i64 Farm Accounts, Profits, and Costs. [may, 



of farmers at present pay Income Tax on the rental basis, 

 an increasing number are finding it necessary to ascertain 

 their profits or losses from year to year, in order to have the 

 information available for Income Tax purposes if necessary. 



FARM PROFITS. 



General. — Although by no means the only object, one of the 

 objects of keeping accounts is to ascertain the result of the 

 year's operations in the way of profit or loss. It is often thought 

 that once the accounts have been made up and a resulting 

 figure .shown of profit or loss, that figure is a matter of fact 

 about which there can be no dispute or difference of opinion. 

 This is not so. Profit in most, if not all, cases is much more 

 a matter of estimate and opinion and valuation than a matter 

 of fact. Before accepting as correct the amount of profit 

 shown by any account, it is necessary to consider the various 

 steps by which that profit has been arrived at, and the questions 

 of valuation, apportionment and principle that have been 

 dealt with in arriving at the profit. 



There are many reasons which account for the difficulty 

 in settling the real figure of profit in a given case, and some of 

 these will be briefly considered. 



I. Arbitrary Period. — The period for which accounts are 

 usually made up — 12 months — is quite an arbitrary one. 

 We are compelled for various practical reasons to show the 

 results of farm operations at regular yearly intervals. It 

 becomes important for many reasons, amongst which are 

 profit-sharing schemes and assessments for Income Tax, 

 that the profit should be allocated as correctly as possible 

 to its proper year, and many of the difficulties arise through 

 the necessity of doing this. 



Again, some of the profits or expenses cover more than one 

 year. A case in point is the raising of cattle which are sold 

 after, say, three years. If a profit eventually results on the 

 sale, in what way should that profit be apportioned over the 

 three years during which the stock was being raised ? A 

 valuation of the stock at market prices each year may or may 

 not bring about this result, while if the stock is carried forward 

 at cost price until sold, the whole of the profit will be shown 

 in the third year. 



An analogous case, on a larger scale, is thatjof a buildnig 

 contractor who contracts for a building, the erection of which 

 will take three years. The practice in apportioning the profit 



