Farm records pertain to the methodical recording and arrangement of diverse data concerning agricultural operations and undertakings within a farm environment. These records are crucial for proficient farm administration, making informed decisions, devising financial strategies, and adhering to regulatory mandates. Depending on the farmer’s preferences and available resources, these records can be upheld in either physical or digital formats.
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Importance of Farm records/Accounts
- They facilitate tracking price fluctuations of purchased or sold products.
- They depict the farm’s financial standing.
- They aid in profit assessment.
- They uncover deceitful actions.
- They support well-informed managerial choices.
- They assist in securing loans.
- They contribute to annual tax calculation.
- They ascertain the true value of the farm.
- They enable efficiency comparisons in management.
- They evaluate enterprise performance.
- They project forthcoming farm yields.
- They establish a foundation for research endeavors.
- They oversee the health condition of crops and livestock.
Types of Farm Records
- Financial Documentation: These encompass statements detailing income and expenses, cash flow, balance sheets, and profit and loss. By offering insights into revenue, costs, profitability, and financial standing, these records aid farmers in financial tracking.
- Crop and Animal Records: These archives capture particulars regarding crops and livestock on the farm. Information spans crop planting and harvest dates, yields, input utilization (seeds, fertilizers, pesticides), livestock stock, health histories, and production figures.
- Field Operations Logs: These logs record farm activities like land preparation, planting, irrigation, fertilization, pest control, harvesting, and storage. They furnish an overview of field operations throughout the farming season.
- Inventory Tracking: These records monitor input and output inventory, encompassing seeds, fertilizers, chemicals, fuel, machinery, and harvested yields. Precise inventory records aid in resource management.
- Machinery and Equipment Documentation: These records capture details about farm machinery and equipment, including procurement dates, maintenance schedules, repairs, and depreciation. Managing these records helps with maintenance and replacement planning.
- Weather and Climate Documentation: These records chronicle weather conditions such as temperature, rainfall, wind speed, and other pertinent climatic data. This data is pivotal for assessing weather impacts on yields and guiding decisions about irrigation, planting, and other farming actions.
- Compliance and Legal Files: These records pertain to regulatory adherence, covering permits, licenses, certifications, and paperwork linked to environmental standards, food safety, and animal welfare criteria.
- Farm Journal: This chronicles day-to-day occurrences on the farm.
- Farm Assets Inventory: This lists all assets owned by farmers and their corresponding monetary values, encompassing land, equipment, and stored and growing crops.
- Input Documentation: This catalogues all items utilized in farm operations yearly, forming the basis for calculating farm profits.
- Production Archives: These records detail all items produced on the farm, providing insights into the profitability of various projects.
- Labor Journal: This notes day-to-day work performed on the farm, aiding in determining labor input, expended effort, and costs per operation.
- Sales Logs: These documents all products sold by the farmer, such as eggs, yams, and goats.
- Consumption Logs: These record farm products consumed by the farmer and their family.
A farm account refers to a systematic record-keeping and documentation process that tracks financial transactions, expenses, income, and other financial aspects related to agricultural operations and activities. It involves maintaining detailed records of all monetary transactions and financial matters concerning the farm. Farm accounts help farmers manage their resources, assess profitability, make informed decisions, comply with tax regulations, and plan for the future effectively.
Key components of a farm account typically include income and expense statements, balance sheets, cash flow statements, profit and loss statements, and other financial records. These documents provide a clear overview of the financial position of the farm, showing the sources of income, the costs incurred in various aspects of farming, and the resulting profits or losses.
By keeping accurate and up-to-date farm accounts, farmers can analyze their financial performance, identify areas for improvement, and ensure proper resource allocation. Farm accounts also play a crucial role in securing loans, meeting regulatory requirements, and demonstrating financial viability to stakeholders such as lenders, investors, and government agencies.
TYPES OF FARM ACCOUNT
Sales Account: Sales Account is also known as sales and receipt account. This shows data of farm produce, the quantity, date sold, to whom and at what price.
Purchase Account: It is also known as purchased for use on the farm.
Farm Valuation: This is the value of the farm at the beginning and end of production. At the beginning it is called opening valuation while at the end, it is called closing valuation.
Cash Analysis Account: It shows the details of the income and expenditure of a farm over a given period of time.
Farm Income Statement: It comprises of all the farm receipts (sales) and expenses came out on the farm over a period of time as shown below.
INCOME STATEMENT OF AKANDE FARMS FOR OCTOBER 1995
Balance Sheet or Networth Statement: The balance sheet shows the capital or financial position of the farm at the end of the accounting period usually a year.
Profit and Loss account: This is the type of account prepared at the end of the business period, usually a year. By farmer with the purpose of knowing whether his business is making profit or loss.
In this account, all expenses and purchases are listed on the left-hand side i.e. debit side and all receipts on sales are recorded on the right hand i.e. credit side. Closing valuation is also put on the right while opening valuation is put on the left.
IMPORTANCE OF PROFIT AND LOSS ACCOUNT
- It helps to detect if the farm is making profit or a loss
- It helps to determine the overall performance of the farm at the end of the account period
- It aids future planning of the farm for better results.
Prepare a profit and loss account for Segun Farms for the year which ended 31/12/17, using the following data.
Cost of feed N500
Cost of drugs N 200
Sales of Eggs N 2000
Eggs for domestic use N 200
Loss due to mortality N 300
Value of stick left N 600
Farm wages N 400
Sales of spent layers N 1000
Transportation cost N 300
Depreciation N 200
Electricity bill N 300
Net profit N 1600
EMEKA FARMS PROFIT AND LOSS ACCOUNT AS AT 20th DECEMBER, 2022
|1||Cost of feed||500||1||Sales of spent layers||2000|
|2||Cost of drugs||200||2||Eggs for domestic use||200|
|3||Loss due to mortality||300||3||Value of stick left||600|
|4||Farm wages||400||4||Sales of spent layers||1000|
|Grand Total||3800||Grand Total||3800|
DEFINITION OF SOME ACCOUNTING TERMS
- Farm Asset: This is anything of value in the possession of a farm business, There are two types.
- Fixed Assets: These are assets which are not used up during production. Examples are; landed property, farm building, motor vehicles, tools and implements, incubator and milking machine.
- Current Assets: These are assets which are used up during the process of production eg water, feed, drugs, chemical, fertilizers, seeds and cash in bank.
- Cost: these are expenses made during production. There are two types fixed and variable cost.
- Fixed Cost: This is the component of the total of production cost which does not vary with the level of production e.g. cost of buildings, equipment, machineries, farm structures (Silo, barn etc.)
- Variable Cost: This is the other component of the total cost which varies directly with the level of production e.g. wages, salaries, cost of seeds, cost of fertilizer, cost of agrochemical etc.
- Liabilities: This is the money owed to external persons or corporate bodies e.g. loan to banks. The two types are.
- Current or short-term liabilities: These are debts that must be paid back within one accounting year.
- Long term liabilities: These are debts that cannot be paid within an accounting year
- Net Capital, Net worth or owner equity: This is the total amount of money supplied by the owner of the farm business.
- Liquidity: is the ability of a farm business to meet its financial obligations as they fall due. It is the ease at which farm asset can be covered to cash.
- Solvency: This is the ability of the farm business to cover its liquidation of the asset. A business is solvent if the sale of its assets would be sufficient to pay off all debts.
- Appreciation: This is the increase in the value or worth of an asset as the asset is being used over time. Examples of assets that can appreciate are growing animals, cash crops, land etc.
- Depreciation: Depreciation refers to the loss or reduction in the value or worth of an asset as the asset is being used over time
- Salvage Value: This is the amount at which an asset is sold off when it is no longer economical to keep, or when the cost of maintenance is too high.
- Useful life Span: This means the number of years a piece of farm equipment can effectively serve the farmer.