Explain the following terms: (a) salvage value (b) farm inventory (c) farm assets (d) point of diminishing return (e) depreciation.

Explanation of the terms:

(a) Salvage value: This is the estimated amount of money that an asset, such as a machine or building, is expected to be worth at the end of its useful life, that is, its scrap or disposal value after it has been fully used or depreciated.

(b) Farm inventory: This is a complete list or record of all the property, goods and resources on the farm, together with their money values, taken at a particular date (usually the beginning or end of the year). It includes land, buildings, livestock, machinery, stored produce and cash.

(c) Farm assets: These are all the valuable properties and resources owned by the farm business that have money value and can be used to generate income. They include fixed assets such as land, buildings and machinery, and current assets such as growing crops, livestock, stored produce and cash.

(d) Point of diminishing return: This is the point in production at which the addition of one more unit of a variable input to fixed inputs begins to yield a smaller (less than proportionate) increase in total output. Beyond this point, each extra unit of input adds less to total product than the unit before it.

(e) Depreciation: This is the gradual loss or reduction in the value of a durable farm asset (such as a tractor, implement or building) over time due to wear and tear, age and obsolescence. It is treated as a cost of production and spread over the useful life of the asset.