Farm Accounts

Te Aroha News, Volume XXXIX, Issue 6172, 14 January 1922, Page 1

Farm Accounts

Income and Profits How many farmers are able to telll at short notice just how they sat; d financially ? The question is suggested by an interesting pamphlet which has been issued by the United States Department of Agriculture, and in which is outlined a method ot analysing the farm business with a view to determining the investment, expenses, and profits. The analysis is based on preliminary accounts tabulating labour and other records of all items, as well as the records of costs incurred in feeding live stock. Tho entire system is finally brought down to a table called the farm summary, which groups totals of the detailed accounts under the heads of investments, farm income, interest on investments, and labour income, value of operators labour, percentage return on investment and value of items for family use. The fist three headings are again subdivided into three, as follow ; —(|) Investment including real estate, live stock, machinery a d equipment, food and supplies, and cash to run a farm ; (2) farm receipts, comprising live steck increases other sources and increase in food and supplies; (3) farm expenses, compiisiug current c ists, unpaid family labour, depreciation and decrease in food supplies. To crave at the investment result, the average of the investments at the b -ginuing and at the end of the faim y ar may bo ak>n, or merely the iuvistn.cnt at the beginning of the year, which ever iepeesents more neilly the true capital iuvested in the yen’s business. The choice . is goveiued by tho c editions on individual farms. If real esta'e improvement! are made, additional iquipment pu'chased or additional live stock added oatly iu the yen’s busTrss, tho ave age of the investment at the beginning and the end of the farm year should be used. Should such changes iu investment havo occuiued lato ia the year, the amouut at the beginning of the year will probably represent more nearly the c*pital f orn that year's business. I he total under the live subordinate heads already mentioned will give the entire farm investment rn which interest should be

charged. Under receipts the sum of the four subordinate groups will represent the total of the receipts of the farm, and in like manner the items which fall under tho general heading of expenses will show the positions for total outgoings. Farm income is arrived at by subtracting the total expenses from the total receipt for the use of capital and workmen’s wages. In calculating labor income, it must be remembered that capital has au earning power which at least eqnals the current rate on well, secured farm loans. Interest at this rate deducted from the farm income gives the farmer's labor income This last represents the amount of moDey remaining to the farmer after payirg all business expenses and deducting interest on the money invested in the business. In addition to the labor iucome, the farmer has the use of the farmhouse and products suchjas fruit, garden vegetables, dairy produce and fuel, that are furnished by his land toward his living. The difference between receipts and expenses will not necessarily correspond to the money in hand or in the bank, as personal and living expenses have to be paid out of this amouut. A further deduction will be interest on morgage or other debts, together with any principal paid. The object of this record is to ascertain how much the farmer makes, not how much he actually saves. After the farm return is made, the responsibility rests with the farmer himself as to liow much he will spend personally or use in other ways There must be a proper relation between all the different classes of work carried od, and account keeping will enable farmers to ascerta.u at once and with accuracy which of their undertakings are snece sful and which unsuccessful.