Topic: Farm Accounts
Contents –
- Farm Accounts
- Types and Importance of Farm Accounts
Farm Accounts
Farm Accounts are statements of money paid out or received for goods and services used in farming business. Money is received due to sales of farm produce or loans from othe sources while money is paid out for purchases of farm produce or settlement of debts. At the end of a given period, the farmer should be able to know whether the business is yielding profits or losses.[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”]
Types of Farm Accounts
- Sales Account – This shows the details of produce sold which also includes – type of produce, quantity sold, amount paid by customer, date sold and customer’s information. Also known as sales and receipt account.
- Purchase Account – This shows the details of all items purchased for use on the farm. It includes name of input, date purchased, number of input or quantity and cost of input.
- Farm Valuation – Farm valuation is carried out to get the time value of the farm. It is carried out at the beginning and end of the accounting or production period.Valuation of the farm at the beginning is known as Opening Valuation while at the end of the production year is known as Closing Valuation.
Importance of Farm Valuation
- A good valuation will determine the disposable value of the farm when the need arises
- useful for tax assessment
- Used to prepare balance sheet
4. Cash Analysis Account – This shows the details of income and expenditure of a farm over a given period of time. Sales and receipts are entered on the left hand while purchases and receipts are entered on the right hand. Total received is recorded at the bottom of the left hand and Total paid is recorded at the bottom of the right hand.
Importance of Cash Analysis Account
- Helps in planning of farm activities
- Useful in preparing balance sheet
- Used in the preparation of profit and loss account
5. Farm Income Statement – It comprises all farm receiptsand expenses carried out on the farm over a specific period of time. It gives an accurate profitability of the farm.
Income statement for Green Praise Farms for the Month of June, 2017
Expenses N : K Receipts N : K
Feeds 2,000.00 Eggs 5,000.00
Drugs 400.00 Culled Layers 3,000.00
Water 500.00 Manure 2,500.00
Labour 1,100.00
Fuel 1,500.00
Net Income 5,000.00
10,500.00 10,500.00
6. Balance Sheet – The balance sheet shows the capital or financial position of the farm at the end of the accounting period usually a year. List of assets is on the right side while list of liability is on the left hand side.
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