QUESTIONS OF PRINCIPLE 39 



an unsatisfactory wheat-cost the fault may be found to lie 

 in the cost of farm-yard manure, and it may be proved that 

 an equivalent of manurial value could have been purchased 

 at a lower figure. Thus, the real fact that emerges is not 

 that wheat-growing is unremunerative, but that farm-yard 

 manure is too expensively produced. It is with the desire 

 to show the loss where it really occurs that many accountants 

 adopt a system of valuation at ' cost or market value 

 whichever be the lower ', and the prices at which raw 

 materials are transferred from one account to another are 

 written down from costs to market values where the latter 

 are lower. Thus, they get a guide to the directions in which 

 substitution of purchased materials for home-produced 

 may be profitable. The motor manufacturer may find that 

 owing to specialization in production of certain parts by 

 other firms, he can buy them at a lower cost than that at 

 which they are produced in his own factory, but on the 

 farm the possibility of the substitution of similar products 

 is less common. Thus, though it may be shown that 

 bought mineral manures are cheaper than home-made 

 dung, or that maize may be substituted for home-grown 

 oats, with advantage, it would not be desirable to introduce 

 any valuation figures into the manure or the oats accounts 

 based on the market prices of mineral fertilizers or maize, 

 respectively, in substitution for the cost valuation indicated 

 by the accounts, though final product-costs must be analysed 

 with care in order that their true meaning may be disclosed. 

 In all farm accounts, then, whilst it is most important 

 always to watch the cost of home-grown raw materials in 

 comparison with that of purchasable substitutes, the basis 

 of valuation must be the cost price in every case. The appli- 

 cation of this principle, however, raises certain problems 

 which call for further consideration and discussion amongst 

 investigators before it can be assumed that the most satis- 

 factory solutions have been found. What, for example, is 

 the cost of a new-born animal ? In the case of a foal it 

 might be said to be represented by the stud fee, the foaling 

 risk insurance (if any), and the cost of food and attendance 



