RECORDS AND ACCOUNTS 383 



the owner possesses, even though they may have no connection with 

 the farm business. If repairs and other expenses connected with the 

 dwelling are charged to the farm, an allowance for rental is likewise 

 due if a proper showing is to be made. 



Notes, personal accounts, money in bank, and cash on hand are 

 forms of property, which, strictly speaking, may not belong to the 

 inventory, since they are neither stock nor equipment, but for the 

 sake of simplicity it is well to include all assets, of whatever descrip- 

 tion. 



Deducting the total liabilities from the total assets gives the "net 

 worth." This is the important item to secure. A comparison of this 

 net worth from year to year shows the financial outcome of the 

 business. 



Fixing the inventory values is a matter of great importance, 

 requiring good judgment and careful thought. Three general methods 

 of estimating values present themselves. The implement may be 

 inventoried at cost, at its selling value, or at its value for service. To 

 value an article at cost is misleading. . As time goes on the business 

 becomes bolstered up with fictitious values which make it appear to 

 have paid better than it really has. To inventory at the selling value 

 of an article may be equally unfair. As soon as a tool is put to use 

 its value for sale drops far out of proportion to its value for service. 

 It is unfair to charge the farm with this large decrease, for the tool 

 is not merchandise; it was not bought to be sold again. If it were 

 worth the price paid it is still worth approximately the same amount, 

 lessened by actual wear or injury, provided the cost of replacing it 

 remains the same. Value for service is the chief factor in determining 

 the inventory value, though neither the cost nor the selling value can 

 be entirely disregarded. In determining this value several factors 

 need to be considered. First among these is the probable length of 

 service of the article. If it may reasonably be expected to last for 

 ten years, under the conditions in which it is used, its value will 

 decrease 10 per cent each year. However, if the service rendered in 

 the tenth year of its use will be much less efficient than in the first 

 year, its value at the beginning of that year is less than one-tenth of 

 the original cost. 



Likewise the cost of replacing an article may be an important 

 factor in determining value. It is manifestly unfair to place value 

 on an article greater than the cost of replacing it. Also, the invention 

 of a better tool for doing the work may destroy the value of a machine 



