APPENDIX 389 



scientific way of treating the household inventory is based on 

 three essential principles or facts: 



1. The inventory valuation of household furnishings does 

 not affect the profits of the farm nor any comparisons made 

 among the farm elements. This means that the simplest 

 method may be used without impairing the efficiency of the 

 accounts through the apparently unscientific or inaccurate 

 treatment. 



2. It is not necessary to calculate depreciation on house- 

 hold furnishings. Such a calculation and entry therefrom 

 would affect no other account. It would mean merely a debit 

 and credit to Household account. Consequently the same pur- 

 pose is served by leaving the inventory entry the same from 

 year to year. The household receives approximately the same 

 benefit from the furnishings each year. 



3. The total furnishings of all descriptions as enumerated 

 are maintained at about 75% of their efficiency over a period 

 of years. Replacements from time to time tend to offset 

 dishes, clothes, carpets, etc., that have been discarded as use- 

 less. When such replacements are charged to the Household 

 account from year to year without being credited in the clos- 

 ing inventory, the result is an annual cost of operating the 

 household which may usually be considered reasonable. Such 

 costs of replacement take the place from time to time of 

 charges that might be made for depreciation. Seventy-five per 

 cent efficiency as used above does not mean that the furnish- 

 ings could be sold for 75% of their cost value. Second-hand 

 furnishings could seldom be sold for that much. That per cent 

 represents their value in use to the farmer 's family. 



Pricing Commodities Fed to Livestock. Under Fictitious 

 Profits it was stated that the net profits of the farm as a 

 whole are not affected by the price at which commodities are 

 transferred from one department to another. As a result of 

 this fact it was pointed out that a transfer of feed to live- 

 stock at market price or more would not create a fictitious 

 profit for the farm. 



There remains to be determined just what price should be 



