Agricultural Economics IV: (Farm Accounts) - Agriculture Form 4 Notes

Introduction

Financial and physical records if accurately kept in the farm serve as very important tools in decision-maki
The records are kept in several books and statements as follows:

This is a document issued by the seller to the buyer for goods taken on credit, and payment to be done later.
The original is given to the buyer and duplicate retained by seller.
The invoice shows the following:
- The buyer and seller.
- Date of transaction.
- Amount involved.
- Invoice number.

This is a document issued by the seller to the buyer when cash payment for goods delivered is made.
It shows the following:
- The buyer and the seller.
- Date of transaction.
- Amount involved.
- Serial number

It is a document which shows that the goods have been delivered.
The receiver verifies the goods and then signs on the delivery note.
The delivery note shows the following:
- Goods delivered as per order.
- Quality or condition.
- People involved in the transaction.
- Date of delivery.

It is a book of first entry showing a record of all business transactions arranged in the order in which they occur.
Its pages are divided vertically into five sectio
The information is posted to the ledger

This is a list of all the possession/assets item by item and their market value.
Such items are land, livestock, tools and equipment and crops in the store.
Valuation is an estimation of the value of each asset or item, based on market price or cost of production.

Issued by the purchasing officer of the supplier for example school.
It shows people involved in the transaction, types and amounts of goods ordered and dates.
It should be written and signed by the authorised officer.
It is written in duplicate and the original is given to the supplier.

Is a book which contains individual accounts.
It is a principle book of accounts in which entries contained in all the other books are enter
It is a storehouse of all the transactions.
Each page is numbered and vertically divided into two equal parts namely credit and debit.
Each part is further sub-divided into four sections.

It is a book where transactions involving cash or cheque payments are record
It involves cash or cheque payments and receipt
It is divided into two parts - debit and credit side.
All the receipts of cash or cheque are recorded on the debit and all payments are recorded on the credit side

Example: Enter the following entries in the cash book.

Cash Book record
Dr				Cr
Date	Details	Cash	Bank	Date	Details	Cash	Bank
1.7.05 3.7.05 11.7.05	Received from Ndete Received from Ngala Cash	5000 2000	2000	2.7.05 4.7.05 9.7.05 20.7.05	D.A.P Water bill Telephone bill Cash	400 500	5000 2000

It involves the recording of sales and receipts, purchases and ex
Each sale or purchase is entered twice, once in the total column and once in the analysis column.
The sum of all the entries in the total column should always equal the sum of the entries in all the other columns.
The cash analysis account sheet is given above.

It is a financial statement of assets and liabilities recorded on a given date.
It shows the financial position of a farm business at a glance (snapshot).
Assets are items owned by the farmer, these include:
- Property (money, goods and buildings).
- Debts receivable from other people.
- Goods and services paid for in advance.
Assets can be divided into two:
- Fixed assets: assets of permanent nature and not easily converted into cash.
- Current assets: assets which can be easily converted into cash.
Liabilities are claims to the farmer's property such as bank overdraft and debts payable. They are divided into:
- Current liabilities - debts which must be paid within a short time.
- Long term liabilities - debts which are payable over many years or over a long period.

Balance sheet of Katilo school as 31-12-2009
Assets	Shs.	Cts.	Liabilities	Shs.	Cts.
Fixed Assets Land Buildings Fences and other structures Current Assets Livestock Debts receivable Cash in bank Cash in hand sub-total			Long-term liabilities Long term loan for land development Loans payable over 15 years Current Liabilities Debts payable Credits from friends Short term loans sub-total
Total			Total

Prepared at the end of a calendar year.
It is a final account which summarises the sale and receipts (income flowing in the business) and the purchases and expenses (flowing out of the business).
Note: If assets are more than liabilities then the balancing factor is net capital (in the liability side) hence the farm business is said to be solvent.
If the liabilities are more than the assets, then the balancing factor is a loss (in the asset side) hence the farm business is insolvent.
To calculate profit or loss, account, valuation is done by having an inventory of all the assets.
Valuation of the assets is determined by market price and cost of production for machinery and buildings as depreciation factor, is attached.

Profit and Loss Account of Kitheko Farm at 31-12-2009
Sales and Receipts	Shs.	Cts.	Purchase & Expenses	Shs.	Cts.
1. Income during the year 2. Debts Receivable 3. Closing valuation Balance (being a loss)			1. Opening valuation 2. Expenditure during the year 3. Debts payable Balance (Being farm profit or net income)
TOTAL			TOTAL