36 THE AGRICULTURAL CLUB. 



year. A case in point is the raising of cattle which are sold 

 after, say, three years. If a profit eventually results on the 

 sale, in what way should that profit be apportioned over the 

 three years during which the stock was being raised? A 

 valuation of the stock at market prices each year may or may 

 not bring about this result, while if the stock is carried forward 

 at cost price until sold, the whole of the profit will be shown 

 in the third year. 



An analogous case, on a larger scale, is that of a building 

 contractor who contracts for a building, the erection of which 

 will take three years. The practice in apportioning the profit 

 in these cases varies. Sometimes the work is carried forward 

 at cost and no profit is shown in the accounts until the building 

 is completed. Or, again, some proportion of the profit may 

 be taken credit for in each of the three years of construction, 

 according to the progress of the work. But any such anticipa- 

 tion of the final profit is generally made on a most conservative 

 basis. The comparison with the farm cattle differs in this 

 respect, viz., that the contractor knows the final price he will 

 receive on completion of the work, while the farmer does not 

 know how the markets will stand when his stock is ready for 

 sale. There is consequently greater need for him to be cautious 

 in taking credit for any intermediate profits. 



Again, expenditure may be incurred, the beneficial results 

 of which will last for more than one year, such as laying hedges 

 or drainage work. This outlay in ordinary cases should be 

 written off in instalments over the period receiving the benefit. 

 The benefit of cleaning the land and applying manures lasts 

 for more than one year, but if the rotation is steady and the 

 same cultivation and manuring is followed, these matters will 

 average out. 



As the farm is a going concern, there are at the end of any year 

 a number of unfinished transactions. Many of the difficulties 

 in arriving at a proper figure of profit would disappear if all 

 the transactions had been completed and realised or paid in 

 cash (say at the close of a farm tenancy). In practice this is 

 impossible. All the operations of raising and selling the produce 

 are going on continuously. The final results of these opera- 

 tions cannot be ascertained until they are realised in cash, and 

 in the meantime they have to be valued, for the purpose of making 

 up each annual account. This element of valuation is one of 

 the chief factors involved, and there is wide scope, not only 

 for differences of personal opinion, but also for different methods 

 and principle to be applied in making the valuation. 



These remarks do not deal with the preparation of the valua- 

 tion. They assume that the valuation has been made, and discuss 

 from an accounting point of view some general considerations 



