AGRICULTURAL ECONOMICS. 41 



The amount of profit to be reserved for all these purposes 

 is largely a matter of personal opinion and prudence, or it may 

 be, of policy, and these reserves afford a ready means of putting 

 by secret reserves of profit and reducing the amount of profit 

 disclosed in the accounts. 



It is sometimes difficult to decide whether expenditure is in 

 the nature of improvements or additions, or is for maintenance 

 only. 



Outlay on additions and improvements is an addition to the 

 capital value. 



Outlay on maintenance and repairs is a recurring expense 

 which must be included in the expenses for each annual account. 

 The dividing line, however, between the two classes of outlay 

 is^not always distinct. 



Implements of improved quality or type and consequently 

 of greater cost may be bought to replace others worn out. This 

 may be treated in one case as a mere expense of renewal, to 

 be included with the other annual expenses, while in another 

 case the part of the increased cost arising from the better quality 

 or improved type may be regarded as an addition to the capital 

 value of the equipment. 



Again, continued high farming would add to the value of 

 the farm, though this increasing value would not be shown in 

 the accounts, as each year's cost of cultivations, fertilisers, 

 etc., would be treated as expenses of the year. 



Another difficulty in arriving at the final figure of profit or loss 

 on the farm is the dovetailing of the farm transactions with those 

 of the household and the farmer personally, owing to the extent 

 to which the farm is used and worked by the farmer and his 

 family. 



On the one hand the farmer receives benefit at the expense 

 of the farm. Some of the farm produce is consumed by the 

 household, and they occupy the farmhouse and garden, the 

 rent for which is paid for in the farm rent. 



On the other hand, the farmer and his family render services 

 to the farm ; members of the family sometimes work on the 

 farm without payment, and the farmer himself also contributes 

 supervision and management, and sometimes labour. 



These transactions do not involve the payment of cash, but 

 in order to obtain accurate profit results, some at least of them 

 should be given effect to in the accounts. Certain farmers 

 may also desire to include with the expenses interest on the 

 capital employed on the farm, before striking the final figure of 

 profit. 



Private income and expenditure, received and paid in cash, 

 should always be excluded from the farm Profit and Loss Account. 



It will be seen that in settling the profits quite a number of 



