SELF-SERVING IN RETAILING EOOD 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 received 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. 
