254 Profit and Loss Sharing in Agriculture, [june. 



PROFIT AND LOSS SHARING IN 

 AGRICULTURE. 



James Wyllie, B.Sc, N.D.A. (Hons.). 



The publication of the writer's Scheme of Profit and Loss 

 Sharing in Agriculture in this Journal^ and elsewhere has 

 created considerable discussion, not only as to whether the 

 Scheme proposed is sound in principle but also as to its practica- 

 bility. The question of principle will always be a matter of 

 opinion, but it is likely that as many employers, and especially 

 farmers, will cavil at the practicability of profit and loss sharing 

 as at the principle involved. Indeed, a common objection 

 amongst farmers is that profit and loss sharing implies not only 

 that accurate accounts must be kept but also that they must be 

 regularly audited by a qualified person. In these circumstances 

 a useful purpose may be served by showing how the Scheme 

 v/ould and does work out in practice. 



1. The Balance Sheet. — The foundation of any profit and loss 

 sharing scheme is a properly constructed balance sheet showing, 

 inter alia, the actual amount of capital invested in the farm. 

 Since capital is one of the factors to be remunerated, the amount 

 must be accurately determined. In particular, the valuation 

 of stocks in hand must be neither too high nor too low, while 

 the amount included for cash at the bank should not be more 

 than is necessary to carry on the farm as a business proposition. 

 Except in special circumstances (which, it may be said, will 

 quite frequently arise), the valuation should be made either 

 according to standard or fixed values, as in the case of sheep 

 stocks, dairy herds and working horses, or on the basis of 

 estimated cost of production or market value, whichever is 

 the lower. It is highly desirable, and will make for confidence 

 amongst the employees, that the valuation be made by a 

 disinterested party, and that the balance sheet be properly 

 certified. 



2. Rate of interest on Capital. — At the outset an agreement 

 should be arrived at between the employer and the employees 

 as to the rate of interest which is to be allowed on the invested 

 capital. Under present conditions it is suggested that the 



* See Vol. XXVI. No. g, December, 191 9, pp. 910-913, which should be 

 read with this article. 



