15 min read
Mathew Wahome
Topic 3: Farm Records and Accounts
1. Farm Records
Farm records are written details of all activities on the farm.
Importance
- Show farm performance over time.
- Help planning and decision making.
- Provide information to get loans and insurance.
- Calculate profit and loss.
- Help in tax assessment.
- Detect theft, wastage and poor performance.
- Help in selecting good animals and varieties.
Types of Records
| Record | Information kept |
|---|---|
| Inventory | List and value of assets |
| Production records | Yields of crops, milk, eggs |
| Income and expenditure (cash) records | Money received and spent |
| Labour records | Workers, tasks, hours and wages |
| Field operation records | Planting, weeding, spraying dates |
| Marketing records | Sales, prices, buyers |
| Breeding records | Services, dates, sires, calving |
| Health records | Vaccination, treatment, diseases |
| Feeding records | Feed type, quantity, cost |
| Stock register / store records | Inputs received and used |
Qualities of a Good Record
Simple, accurate, up to date, clear, complete and kept safely.
2. Farm Accounts
a) Inventory and Valuation
An inventory is taken at the start and end of the year to value assets.
b) Profit and Loss (Income) Account
- Profit = Total income - Total expenses
c) Balance Sheet
A statement of assets, liabilities and net worth at a given date.
| Term | Meaning |
|---|---|
| Assets | Things owned that have value (land, machines, stock, cash) |
| Current assets | Can be turned to cash within a year (cash, produce) |
| Fixed assets | Long-term (land, buildings, machinery) |
| Liabilities | Amounts owed (loans, creditors) |
| Current liabilities | Due within a year |
| Long-term liabilities | Due after one year |
| Net worth | Assets - liabilities |
Example
| Assets | KSh | Liabilities | KSh |
|---|---|---|---|
| Current assets | 150,000 | Current liabilities | 80,000 |
| Fixed assets | 650,000 | Long-term liabilities | 120,000 |
| Total assets | 800,000 | Total liabilities | 200,000 |
Net worth = 800,000 - 200,000 = KSh 600,000.
3. Depreciation
The fall in value of an asset over time due to wear and tear or age.
Straight-line method: Annual depreciation = (Cost - Salvage value) / Useful life.
Example: Tractor cost KSh 1,000,000, salvage KSh 200,000, life 8 years: (1,000,000 - 200,000) / 8 = KSh 100,000 per year.
4. Analysing Farm Performance
- Gross margin per enterprise.
- Net farm income = total income - total costs (including depreciation).
- Compare yearly performance to identify strengths and weaknesses.