Farm a/cs

Question 1

Purpose of farm a/c

Answer 1

• to establish p/l of the farm
• to back up applications for bank loans and/or grants
• to facilitate planning/budgeting
• to find out net worth of farm
• to find drs/crs

Question 2

How do you deal with drawings for a farm a/c

Answer 2

dr drawings a/c, cr sales a/c. bc goods are produced on farm, … finished goods can’t be included in purchases

Question 3

Limitations of a receipts/payments a/c

Answer 3

• doesn’t show if funds are covering costs
• amounts due and unpaid are not included
• does not take into a/c losses such as depreciation
• does not show if bar/restaurant is profitable