30 BULLETIN 994, U. S. DEPARTMENT OF AGRICULTURE. 
The various uses of the term " profit" illustrate the need for a more 
general understanding as to the nomenclature used in farm account- 
ing studies. Doubtless the time is coming when "profit" will mean 
just one thing to everyone interested in the farm business, while 
"farm income/' "labor income," "interest on investment," and 
other kindred terms will express the precise meaning intended, by 
virtue of a wider dissemination of the correct definitions and the 
proper use of these terms. 
In common farm-accounting practice the profit from a farm 
business is that amount which remains after all expenses, including 
the labor used on the farms, and interest on investment in the farm 
business, have been deducted from the total receipts, the total 
receipts to include cash receipts, farm products consumed on the 
farm, and increase in inventory other than an increase in the value 
of land owing to an unearned rise in value. If the inventory is 
properly kept, any permanent improvement added to the farm as an 
expense will be counterbalanced by a proper increase in the value of 
the farm, but a more or less arbitrary increase in the value of the 
land should not be included as a receipt in the operation of the year's 
business. 
In commercial accounting practice, however, interest on invest- 
ment or capital is not commonly included in the costs. The position 
is commonly taken that profits can not be divided into "interest" 
and "profits," but that the total remainder above all operating 
expenses represents the profit, which may be expressed as a certain 
percentage of the capital investment. Interest can not arbitrarily 
be estimated and taken out in computing the costs and arriving at 
the total profit. In comparing farming as a business with other 
lines of business, when a total profit or net return is used interest on 
the farm capital should not be included in the costs in determining 
the profit. 
There is also need for distinguishing between the profit from a par- 
ticular enterprise on the farm and the profit from the entire farm 
business. From an accounting standpoint, for example, the field 
crops, considered as separate enterprises, will often show a very good 
profit, while the live-stock enterprises which consume these crops 
may show a very small profit or an actual loss; nevertheless, the 
returns from the farm business at the end of the year are such as to 
be satisfactory to the farm operator. 
THE ROUTE PLAN. 
The route plan of obtaining cost of production data, as conducted 
at the present time by the Office of Farm Management and Farm 
Economics, involves studies of a group of from 20 to 25 farms in a 
locality. A field statistician spends his entire time in the vicinity, 
