BOOK-KEEPING FOB FARMERS. 



921 



Repayments of Principal with Interest. 



When land is obtained as a conditional purchase or a homestead selection, 

 where repayments are being made under a loan from, say, the Rural Bank, 

 and in fact whenever payments include interest with the principal, it should 

 be noted that the principal is reduced by the total amount of the payment, 

 less the interest. 



For instance a payment of £15 on a C.P. might consist of £9 principal 

 and £6 interest, and would be journalised thus, 



£ s. d. £ B. d. 



Land % (or Loan %) 9 



Interest %, Dr 6 



To Bank 15 



The former reduces the total liability, whereas the latter is an expense lor 

 the current year. 



Capital Cost. 



Where a property is being constantly improved, a distinction should be 

 made between permanent additions and current expenses. The former 

 appear in the balance-sheet as assets, while the latter become part of the 

 Profit and Loss Account. For instance, an orchardist who purchases un- 

 improved land and gradually clears, fences, and plants the ground as circum- 

 stances permit, would probably utilise the space between the trees for the 

 first few years for general crops and thus support himself. Under such 

 conditions he might only charge to a Land or Orchard Account the actual 

 outside costs 



Assuming the purchase in 1919 of 27 acres at £10 per acre, clearing 12 acres 

 at £8 per acre, fencing at £60, and wire-netting at £50 per mile, ploughing 

 and subsoiling at £3 per acre, trees at £8 10s. per acre, and planting at 

 £2 per acre. 



In 1 920 a further area oU0 acres was cleared and planted at the same rates. 

 'The cultivation, pruning. &c, of planted areas cost £2 per acre per annum. 



The net cost to date of the orchard would then be as under: — 



Specimen Orchard Account. 



Or. 



By Balance c|d (net cost 

 to date) 



612 10 



£ti!2 10 



By Sale of Timber ... 30 



„ Balance c/d (net cost 



to date) : 876 10 



£906 10 



