ACCOUNTS ARE CLEAR AND CONCISE

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

ACCOUNTS ARE CLEAR AND CONCISE

Masterton United Friendly Societies 9 Dispensary, Incorporated (By "Fiat Lux.") Judging by the satisfactory results disclosed m the published accounts of the Masterlon United Friendly Societies' Dispensary, Inc., which are particularly clear and concise, the management is m thoroughly capable hands.

THIS concern is evidently well managed and is not afraid to put all its cards on the table m the shape of properly prepared annual accounts from which even the veriest layman can see at a glance both the gross and net results for the year which ended on January 31, 1928. The published accounts conform to the highest accepted accounting practice and include trading account, which gives the year's gross profit; profit and loss account which gives details of all expenditure and the net profit; appropriation account, m which all depositions of net profit or loss are shown; then the final account, which is the balance-sheet. The outrtandina feature of the accents" ufder review is the £? covery m gross profit. In 1927, with £2612 of sales, the gross profit was only £806, whilst this year on sales of only £2694 the amount is no less than £1414. Thus, m 1927, the rate of gross profit was slightly under 31 per cent, whilst this year it works out at 52y 2 per cent. Knowing that a concern of this kind should regularly produce a gross profit of not less than 50 per cent.—and failing any detailed explanation of the poor results m 1927—"Fiat Lux" believes there must have been something

of the whole of the stock is turned over once m every four months, There are many traders m New Zealand to-day, dealing m all lines except, perhaps, groceries and perishables, who would be very glad indeed to be able to follow this lead, but overbuying is still a curse m retail trade. The delay m obtaining supplies during the war years has no doubt much to answer for m this connection, The nominal capital of this dispensary is £1500, of which £750 is allotted and fully paid-up, The item of share suspense account, £613, may mean anything or nothing, Its title gives no indication whatever of the nature or meaning of the account, which may be a reserve, calls *>«* m a*™nce <* »* thing at wouW be & to item a proper designation m future publications. _ , ... __„ Sundry cred.tors at £200 are perfectly reasonable, particularly so smce the current banking account contained cash to the extent of £385 > the Prompt payment of merchants accounts and the secur'"9 of full discounts being thereby assured. The next item on the liabilities side is bad debts reserve, £25.

MASTERTON UNITED FRIENDLY SOCIETIES' DISPENSARY. Balance-sheet, January 31, 1928. LIABILITIES. ASSETS. £ £ Capital, paid up 750 Furniture and fittings 147 Share Suspense A/c Gl3 Stock 513 Sundry Creditors 200 Debtors 52 Bad Debts Reserve 25 Savings Bank Deposit 505 Appropriation Account 15 Bank 385 Cash 1 £1603 £1603

very seriously wrong with the 1926 or 1927 stock-taking or else a lot of stock had to be heavily depreciated at stocktaking. It must be understood that the gross profit is merely the difference between the buying price and the selling price of stock and is m no way or degree affected by the expenses of running the concern, which affect the net profit only. Reducing this variation m the two years' gross profit . rates down to the simplest possible terms, means that m 1927 goods purchased by the dispensary for £1 were sold- for 29/-, whereas they should have been sold for not less than 40/- if a gross return of 50 per cent, were aimed at. This is a tremendous difference and should certainly have brought forth from the committee of management a full and complete explanation. The balance sheet discloses a very satisfactory financial position, due m a large ■ measure to the fact that the stock is kept down to a very low figure. The tendency m many such concerns is to- overstock, but such an error is very clearly avoided m this case, where the figures show that the value

Seeing that the book debts total only £52, this is surely very hand- 5 some provision. It is to be charitably hoped, however, that the provision of 48 per cent, of the book debts is not intended as any reflection whatever upon the honesty or paying capabilities of the Masterton people, but rather a manifestation of excessive caution and prudence on the part of the management of the dispensary. On the assets side, the outstanding feature is the amount of cash — £830 — £500 of which is on deposit m the Post Office Savings Bank. One cannot help wondering what it is doing there. The ordinary trading banks give a higher rate of interest on a two years' fixed deposit, asrainst which an overdraft can be secured at a moment'o notice. » So why not take ft where It wHI earn the highest possible rate of interest? The Masterton lodges surely have a fine little dispensary going and a continuance of the present careful and capable management must result m further enhancing the returns therefrom.