26 BULLETIN 994, IT. S. DEPARTMENT OF AGRICULTURE. 



the charge for plant food consumed to a definite and practical basis. 

 Soils are so variable in physical condition and soil theories are still 

 so unsettled as to make it extremely difficult to set a standard 

 which will be generally acceptable. Assuming that a charge for 

 consumed fertility might be made against the crop, it is obvious 

 that the account to receive the credit would be the land. This 

 would mean making land values variable, according to the kind of 

 crops grown. It can readily be seen that this would lead to great 

 confusion. 



The fertilizer cost item illustrates the extreme variability that 

 exists hi the cost of farm products because of the great variation 

 in soil types, farm practices, and fertility methods. Without more 

 definite data than are now available it becomes dangerous to make 

 arbitrary charges for the fertility removed from the soil. 



Interest. — Considerable difference of opinion exists as to the practice 

 of including interest as a cost in farm-cost accounting. Commercial 

 accountants are divided into two schools on this question and two 

 procedures are followed in commercial accounting. Many authori- 

 ties include interest for certain organization studies and omit it as 

 a cost in arriving at conclusions on other lines. Cole * states that 

 proper accounting is based primarily on the purpose served, and 

 relates only secondarily to the object with which the expense chances 

 to be identified. The principal purpose of farm cost accounting, from 

 the standpoint of the farmer, is to provide figures that will make it 

 possible to compare the costs and profits of competing enterprises 

 on individual farms. Hence the inclusion of interest" as a cost in 

 farm accounting as a matter of fact is not contrary to the principles 

 of commercial accounting if more profitable farming is the object. 



The use of capital, whether in the form of land, live stock, or 

 equipment, whether borrowed or provided from a surplus, is an 

 element of cost in production that must be reckoned with and 

 allowed for in any adequate accounting system. Statements of 

 business men, economists, and at least a representative number of 

 accountants confirm this practice in comparative analyses of various 

 units of industry. 



Hatfield 2 clearly points out that where it is essential to determine 

 whether capital shall go into a given industry or not, what is wanted 

 is a correct estimate of the net income after deducting all interest on 

 capital and other items frequently excluded from cost accounts 

 themselves. "The information necessary to show whether an enter- 

 prise is ultimately successful is very different from that which shows 

 whether an enterprise once established should be continued." The 

 comparison of farm enterprises in this connection clearly necessi- 



1 Accounts — Their Construction and Interpretation, by William Morse Cole, p. 114. 

 a Modern Accounting, p. 307. 



