ACCOUNTING RECORDS FOR COUNTRY CREAMERIES. 19 



the above reserves, it is sometimes desirable to carry the undis- 

 tributed balance of income, as shown by the operating statement, to 

 the ledger instead of carrying it forward to the head of the next 

 month's operating statement for distribution. Since the undis- 

 tributed balance is excess income, it can only be considered as an 

 amount of surplus, and therefore can not properly be designated as 

 a reserve, although it may be used as a fund for general purposes not 

 specifically covered by other reserves. 



CLOSING THE LEDGER. 



At the end of the fiscal year the books of the creamery should be 

 closed. In books operated in conformity with the instructions con- 

 tained in this bulletin, the totals of the income and expense accounts 

 portrayed in the ledger are the result of accumulated credits and 

 debits for the entire yearly period. 



A physical inventory should be taken of all property and supply 

 accounts, the value of which should be credited to the inventory 

 accounts in the ledger and carried forward as the balance on hand at 

 the beginning of the year. Should the inventory accounts show a 

 credit balance, it will indicate that the usage charged to such accounts 

 has not been distributed in the proper amounts during the year. 

 The error in distribution either may be charged entirely against the 

 last month or may be prorated as added expense during the months 

 of the following year. 



All income and expense accounts should be closed by debiting 

 them with an amount to balance and such amount should be carried 

 to the profit and loss account. If the entire income has been 

 expended during the year, the profit and loss account should balance 

 and there should be no addition to surplus. However, an undis- 

 tributed balance in the operating statement of the last month is 

 often shown and, in that event, the profit and loss account should 

 show a credit balance of an equal amount. Where an undistributed 

 balance is shown, it may be added to surplus or profit and loss may 

 be debited, and the amount carried forward to the operating state- 

 ment for the first month of the following year, there to be distributed, 

 together with other income of the month. 



In opening the books for the new year, all accounts shown will 

 then be either assets or liabilities, together with surplus, capital, and 

 reserves, the latter representing the net capital of the company. 1 



THE OPERATING STATEMENT. 



After all entries covering income and expenses have been made 

 in the ledger, the monthly balances of these accounts should be 



1 For further discussion of this subject, see IT. S. Department of Agriculture, Office of Markets and Rural 

 Organization, Document No. 2: Lumber Accounting, and Opening the Books in Primary Grain Elevators. 



