38 THE AGRICULTURAL CLUB. 



An industrial concern does not value it fixed assets each 

 year. There is no need to do this, as they are intended to remain 

 on the ground in order to produce the goods sold. If at each 

 year end the fluctuating values, according to the market, of 

 land, buildings and plant were taken into the accounts, the 

 accounts would to that extent show paper profits and unreal 

 and variable results, and the true profit of the concern from 

 making and selling its goods would be obscured. 



The fixed assets are therefore kept apart as being the fixed 

 capital of the concern. A regular yearly depreciation is written 

 off this property according to its expected life, and this depre- 

 ciation is included with the year's expenses. 



The circulating assets, on the other hand, are valued each year, 

 generally at cost (or at the market price if this is lower than cost). 

 To illustrate. Take the case of a company making farm 

 implements. Before the concern can start operations it will 

 need land, buildings, plant and machinery, etc., with which 

 to make the implements. The cost of these fixed assets, when 

 obtained, goes to Capital Account. 



At the end of the first year's working a number of implements 

 will have been sold, and a number will also be on hand in various 

 stages of manufacture, together with stocks of the necessary 

 raw material (iron or steel). These will represent part of the 

 circulating assets, and before the year's profit or loss can be 

 ascertained they must be given a value to put into the accounts. 

 The expenses must also include the annual depreciation of the 

 fixed assets referred to above ; but except for this depreciation 

 the annual Profit and Loss Account is not concerned with the 

 value of the fixed or capital assets. 



It will be seen that the fixed assets and the circulating assets 

 are treated in different ways. The value of the circulating 

 assets is brought into the Profit and Loss Account, while the 

 fixed assets are not valued each year end, but their annual 

 depreciation only is included with the expenses. 



I have suggested that there may be two somewhat distinct 

 classes of farm property, and have drawn an analogy with an 

 industrial concern. It can be no more than an analogy. The 

 dividing line between the two classes is not so clear in farming, 

 where some of the work horses may be sold, and other changes 

 in the " Personnel " of the fixed live stock, owing to death, 

 disease, and other causes, occur from time to time. But there 

 is sufficient difference between the two classes to suggest that 

 they should not both be necessarily brought into the accounts 

 each year on the same basis. The annual farm accounts should 

 show the profit or loss arising, in the normal working operations 

 of the farm, from the disposal of the crops and stock intended 

 to be sold off the farm. 



