(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
(a) Reasons why farm accounts should be kept by a farmer include:
- To know the cost of production and profitability of the farm.
- To aid in decision-making regarding what crops to plant and when to plant them.
- To help in obtaining loans from financial institutions.
- To monitor and control farm expenses.
- To comply with tax laws and regulations.
- To provide a record of farm operations and activities.
(b) Profit and loss account for Ada Farms for the year ending December, 1993:
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|
Amount (N) |
| Sales: |
57,500.00 |
| - Maize |
30,000.00 |
| - Yam tubers |
10,500.00 |
| - Cassava stems |
15,000.00 |
| Cost of goods sold: |
|
| - Maize seeds |
1,500.00 |
| - Fertilizer |
1,600.00 |
| - Insecticides |
1,000.00 |
| - Herbicides |
1,200.00 |
| - Cassava stems |
1,300.00 |
| - Processing of cassava |
2,500.00 |
| Gross profit: |
48,900.00 |
| Expenses: |
|
| - Tractor hiring |
1,000.00 |
| - Transportation cost |
1,500.00 |
| - Wages of workers |
8,000.00 |
| - Miscellaneous expenses |
2,000.00 |
| Net profit: |
36,400.00 |
| Valuation: |
|
| - Opening |
45,000.00 |
| - Closing |
15,000.00 |