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IAHM ACCOrXTINd 



interpretation of the Loss and Gain account and the State- 

 ment of Resources and Liabilities prepared from books 

 kept under a cost system, will enable a farmer to find out 

 what elements of his farming operations were profitable 

 in a given year and which unprofitable. 



By comparing with preceding years, he will be able to 

 form conclusions as to whether the loss or very small profit 

 in any line is due to unfavorable weather or to some ap- 

 parently more permanent cause, as soil, climate, market 

 conditions or poor management. 



Fixing Prices, Theoretically. The third purpose of cost 

 accounting on a farm, that of fixing prices, is more theo- 

 retical than practical. It is theoretical, because cost ac- 

 counting is not universally applied to farming operations. 

 A few individuals knowing that they are losing money 

 on a certain crop or livestock at prevailing prices cannot 

 prevent the great mass of other farmers from selling be- 

 low cost. Some fanners like some manufacturers think 

 they are selling everything above cost because they come 

 mil ahead financially at the close of the year. As a matter 

 of fact they are sometimes making one remunerative class 

 of goods carry the burdens of another unremunerative 



If farmers throughout a competing district kept accur- 

 ate and detailed cost records and accounts they would be 

 able to sell above cost, for the crops that were losing 

 money would be so generally discontinued that prices 

 would be adjusted to a reasonable profit-making figure. 

 As a matter of fact, then, fixing prices of farm products 

 on a basis of cost of production is quite remote, partly 

 because of the great competing area that produces and 

 sells in ignorance of cost, and partly because the compet- 

 ing area includes practically the whole world. 



General Scheme of Operation. In operating a cost 

 system on the farm, it is necessary to keep the cash journal 



