Explain briefly the following terms in farm management: (a) farm valuation. (b) cash analysis account; (c) profit and loss account; (d) balance sheet.
Explanation
Explanation of terms in farm management:
(a) Farm valuation.. (i) This is carried out or performed in order to get a time value of the farm. (ii) The exercise is always carried out at the beginning as ng and end of the accounting or w production period, usually a year. (iii) the value of the farm at the beginning is opening valuation while at crops, the end of the production period is closing valuation. (iv) a complete list of all livestock, ts,machinery, buildings and stored products is made during the exercise (v) the value of each item in stock is estimated. (vi) good valuation will assist in determining the disposal value of the farm if the need arises. (vii) It is also useful for tax ax assessment.
(b) . Cash analysis account: (i) shows the details of income and expenditure of the farm over a given period. (ii) in preparing the account, sales and receipts are entered on the left hand side containing columns for date, name and details of particulars and a number of cash columns. The first of these cash columns is headed “Total received” and is followed by columns for the main products sold and other receipts. (iii) purchases and expenses are entered on the right hand side. The first cash column is headed “Total paid” and is followed by columns for items purchased and other costs. (iv) it helps in planning of farm activities. (v) It also helps in preparing balance sheet and profit and loss account.
(c) Profit and loss account: (i) gives a measure of the profit or loss obtained during the accounting period, usually a year. (ii) purchases and expenses are put on the left and sales and receipts on the right. (iii) closing valuation is also on the right and the opening valuation on the left. (iv) the net profit is on the left side while the net loss (if any) is on the right. (v) this helps to determine the overall performance of the farm at the end of the accounting period. (vi) it helps and aids future planning of the farm for better results.
(d) Balance sheet: (i) this is a statement showing the financial position of the farm at the end of the accounting period usually a year. (ii) it assists also in future planning purposes. (iii) list of assets is on the right-hand side and the list of liabilities or debts is on the left-hand side. (iv) It helps in the assessment of management performance.