(a) State six reasons why farm accounts should be kept by a farmer. (b) Prepare...
(a) State six reasons why farm accounts should be kept by a farmer.
(b) Prepare a profit and loss account for Ada Farms, for the year ending December, 1993 using the following information.
(i) cost of maize seeds- N1,500.00
(ii) cost of fertilizer - N1,600.00
(iii) cost of insecticides - N1,000.00
(iv) tractor hiring- N1,000.00
(v) cost of herbicides- N1,200.00
(vi) cost of cassava stems N1300.00
(vii) sales of maize- N30,000.00
(viii) sales of yam tubers - N10,500.00
(ix) sales of cassava stems - N15,000.00
(x) transportation cost - N1,500.00
(xi) cost of processing cassava tubers - N 2,500.00
(xii) sales of cassava stems - N 22,00.00
(xiii) wages of workers N 8,000.00
(xiv) miscellaneous expenses - N 2,000.00
(xv) maize consumed - N 500.00
(xvi) yam consumed - N 800.00
(xvii) opening valuation - N45,000.00
(xviii) closing valuation - N15,000.00
Explanation
(a) Reasons for keeping farm accounts are: (i) It enables the farmer to monitor the changes in prices of produce bought or sold by the farm.
(ii) shows the financial weakness or strength of the farm.
(iii) enables the farmer to know whether he is running the farm at a profit or loss.
(iv) enables the farmer to detect fraudulent practices on the farm. enables the farmer to make serious management decisions.
(vi) enables the farmer to obtain loans from the bank
(vii) makes possible, accurate determination of his annual tax.
(viii) enables the farmer to determine the actual worth of his farm for any given purpose.
(b)(i) Profit and Loss account for Ada Farms, for the year ending December 1993
DEBIT | CREDIT |
Purchases and Expenses (N) | Sales and Receipts (N) |
Opening valuation - 45,000.00 | Closing Valuation - 15,000.00 |
Cost of maize seeds - 1,500.00 | |
Cost of insecticides - 1,600.00 | Sales of cassava tubers - 15,000.00 |
Tractor hiring - 1,000.00 | Sales of yam tubers - 10,000.00 |
Cost of herbicides - 1,200.00 | Sales of cassava stems - 2,200.00 |
Cost of cassava stems - 1,300.00 | Maize consumed - 500.00 |
Transportation cost - 1,500.00 | Yam consumed - 800.00 |
Cost of processing cassava tubers - 2,500.00 | |
Wages of workers - 8,000.00 | |
Miscellaneous expenses - 2,000.00 | |
Total - 66,000.00 | |
Net profit - 7,400.00 | |
Grand Total - N74,000.00 | Total N74,000 |