Farm Records and Accounting It is always said

Farm Records and Accounting It is always said that cultivator is good producer rather than good business man. He knows how to produce but he does not know how to keep accounts of the farm. It is therefore very necessary to have sufficient knowledge about farm accountancy in order to handle the farm business efficiently. The farm accounting or accountancy is also called as “Farm Book keeping”. It’s defined as under.

1) Farm accountancy is defined as the art as well as the science of recording in books business transactions in regular and systematic manner so that their nature, extent and financial effects can be readily ascertained at any time of the year. 2) Farm accounting is an application of the accounting principles to the business of farming.

3) Farm book keeping is known as a system of records written to furnish a history of the business transactions, with special reference to its financial side. The Farm Accountancy or Farm Book Keeping is a matter of Farm Business Analysis. Therefore Farm Business Analysis is done by following three steps.

Three steps. 1) Proper activities: recording of accounts and All the transactions are properly recorded in relevant books. Therefore aspect wise record books are to be maintained. Proper recording of data will be useful further analysis purpose.

2) Analysis & Interpretation: The collected data is raw data. Under this second stage, farm accounting begins with determination of the proper measures of income and computation of management and efficiency factors for the farm.

3) Presentation of Results: Finally tabulation and charts are made to show the factors which affect the farm success and failure so that an individual farmer by comparing his performance with these users or standards may be able recognizes his weak points and take necessary steps for improvements.

Objective of Farm Accountancy The main object of keeping Farm account is to examine as to 1) How does the business fare at a certain time? 2) Where are the weaknesses? 3) What improvements are possible? Similarly by farm business analysis, the background information can be obtained for getting credit facilities.

Advance (Importance) of Farm Records & Accounts Farm records and accounts are very important as they are advantageous as described below. 1) Means to higher income To obtain higher income, farmers must have exact knowledge about present & potential gross income and operating costs. The best way to obtain information on present results is to keep records and accounts in order to -

Know financial status at a point of time. Know gains and losses over time. Know better source of income and items of costs. Keep a check on unproductive expenditure. Examine comparative profitability & costs involved or different enterprises Weak points farm organization. Develop rational short term and long-term production plans.

2) Basis for diagnosis and planning: Diagnosis of management problems is the pre requisite of sound planning. Records and accounts provide the basic information needed for as such as diagnosis. 3) Way to improve managerial ability of the farmer: It helps to acquire business habits which can help in taking advantage of changes in the economic environment.

The farmer gets a better insight into the working of his business, which helps in finding out the defects which can be set right by exercising bettor control and effecting economics. Farmer can avoid mistakes and losses which would otherwise result to dependence only on his memory for guidance.

4) Basic for credit acquisition: Properly kept records and accounts are authentic records with the help of which the lending agencies can sanction the loans easily. 5) Basic for Research in Agril Economics: Research requires precise and correct data which is possible only if proper records and accounts are maintained on the farms included in the study.

6) Basic for Govt. Policies: The farmers need to continuously feed the facts for state and national farm policies such as land policies, price policies and crop insurance. Records and accounts are helpful in obtaining the correct data for examining and developing such policies to be sounds.

Methods/System of Book Keeping There are two systems of farm accountancy. a) Double Entry system b) Single Entry system

a) Double Entry System: It is a method of recording each transaction in the books of accounts in its two fold aspects i. e. two entries are made for each transaction in the same set of books, one being a debit entry and other a credit entry. Every business transaction involves two parties one for receiving the goods or services and other for giving them. Every transaction, therefore, is entered at two places, for credit and for debit. For example

i) Sale of Wheat for Tk. 2400/Two accounts involved will be cash account and wheat account. The cash account will be receiving account hence the amount will be written on the debit side. The wheat account will be giving account, and hence the amount will be written on the credit side of it.

i) Receipt of Money from Mr. Ram Tk. 2500/Here Tk. 2500/ have again been received in the cash account. The cash account is therefore debtor for the amount received. Mr. Ram has paid the amount and therefore Mr. Ram’s account will be the creditor. Cash account will be debited and Mr. Ram’s account will be credited.

b) Single Entry System: This is the system which ignores the double effect of transactions. Only personal account of debtors and creditors are kept and the impersonal accounts are ignored completely.

Difference between Double & Single Entry system Sl. Double Entry system Single Entry System No. 1 Double Entry system is perfect in Single Entry system is faulty its arrangement and mathematically incomplete & unscientific accurate. 2 Record of both personal and Only personal accounts are kept impersonal accounts are kept 3 Trial and balance account is It cannot possible under double entry 4 It is perfect, accurate and result are It is imperfect, less accurate more reliable and unreliable.