RECORDS AND ACCOUNTS 375 



Such records, however, tell only a part of the story. If the farmer 

 has any money invested in the farm enterprise, his cash income may 

 not give a correct report of the results of the year's operations. The 

 value of his capital may have increased or decreased as a result of 

 the growth of his farm property or its depreciation through use. 

 Only by making an inventory at regular intervals can such profits and 

 losses be adequately recorded. If real estate be included in this 

 inventory, however, a danger appears. Increase in the value of the 

 farm may cause it to show an apparent profit, whereas there has been 

 an actual loss in operation. Ordinarily this danger is only for the 

 man who is willing to deceive himself, but if the increase in value is 

 due to the increase in productivity of the soil as the result of better 

 farming, there could hardly be objection to including it as a true gain 

 from operation. Particularly, if the farm practice has subordinated 

 cash returns to this building-up process, such improved fertility must 

 be reflected hi a higher valuation, or the accounts will fail to tell a 

 true story. Finally, the inventory serves to determine the amount of 

 the gross income which shall be credited to labor, by setting the 

 amount upon which interest must be first allowed. 



Section C shows two simple systems for bringing together such 

 financial records as will enable the farmer to ascertain the amount of 

 income, whether in form of cash or capital, which has resulted from 

 the year's operations, and also to indicate the distribution of that 

 income between the labor and the capital which have co-operated to 

 produce it. Here again we find opportunities to apply the compara- 

 tive method of studying the efficiency of the farm business without 

 resort to the more complicated methods of cost accounting. We have 

 already spoken of the possibilities of comparing the performance of 

 different productive units, even if not reduced to a financial basis. In 

 selections 128 and 129 we see two possible ways of detecting the strong 

 and weak points of management by comparing with conspicuously 

 successful farmers or with what have been worked out as normal 

 standards. 



In section E, Professor Taylor has admirably pointed out the appli- 

 cation of cost-accounting methods to the study of the organizer's 

 problems. There are two questions which properly emerge from any 

 scrutiny of cost-accounting data. The first is, "Can costs of produc- 

 tion be lowered ? ' ' The cost accounts show, not only what the product 

 cost, but also the elements which went into that total. A careful 

 study will serve to reveal leaks in the use of man labor or horse labor, 



