Lesson Notes By Weeks and Term - Senior Secondary School 2

SUBJECT: AGRICULTURAL SCIENCE

CLASS:  SS2

DATE:

TERM: 3RD TERM

REFERENCE BOOKS

• Essential Agricultural Science for Senior Secondary Schools, by O.A. Iwena
• WAEC PAQ
• Essential economics

WEEK SEVEN

TOPIC: FARM RECORD AND FARM ACCOUNT

CONTENT

• Meaning of Farm Accounts/Farm records
• Importance of Farm Account / farm records
• Types of Farm Record
• Types of Farm Account

MEANING OF FARM ACCOUNTS AND RECORDS

FARM ACCOUNT

Farm Accounts are statements of money paid out or received for goods and services used in a farming business.

FARM RECORD

Farm Records are written documents, showing major activities going on in the farming business

IMPORTANCE OF FARM ACCOUNTS/RECORDS

1. It enables the farmer to monitor the changes in prices of product brought or sold.
2. It shows the financial position of the farm
3. It helps to determine profit
4. Detection fraudulent decisions
5. For taking informed management decision
6. For procurement of loans
7. For determination of annual tax
8. Determining the actual worth of the farm
9. For comparing management efficiency
10. To evaluate performance of an enterprise
11. To estimate future farm returns.
12. It provides basis for conducting research.
13. To monitor health status of crops and animals.

EVALUATION

1. What is farm record and account?
2. List five importance of keeping farm records and account.

TYPES OF FARM RECORD

1. Farm Diary: This is the record of daily activities 
2. Farm Inventory: This is the list of all assets on the farm and their money worth or value
3. Sales and purchase record: record of revenue and expenses made by the farm business.
4. Yield or production record: it contain the information on output of crops and animal product
5. Payroll or labour record: It shows the amount and types of labour hired or employed to work on the farm and rate at which their  wages are paid 
6. Farm Input Utilization Record: It shows the input required, utilized and their level of input application.

TYPES OF FARM ACCOUNT

1. 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.
2. Purchase Account: It is also known as purchased for use on the farm.
3. 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.
4. Cash Analysis Account: It shows the details of the income and expenditure of a farm over a given period of time
5. 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

1. 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.
2. 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 weather 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

1. It helps to detect if the farm is making profit or a loss
2. It helps to determine the overall performance of the farm at the end of the account period
3. It aids future planning of the farm for better results.

Example

Prepare a profit and loss account for Segun Farms for the year which ended 31/12/17, using the following data;

1. Cost of feed            N500
2. Cost of drugs            N 200
3. Sales of Eggs            N 2000
4. Eggs for domestic use        N 200
5. Loss due to mortality        N 300
6. Value of stick left        N 600
7. Farm wages            N 400
8. Sales of spent layers        N 1000
9. Transportation cost        N 300
10. Depreciation            N 200
11. Electricity bill            N 300
12. Net profit            N 1600

SOLUTION

SEGUN FARMS PROFIT AND LOSS ACCOUNT AS AT 31ST DECEMBER, 2017

EVALUATION

1. List five types of farm record
2. Explain any two of record mentioned
3. List five types of farm account
4. Explain profit and loss account

DEFINITION OF SOME ACCOUNTING TERMS

Farm Asset: This is anything of value in the possession of a farm business, There are two types;

1. 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
2. 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

1. 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 e.t.c) 
2. 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 e.t.c

Liabilities: This is the money owed to external persons or corporate bodies e.g. loan to banks. The two types are;

1. Current or short term liabilities: These are debts that must be paid back within one accounting year
2. 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.

Asset – Liability = Owner’s Equity or Capital

1. 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.
2. 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
3. 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.
4. Depreciation: Depreciation refers to the loss or reduction in the value or worth of an asset as the asset is being used over time
5. 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
6. Useful life Span: This means the number of years a piece of farm equipment can effectively serve the farmer.

EVALUATION

1. Define the following: (i) Appreciation (ii) Solvency (iii) Liquidity
2. Distinguish between fixed assets and variable assets.  

Calculations of Depreciation and Salvage Value

The formula for calculating depreciation is as follows, 

1. Total depreciation = cost price of asset – salvage value of asset
2. Annual depreciation =

Example: A plough was purchased in 1985 at the cost of N 6000 and sold off in 1990 at the cost of N 1000

Calculate;

1. The salvage value
2. Total depreciation
3. Annual depreciation
4. Appreciation

Solution

• Cost price of the plough        = N 6000
• Salvage value            = N 1000
• Lifespan of useful life (1990  - 1985)    = 5years

1. Salvage value = N 1000 i.e the price at which it was sold off
2. Total Depreciation 

             = Cost price – salvage value

             = N 6000 – N 1000

             = N5000

CLASS ACTIVITY

Answer  questions 3, 4, 6 and 9 from Essential Agricultural science on Page 448. 

GENERAL EVALUATION

1. What are farm records and account?
2. List five importance of keeping farm records and accounts.
3. List five types of farm account.
4. Distinguish between fixed and variable cost.

READING ASSIGNMENT

• Essential  Agricultural Science for senior Secondary School by O.A. Iwena Chapter 48 pages 440-449
• Answer the following questions from WAEC PAQ 1989 theory question 10, 1993 theory question 10, 1996 theory question 10, 1997 theory question 10, 1998 theory question 10, 2013 theory question 9 & 10, 2009 theory question 9 & 10, 1999 theory question 9, 2006 theory question 9 and 2007 theory question 9

WEEKEND ASSIGNMENT

1. In profit and loss account, opening valuation is put on the _____ A. credit side B. debit side C. and side D. all sides
2. Ability of farm to meet its financial commitment as the falls due is _____ A. solvency B. liquidity C. depreciation D. appreciation
3. The amount at which an asset is sold off when the cost maintaining it is high is called ____ A. useful life B. lifespan C. salvage value D. asset
4. Day to day activities on the farm are recorded in _____ A. register B. diary C. payroll D. inventory
5. Farm assets are recorded in _____ A. diary B. register C. inventory  D. labour

THEORY

1. What is profit and lost account
2. List five types of farm records
3. What is farm asset
4. Distinguish between credit and subsidy