Introduction to Farm Accounting
Farm accounting is of so much importance to daily agricultural activities because it helps a great deal in dealing with liabilities revenue and costs. It deals with recording all farms resources and measuring all farm transactions in the farm business that can have financial consequences. Profits and losses are mainly determined by the climatic conditions in the area of practice and this makes farm accounting more complex. But with a lot of skilful planning, one can get into a straight finance management for every operation on your farm. In modern farming, there should be good producers and that should go hand in hand with good financial managers to keep reliable farm records and to maintain a record keeping system that is proven. For a good and skilful farm accountant expected to keep reliable farm records and financial reports must have acquired a bachelor’s degree in either, accounting, finance, agricultural business or business administration.
Roles of farm accountants
- Farm accountants are responsible for finance administration and practising accounting of the business to keep the daily records reliable.
- They also control farming costs and are directed to perform accounting duties and budgeting of daily expenses.
- They are responsible for the pricing of farm products and items that are yet to be produced.
- They also calculate costs and pricing the work done or work in progress.
- They work with the management in preparing budgets and reports of financial procedures.
- They are responsible for analyzing report on the cost of products and the farm projects.
- They create statements on daily production.
- They also interpret statistical information so as to deal with the coast, policies of operation, budgets, and possibilities of increased profits.
- They keep the general ledger uncompromised.
- They analyze monthly project performance interpreting against the budget.
- They develop accounting systems of management and financial reports.
- They are responsible for analyzing monthly reports against the farm budget.
Reasons why farm accounts are kept
- There should always be a reason why farm accounts should be kept. The following are the reasons;
- It is from the farm accounts that the farmer can tell the size of income generated from the farm. The family expenses may then be adjusted to the income such as loans and taxes. The money is then planned for and can be used for investing for future farm improvements.
- To actually know the value of the farm. This helps in determining the sales value of the farm products.
- Farm accounts play a great role in supporting better farm management, this is done by maintaining the profits. The keeping of the records also keeps the open the weak spots of the farm and from that, how to improve the farm’s produce might be reached at.
- Farm accounts quickly detect cash theft and losses in farm stock or money when the average profit is calculated.
- The farm account record provides the data for the most reliable income tax.
- It helps in claiming for the expenses for the work done by the workers.
During the accounting process, various documents are used. This includes;
- Cash receipt. It is duplicated by the seller when a good is bought and paid in cash.
- This is given to the buyer and the seller remains with one. This is to keep statements.
- This is a summary of all monthly invoices to a customer.
- Purchase order. This is a request written for the supply of goods.
- This is a payment order to a bank to make payments.
With modern farm practices and improved technology in farm accounting techniques, increased farm productions have lowered the farm products prices making them affordable by the middle class.