SYSTEM OF ACCOUNTS FOR FARMERS' COOPERATIVE ELEVATORS. 17 
an amount which experience would dictate is sufficient to take care 
of the uncollectible debts of the company. 
While many elevator companies make a practice of furnishing 
supplies to members and others on credit, all supplies, if possible, 
should be handled on a strictly cash basis. Any system of extending 
unprotected credit requires a large capital and often results in con- 
siderable loss. 
RESERVE FOR SINKING FUND. 
In some States, notably South Dakota, where the cooperative law 
is in operation, a statutory regulation requires that a certain per- 
centage of the capital invested be set aside each year in a reserve for 
sinking fund, so that the company will be in a position to retire its 
capital stock at the end of a given period. Companies operating 
under such conditions should set up a reserve for sinking fund in 
accordance with the requirements of their State laws. 
Where the custom of hedging grain prevails, an account should be 
opened designated "profit and loss on hedging." To this should be 
debited or credited the losses or gains incident to the hedging of grain, 
the opposite entry being made to the commission account handling 
the business. 
To determine the profit and loss for the year, all income accounts 
should be credited and all expense accounts debited to this account. 
When the amount of profit has been ascertained, dividends may be 
declared and paid, and the remainder transferred to the surplus 
account. 
After the books have been closed for the year, any errors discovered 
affecting the previous year's business should be entered in the account 
affected and carried to the opposite side of the surplus account, the 
profit and loss account being reserved for the current year's business. 
The individual needs and the peculiar conditions surrounding 
elevators in different parts of the United States may require other 
accounts besides those discussed above, and if such is the case, 
accounts covering these special requirements may be opened along 
the same general lines as those previously discussed. 
The following balance sheet is submitted as a guide in the arrange- 
ment of assets and liabilities. Other asset and liability accounts 
may appear on the books of an elevator and in such case should be 
included. 
