RECORDS AND ACCOUNTS 391 



127. AN ILLINOIS SYSTEM OF ACCOUNTS 1 



Four things must be known in order to have a fairly accurate 

 record of a farm business for any one year. These are as follows: 



1. The value of the real estate, stock, feed, grain, supplies, and 

 machinery at the first of the year as determined by careful inventory. 



2. The total farm receipts 2 for the year. 



3. The total farm expenses 3 for the year. 



4. The value of real estate, stock, feed, grain, supplies, and 

 machinery at the end of the year as determined by another inventory. 



A summary of the information contained in such a record will 

 enable the farmer to determine the financial result of the farm business 

 for the year. 



The net farm income, as used here, is the income received from the 

 use of capital invested and the labor performed by the operator of the 

 farm after deducting all of the other expenses of the farm business. 

 This net farm income varies from year to year, depending on the 

 management of the farm and on such factors as variation in seasons, 

 fluctuation in prices, diseases among live stock, etc. These are con- 

 ditions over which the farmer has little or no control. 



Man labor has quite a definite value at farm work when no capital 

 is invested. For instance, in Illinois the single farm hand receives 

 from $300 to $450 and board annually. In the case of the married 

 man, the cash wage is about the same and in addition to this he usually 

 receives house rent, use of garden, use of a cow, and other miscellane- 

 ous items, which make his real wages about the same as those paid 

 the single man. This represents only the labor wage of a man on the 

 farm and is no measure of his ability to operate a farm. 



The farm operator, as compared with the hired man, has an 

 opportunity to demonstrate his ability to manage a business with 

 considerable capital. Since his labor has quite a definite value and 

 the farm earnings vary from year to year, the man's value as a 

 manager is hard to determine. When the interest at the usual rate 



1 From the Farm Account Book prepared for the Champaign County Agri- 

 cultural Improvement Association by the Extension Division of the College of 

 Agriculture, University of Illinois. 



2 The term "total farm receipts," as used here, means the total income from 

 the farm for the year; that is, it includes all cash receipts from the farm and the 

 increase in value of improvements, live stock, grain, supplies, machinery, and 

 other farm equipment. 



The term "total farm expenses," as used here, means the total cost of the 

 farm business for the year; that is, it includes all cash expenses of the farm, the 

 decrease in value of improvements, live stock, feed, supplies, tools, machinery, 

 and the value of the unpaid family labor not including the operator's wages. 



