i68 Farm Accounts, Profits, and Costs. [may, 



(h) Yearly Tenancies. — It must be borne in mind that in 

 England, at all events, most farms are let on a yearly tenancy, 

 and with the increasing frequency with which estates are being 

 sold and the risk of a notice to quit, it may be necessary for the 

 occupier at short notice to realise even what have been termed 

 the fixed assets. 



It may be argued that these reasons make it unwise to assume 

 that the farm wiU continue as a going concern, and that these 

 fixed assets should, therefore, be valued in the same way as the 

 stock, etc., intended for sale. But if for the " Fixed" Stock, 

 cost less depreciation be adhered to as the basis, there is not 

 much risk of a loss ensuing on realisation. Further, the great 

 majority of faims in the past have not been subjected to in- 

 terruption of their tenancies, and, in view of the promised 

 legislation to give farmers increased security of tenure, I think 

 the general considerations put forward above may stand. 



3. Reserves. — At the end of the year there may be liabilities 

 and contingencies — such as bad debts, dilapidations, decreased 

 fertihty, etc., for which it may be necessary to provide by 

 making a reserve against the year's profit. 



The necessary amount of depreciation to be written off the 

 Live and Dead Stock (if these are not the subjects of a valua- 

 tion) has also to be decided, and in practice this is often an 

 important question. 



In commercial concerns these reserves are more numerous 

 and important than in farming. 



The amount of profit to be reserved for all these purposes 

 is largely a matter of personal opinion and prudence, or it may 

 be, of policy, and these reserves afford a ready means of putting 

 by secret reserves of profit and reducing the amount of profit 

 disclosed in the accounts. 



4. Improvement Outlay and Maintenance Outlay, — It is some- 

 times difficult to decide whether expenditure is in the nature 

 of improvements or additions, or is for maintenance only. 



Outlay on additions and improvements is an addition to 

 the capital value. 



Outlay on maintenance and repairs is a recurring expense 

 which must be included m the expenses for each annual account. 

 The dividing line, however, between the two classes of outlay 

 is not alAvays distinct. 



Implements of improved quality or type and consequently 

 of greater cost may be bought to replace others worn out. 

 This may be treated in one case as a mere expense of renewal. 



