WHERE IS THE RESERVE

Shannon News, 21 August 1923, Page 3

WHERE IS THE RESERVE

FARMER v. ACCOUNTANT. At the annual meeting of the Okoia Co-op. Daily Co., Ltd., a dairy- farmer asked for ;enlighjtenm&nt upon the reserve. ""Has the company got that money in? Does, it exist in hard cash?" he asked. The chairman replied that a lot of the money had been used for the time being in improvements to the buildings. The farmer considered that n sltould be put away into a sinkingfund and should be ready as cash to be used when called upon. The company secretary explained the position in this way. "Suppose you put the money away arid get interest on it, and the time comes when an overdraft is needed, with interest to he paid. What is the good of that? It is better for -us to use it actively for the purpose of the company. 'We can put it away in cash if we like, but we save money by u-ung it. It is shown in the balance sheet as a. liability of the company, and cannot be used for paying out. dividends. It is an accountancy matter difficult for one not versed in accountancy to understand. The reserve is really contained in the assets of the company, which, if realised, would provide for that amount -in hard cash. This is the common practice in such matters.