GUARANTEED, BUT NOT CONTRIBUTED

NZ Truth, Issue 1168, 19 April 1928, Page 14

GUARANTEED, BUT NOT CONTRIBUTED

Jinanetaljjeviews

SB

Toko. Farmers 9 Trading Association, Ltd., Balance-sheet Discussed (By "Fiat Lux.") From the fad that the capital of the Toko. Farmers' Trading Association, Ltd., is a minus quantity, "Fiat Lux" believes the company to be a rara avis —a company whose capital is guaranteed and not contributed.

THE Companies Act, 1908, actually provides the machinery for such a concern, but it is seldom indeed that one is met with. There are a number of points about this concern which lead one to the conclusion that it is not carried on as an ordinary trading business, but rather as a commission-buying agency for members whose object is to obtain gooda at the lowest possible price. Only from this point of view can the results shown m the trading account, and m the profit and loss account fc>«» arrpntpH « nti-.»t* n,, n I sheer absurdities I sheer absurdities. For instance, the stock on hand at the commencement of the year was valued at £405; purchases during the year amounted to £4725. Adding these together shows that

are discounts received from merchants; and thirdly, it would appear that subscriptions are received from shareholders. Tho commission on sales for the year amounted to £205, but owing to the loss of £34 m stock, this was reduced £171, which forms the firm's g rO3S profit for the period and is equal t0 on]y 3^ per cent. on sales. r £o this gross profit of £171 has to be afldefl merchants' discounts of £103 and subscriptions £39, making a total £™f lncome of/31i' woar OTnmiTl*Afl The expenses for the year amounted to £257 arid include £31 interest, presumably on bank overdraft, and £61 for railage and cartage, leaving a final net profit of £sG—equal to 1.1 per cent, on sales, j t is worthy of note that although the book-debts amount to nearly £500,

TOKO. FARMERS' TRADING ASSOCIATION, LIMITED. Balance-Sheet December 31, 1927. LIABILITIES. ASSETS. £ £ Bank overdraft 381 Stock „■.., 261 Sundry creditors , 39G Furniture and fittings 1 17 Accrued charges 52 Debtors 483 Cash 2 Capital account „. 122 Less' profit 56 — 66 £829 £829

the Association received £ 5130 worth of goods at prime cost—that is, exelusive of railage and cartage. On the other side, It Is found that goods to the value of £4835 were sold and £261 worth were on hand at the end of the year, together making £5096. Thus we find that tho Association received £5130 worth of goods during the year, but lias accounted for only £5096 worth, exclusive of railage and cartage. There would thus appear to be a direct loss of £34 m goods handled and no explanation -whatever is forthcoming from the chairman m his report to shareholders. Perhaps ho did not realize just how the figures would analyse. Now, regarding remuneration to the Association for handling this volume of business, and to reimburse it for railage, cartage and other direct and Indirect charges, this would appear to be effected m three different ways. Firstly, purchasers are charged a commission of about 4.2 per cent. on their purchases; secondly, there

no provision whatever has been made for bad and doubtful debts, nor has depreciation been provided m respect to furniture and fittings, Let us turn to the balance-sheet, The first thing that strikes one is that the concern is insolvent, since its liabilities amount to £829 and its assets to £66 less. This, although "audited and found correct," can hardly be a correct statercient of the position, Even though the capital is provided by guarantee f it should be snown appropriately m the balancesheet, whereas if there are ordinary shares, they should be shown m the usua| manner. „,,,.- , „ , . Looked at from any angle this balance-sheet is really wonderful: "Debts to the right of them, Debts to the left of them, Debts m front of them ...» seems to sum up the situation, Perhaps constant and intimate assoelation with many mortgages has for many of the farming community i-ob-bed debt of its sting.