Farm Records and Accounts

Why keep records?

Under the Kenyan Senior School CBC (KICD) Agriculture learning area, you are expected to run a school or home project as a small business. Records show whether an enterprise is paying, help you plan the next season and are needed when applying for credit from banks, SACCOs or Agricultural Finance Corporation (AFC).

Main uses:

• Measure profit or loss
• Detect wastage and theft
• Plan budgets and crop or livestock programmes
• Support loan applications and tax returns

Types of farm records

Simple accounts

• Cash book: records cash received (debit side) and cash paid (credit side).
• Assets: what the farm owns (land, machinery, stock).
• Liabilities: what the farm owes (loans, unpaid bills).
• Net worth = assets - liabilities.

Gross margin and profit

Gross margin (GM) = total revenue - total variable costs. It is used to compare enterprises such as maize versus beans on the same land.

Net profit = gross margin - fixed costs.

Variable costs: seeds, fertiliser, chemicals, hired labour, feed. Fixed costs: land rent, depreciation, permanent staff, insurance.

Worked example 1

A school farm sells 50 kg bags of potatoes: 100 bags at KES 2,500. Seed cost KES 40,000, fertiliser KES 30,000 and labour KES 50,000.

• Revenue = 100 x 2,500 = KES 250,000
• Variable costs = 40,000 + 30,000 + 50,000 = KES 120,000
• Gross margin = KES 130,000

Worked example 2

A farmer owns assets worth KES 900,000 and owes a loan of KES 250,000.

• Net worth = 900,000 - 250,000 = KES 650,000

Depreciation

Machines lose value with use. Using the straight-line method:

Annual depreciation = (cost - scrap value) / years of life.

A water pump bought at KES 60,000, scrap value KES 6,000, life 9 years: (60,000 - 6,000) / 9 = KES 6,000 per year.

Good record-keeping habits

• Record on the same day, in ink, in a hard-cover book or phone app.
• Be accurate and honest; keep receipts.
• Review monthly and compare with the budget.

Try it

• List five records you would keep on a poultry unit of 100 layers.
• A farmer sells 30 bags of beans at KES 9,000 with variable costs of KES 150,000. Find the gross margin.
• Find the yearly depreciation of a KES 120,000 machine with scrap value KES 12,000 over 6 years.
• Prepare a simple cash book for your school project for one week.