278 FARM ACCOUNTING i 



rating and harvesting a crap. Similar expenses for 

 labor, and miscellaneous items might be enumerated in 

 the case of livestock. In either instance, a certain amount 

 of capital is required to produce a crop or raise livestock, 

 aside from the elements of property previously mentioned. 



Theoretically, interest on the capital paid for labor, feed 

 and other items should be charged to the crops or livestock. 

 Practically, it is not considered of sufficient importance 

 to pay for the time and difficulties of calculation. For a 

 purely scientific investigation, such interest should be con- 

 sidered. For practical farming purposes, it should not be 

 considered, as its relative effect upon different farm ele- 

 ments is about the same. 



The Process of Closing. It is stated in the discussion 

 of various accounts that they are closed at the end of the 

 fiscal year into other accounts, in order to give certain re- 

 sults. Such statements require slight explanation in order 

 to have the closing made without confusion of entries or 

 accounts. 



The principles governing the closing iwider a cost sys- 

 tem are logical. In order to view them logically one has 

 only to a,s7, himself the object of closing. The answer is: 

 "In order to distributi the costs of production oi-fr the 

 productive elements on the farm." Such :i distribution 

 is necessary to find the profit from the operation of each 

 productive element, the incomes having been credited to 

 the proper accounts direct at the time they arose. 



Expenses in farming are divisible into ttro classes (1) 

 direct and (2) indirect. In general, direct expenses on 

 any productive element consist of those that have a defi- 

 nite known value at the time they are incurred. Indirect 

 expenses on any productive element consist of those whose 

 value is not known or certain at the time they are incurred. 

 Examples of direct expenses are man labor, horse labor, 

 seed, fertilizer and similar items in connection with crops; 



