SYSTEM OF ACCOUNTING FOR COOPERATIVE ASSOCIATIONS. 19 
Inventory. — The debit balance appearing on this account measures 
the cost of goods on hand at the beginning of the fiscal year. 
Merchandise. — The Merchandise account is divided into two 
accounts: Merchandise Purchases and Merchandise Sales. 
Merchandise purchases. — This account is debited with the cost of 
the merchandise and freight on the same. It is credited with the 
cost of goods returned by the organization. The debit balance appear- 
ing on this account represents the cost of merchandise purchased. 
Merchandise sales. — This account is credited with the total sales 
and is debited with the total amount of goods returned by customers. 
The credit balance of the account measures the total net sales. 
Trading account. — This account is a subdivision of the profit and 
loss account and is used only when the books are being closed. It 
shows how the gross profit on sales is arrived at. The use of this 
account is more fully explained under the heading " Closing the 
Books" (page 20). 
Fruit. — An account is opened under the captions of " Fruit" or 
"Produce," according to the product handled. This account is 
credited with the remittances received for the shipments and charged 
with the gross amounts paid to the growers — that is, the net plus 
commission. The two sides of this account should balance at the 
end of the season, showing that full returns have been made to the 
growers. 
Fruit profit and loss. — x\n account under the caption " Fruit Profit 
and Loss," or "Produce Profit and Loss" is carried only when a 
portion of the products are bought outright from the growers instead 
of all being handled on a strictly commission basis. This is explained 
in detail under the description of the journal (page 10). This account 
measures the profit made or loss sustained on products bought from 
the growers. 
Commission. — The credit balance appearing on this account will be 
the amount of the commission earned. 
Expense. 1 — To this account are debited all disbursements on account 
of expense. The account can be further subdivided into salaries, 
rent, insurance, etc., but in a small business it is perhaps just as 
practical to have the one expense account showing the distribution 
of the various items in the explanation column on the ledger. At the 
end of the year, the account is analyzed and a statement made up 
showing the distribution of the items under various subheadings. 
If a large amount of office supplies and stamps is carried over at the 
end of the year, it should be taken into consideration in order to 
arrive at the true profit or loss. 
i A method for segregating expense items by means of an expense distribution book is explained in U. S. 
Department of Agriculture Bulletin No. 178— "Cooperative Organization Business Methods." This will 
be found a much shorter and preferable method for the larger organizations than the one here given. 
