property, 

 debts, reserves, expenses, net worth, or what not, should therefore 

 be brought together and classified according to the accounts affected. 

 Only when this is done will the association be able at all times to 

 answer the question, " How do we stand?" with any degree of assur- 

 ance that it is answered correctly. 



The business standing of an individual or a business concern is re- 

 vealed by the statement of resources and liabilities. In the case of 

 a farmer purchasing a farm for $50,000 and paying $30,000 in cash 

 and giving mortgage notes for $20,000, the statement of resources and 

 liabilities would appear as follows : 



Resources. 

 Farm $50, 000 



Liabilities. 



Notes payable $20,000 



Net worth 



Owner's investment 30,000 



50, 000 50, 000 



This statement shows, first, that the farm business, as a unit in 

 itself distinct from the owner, is in the possession of property valued 

 at $50,000. In the second place, the statement shows the kinds and 

 the amounts of the different equities in the business. Note holders 

 have a prior claim of $20,000 against the undivided property of the 

 farm business. The remaining $30,000 represents the owner's equity. 



If the owner had invested $40 T 000 instead of $30,000, the other 

 items (value of farm and the indebtedness) remaining the same, the 

 owner's claim against the business would be worth only 75 cents on 

 the dollar, as there would be only $30,000 left after paying the note 



