A SYSTEM OF ACCOUNTS
FOR A SMALL CONSUMERS' CO-OPERATIVE
By Earl R. Browder.
Of systems of bookkeeping there is no end. Every kind of busi-
ness and every individual business has a system of its own. There arc
probably no two sets of books in existence whi«h aye exactly alike.
This condition is to some extent necessary,' and s^^ie'C^jmot expect that
even in the Co-operative Movement we shall soon _^find accounting
methods completely standardized, ; * ; : *; \/ j j/: » :
It is in the Co-operative' Movement, however, that the need for
standardization methods is most felt. Especially is this so in Con-
sumers' Co-operation. But unfortunately, the co-operator who investi-
gates accounting systems for the purpose of applying them to his own
"infant" co-operative, too. often finds nothing but a maze of "forms,"
"reports," "columnar books," etc., most of which he finds he cannot ap-
ply to his own business with conyenience or economy. He therefore
falls back upon his more or less complete knowledge of accounting
principles and constructs a system of his own.
In preparing this leaflet on accounting the purpose has been to
present a simple working scheme for small societies, which represents
the concensus of opinion as to proper method. However, the forms
will not work of themselves. This and all systems presuppose some
knowledge of book-keeping by the user.
At present it is not possible to draw up a set of forms which will
be applicable to any large number of organizations. There must first
be a greater understanding of the principles upon which it must be
constructed, and more agreement as to what results are wanted.
Toward these ends the League is working.
If possible, avoid the use of unnecessary special forms, which are
very expensive, and use forms which may be obtained already ruled.
The original entry for cash sales will probably be by means of a
cash register, which is the most efficient manner of handling cash re-
ceipts. If it is impossible to install a cash register system, sales slips
with carbon copies should be used (Form No. 1), in which case every
slip must be carefully accounted for, each clerk being responsible for
the book in his i30ssession, and the total cash sales entered, from these
slips, in the cash report at the close of each day.
Every receipt o£ cash, other than cash sales, is entered upon Form
No. 2. This is a carbon receipt book. One receipt is given to the
payor, and the amount of the one retained is entered on the cash re-
port each day.
Every cash payment is entered upon Form No. 3. This voucher
gives the details of the obligation that is cancelled, the approval of the
manager, the certificate of correctness if passed upon by any other
than the manager, and the receipt of the payee. The voucher is num-
bered and entered ;ip,. the cash, report each day. Some such voucher
should always Ije, prp.vjidedlfijr Qases where an invoice is not obtain-
able. Wheri an invoice is available it provides the best voucher pos-
sible wheijfpfope^lyi-eceiptMrThe^ manager's O. K. should appear'
on each Voiicher: ■ ' ' '',.. ':,' ■, >i'
Form No. 4 is a Daily Cash Summary o£ Receipts and Payments.
The form given is merely suggestive. In practice it may be varied to
suit the needs of the business. Here is the only place where the cash
is balanced daily. This should always be done. The entries may be
made daily from this Summary or from the separate slips into the
Journal, or the cash account may be carried forward on this Summary
until the end of the month and then the cash totals posted directly in
the General Ledger. The distinctive feature is that nothing but cash
transactions are included in this Summary, and that every cash trans-
action is indicated fully, showing its full significance.
Form No. 5 is a tabulation of Credit Sales for each day. The
credit sales are orginally entered upon slips of the same kind as
Form No. 1, but of different color. Each day they are totalled on Form
No. 5, classified by departments, and entered in the Journal.
Form No. 6 is the Invoice Register, in which every invoice for
purchases is entered when received. Some stores include in the Reg-
ister all information as to discounts and deductions of every kind;
small stores will not find this necessary. The essential points are that
it gives a total of Accounts Payable incurred during the month, the
distribiition of merchandise purchases by departments, and indicates
for what account any other purchases- are made. At the end of the
month the total of this Register is entered in the Journal (Form No.
7), crediting Accounts Paj^able, debiting Merchandise with goods
charged to departments, and debiting Expense and other accounts with
whatever was purchased for that purpose.
All transactions not covered by the cash or credit reports are en-
tered upon a Journal Voucher (a plain ruled slip on which are noted
the details of the transaction covered, and the accounts to be debited
and credited), which explains their nature fully, and from there to the
Journal. For example, all discounts earned during the month and de-
ducted from Accounts Payable are entered upon a Journal Voucher
and the total at the end of the month credited to Discount and debited
to Accounts Payable.
The details of Accounts Receivable are not noticed daily in the
'Journal. The totals merely are entered. At the end of the month,
these go to the General Ledger, to the Aci^ounts Receivable page, as
an asst.. The details are posted direct: vl an Accounts' Receivable Led-
ger from the original charge slips and from the daily cash report. The
total balances of this Accountii i^eceii^able Lf^dger are verified at the
end of the month by comparison with the "control" account in the
The same method is used with the details of the Accounts Pay-
able: these are posted in an Accounts Payable Ledger directly from
the Invoice Register and the cash report. The total balances at the
end of the month are verified similarly in the General Ledger.
The Journal (Form No. 7) co-ordinates all the business and clas-
sifies it for entry once a month into the General Ledger. The first
column. General Ledger, takes the place of from about six to eighteen
separate columns which would be necessary if there were a column for
every account not enumerated in the other five columns. Such iterns
as these should be posted in the General Column : Capital Stock, In-
terest, Dividends, Discounts, Fixtures, Taxes, Real Estate, etc. Other
columns are opened for Cash, Merchandise, Expenses, Accounts Piiy-
able and Accounts Receivable. Entries should be made daily, and the
totals classified and posted to the General Ledger at the end of the
The General Ledger is the most essential book in the whole sys-
tem of accounting. It is posted once a month from the Journal, or the
special slips, vouchers, registers and ledgers. Additional columns are
opened for each of the items usually entered in the Journal Column
under "General Ledger" column, the other columns being the same as
in the Journal. These items are classified and the month's totals are
entered. In the Ledger should be found all the information of the
month's operations, and in such a co-ordinated form that nothing is
lacking but an inventory of the propertly in the possession of the So-
ciety with which, from the records, can be made up at once the com-
plete Trading and Savings and Loss Accounts of the Society.
Surplus Savings (or profits) are not ordinarily ascertained oftener
than once each quarter in co-operative circles. The wisdom of fre-
quent inventories and the quarterly stock-taking, however, have been
amply demonstrated. These have become as important institutions
in the Co-operative Movement as the Savings-return or Purchase Div-
idend, After the quarterly inventory has been taken, the excese^ of
Assets over Liabilities should be ascertained. This amount, in Co-
operative phraseology, is the surplus-saving. If by agreement with
the members of the Society it has been determined to pay this surplus
saving back to them, in proportion to their purchases, this should be
done quarterly. If not, the whole surplus savings may be employed
for the general welfare of the members through many social measures.
It is customary to set aside from the surplus saving a certain propor-
tion (30%) for a reserve fund, for depreciation and expansion, and an
additional amount (not less than 5%) for co-operative educational
purposes. Interest on capital stock and the expenses of the store must,
of course, also be divided before the final distribution of the surplus
saving is made among the members.
The essential points of this system are that:
(1) Cash transactions are handled separately;
(2) The Cash balanced each day;
(3) Credit transactions are similarly separated, and come
into the Journal distinctively noted as credit trans-
(4) All other transactions are handled by Journal Vouchers,
and are entered directly in the Journal ;
(5) All transactions of whatever nature are entered im-
mediately, whether they involve the payment of cash
The CO-OPERATIVE LEAGUE will be glad to answer ques-
tions about accounting methods for Co-operative Societies. *
Form. No. 1
Cash Sales Slip (Original)
Form No. 2
Cash Keceipt Sook (original)
Form No. 3
Cash Payment Voucher
Charge to Account
Org. Bill from dealer to be attached to this form
Received Payment for above Account
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