Farm account theory

Question 1

What are reasons to prepare farm accounts

Answer 1

To calculate profit/loss of farm
To establish farm’s net worth
To establish what is owing to and by farm
To apply for grants from government and EU bodies
To apply for loans
To facilitate budgeting and planning
To ascertain profit/loss for each farming activity

Question 2

Name five accounts of a farming enterprise

Answer 2

Receipts and Payments account(ACB)
Statement of capital (reserves)
Enterprise analysis accounts (for each activity)
General P&L
Balance Sheet

Question 3

Explain a receipts and payments account

Answer 3

All farm enterprises should maintain an analysed cash book where receipts and payments are recorded under heading for each enterprise an subheadings

Question 4

Explain statement of capital

Answer 4

List of opening assets and liabilities at beginning of financial year- net worth of farm

Question 5

Explain enterprise analysis account

Answer 5

Trading P&La/c for farm’s particular enterprise
Figures used in this account are taken from columns of receipts and payments a/c
When farm has more than one enterprise the contribution or money made from each enterprise that is calculated is transferred to general P&L

Question 6

Explain General profit and loss account

Answer 6

Used to find the overall profit or loss of a farm
Overall income from all enterprise activities
Any expenses that cannot be allocated directly to individual farm enterprise are included here

Question 7

Give examples of different farm enterprises

Answer 7

Cattle and milk
Sheep
Pigs
Tillage crops(grain, veg)
Horses

Question 8

Explain conacre

Answer 8

Rental of farm land- can be revenue or expense

Entered in general profit and loss

Question 9

Explain Set-aside land

Answer 9

Land which is not in use and for which payments are made to farms by the government
Purpose- to regulate oversupply of farming items
No longer in use

Question 10

Explain forestry premium

Answer 10

Money paid to farmers to encourage the planting trees

Question 11

Explain Single payment

Answer 11

Payment to farmers by the EU under the Common Agricultural Policy (CAP)

Question 12

Explain Dairy Wages

Answer 12

Payment made to workers who work with cattle and cows on the farm

Question 13

Explain haulage

Answer 13

Term applied to the cost of transporting livestock

Question 14

Explain Harvesting

Answer 14

Amounts paid to contractors for harvesting crops

Question 15

Explain REPS and AEOS

Answer 15

Payments made to farmers to protect the environment within their own farmers

Question 16

What does REPS stand for

Answer 16

Rural environmental protection scheme

Question 17

What does AEOS stand for

Answer 17

Agri- environment options scheme

Question 18

What are unharvested crops valued at

Answer 18

0

Question 19

How to value stocks of enterprises

Answer 19

Enter all sales and grants
Deduct all cost of sale items to arrive at gross income
Stocks valued at lower of cost and NRV

Question 20

What i the formula to value other stocks on hand- how much was consumed during period ex: fertiliser

Answer 20

Opening Stock + Purchases During Year - Closing Stock = Amount Used

Question 21

Which account, other than drawings, is affected by “arm produce used by family”?- Explain

Answer 21

Drawings are debited and sales are credited. Sales are credited rather than purchases because the farm produce are produced rather than purchased

Question 22

Outline the advantages of preparing farm enterprise analysis accounts

Answer 22

Allows better planning and decision making and resources can be diverted elsewhere is necessary
Allows costs to be allocated to the relevant activity within the farm
Farmer can find profit.loss on each activity- contribution of each activity towards the farm profit can be seen