AGRICULTURAL ECONOMICS. 39 



Alternative Bases oj Valuation. There are alternative 

 bases on which the valuation may be taken, which need con- 

 sideration. 



All, or any, of the items in the valuation may be taken at cost 

 price, or market price, or at something under market price, 

 or at a fixed price, or on some other basis. 



I will deal in detail with two of these the Cost Basis, and 

 the Market Basis. 



Cost Basis. By this method all the live and dead stock is 

 carried forward in the accounts at its cost price until it is 

 disposed of. The profit on any sale does not therefore appear 

 in the accounts until the sale occurs. Until that time the move- 

 ments of the market, whether up or down, are ignored in the 

 accounts. This method corresponds most closely to those 

 adopted by industrial concerns. It avoids the difficulties 

 which are apt to occur, when market prices of unsold stock are 

 put into the accounts and the market falls before they are ready 

 for sale. But whatever merits this cost basis may possess 

 very few farmers are able to adopt it, as the necessary informa- 

 tion as to the cost is not available. 



Market Basis. This method is customary and in many 

 ways convenient, especially when live stock is concerned, and it 

 will probably remain the one most frequently adopted. 



The effect of putting the market price of unsold produce 

 into the accounts is that the produce is treated in effect as if it 

 had been sold, and the accounts show the profit at the time the 

 valuation is put in. The profit is thus anticipated before its 

 actual realisation, and becomes for that year a paper profit. 

 It is probable that some farmers have been paying Income Tax 

 on profits which are not realised profits, but which arise from 

 the upward movement of the market. Further, it is sometimes 

 found in practice that owing, say, to corn threshing out badly, 

 or damage being done by rats, or other similar causes, the valua- 

 tion price is not realised, and in that event a loss ensues which 

 has to be borne by the following year's account. The prob- 

 ability of this is of course lessened when, as is often the case, 

 the valuation is made in a prudent and conservative manner, 

 and temporary or abnormal fluctuations are discounted. 



It will be seen that, even with the circulating assets which 

 are intended to be sold, the insertion in the accounts of the 

 market value of unsold produce tends to obscure the profit 

 which is eventually realised in cash. 



Commercial concerns, especially in trades where market 

 prices are apt to fluctuate wildly, have found that the safest 

 way of showing their profits is to carry the circulating assets 

 at cost until they are actually sold, and to ignore in the accounts 

 possible prices which the goods may fetch. 



