AGRICULTURAL ECONOMICS IV
This topic entails the following:
- Importance of farm accounts
- Financial documents and their uses
- Analysis of financial statements
- Books of accounts and their uses.
The following relevant questions and their answers in this topic will greatly motivate and help the user to comprehend and understand the required concepts and practices:
- Name three methods of grafting that are used in propagation of plants
2 a) The following transactions were extracted from Mr. Tembo’s financial books for the year
ending 31st Dec 2003.study and answer the questions that follow:
Particulars cost (ksh)
Milk sale 8 000
Goat sale 500
Purchase of farm tools 1 000
Construction of zero grazing unit 10 000
Depreciation of machinery 800
Closing stock 16 000
Veterinary bills 400
Interest payable 750
Wages 4 800
Sales of cabbages 750
Sales of tea 4 700
Opening stock 12 000
Sales of heifers 9 400
Purchase of pesticides 300
(a) i) Prepare a profit and loss account for Mr. Tembo’s farm for the year ending 31st Dec. 2003
- ii) Calculate the percentage profit or loss made by the farm
- b) i) Give five functions of farmer’s cooperative societies
- ii) Outline five common risks and uncertainties in farming
- State four reasons for using certified seeds for planting
- List any two financial statements which may be prepared on a farm
- The following information was obtained from Lang’at’s farm records for the year ending
December, 2004. Study it and answer the questions that follow:-
Goats 4,000
Poultry 15,000
Causal workers 12,000
Opening valuation 150,000
His sales and receipts are as follows:
Mohair 75,000
Rabbits 3,600
Eggs to hotel 15,000
Closing valuation 200,000
(a) Prepare the profit and loss A/C of Lang’at’s farm
(b) State the benefit of a profit and loss A/C to Mr. Lang’at
- (a) List any four financial documents used in the farm
(b) Prepare a profit and loss account for Mr. Rob’s farm for the year ending 31st Dec. 2009, given
the following information:-
Sale of milk Kshs.10,000
Sold two heifers kshs.10,000
Cabbage sold Kshs. 20,000
Debts payable Ksh.4,200
Sold tomatoes Kshs. 3,000
Veterinary bills Kshs.2,500
Bought livestock feeds Kshs.2,500
Purchase fertilizers Kshs.5,000
Bought seeds Kshs. 4,000
Debts receivable Kshs.20,000
Opening valuation Kshs.150,000
Closing valuation Kshs.200,000
(c) Did the farm make a profit or a loss? Calculate the percentage profit or loss made by the Farm
(d) Explain the various ways in which farmers may adjust to risks and uncertainties
- a) The following transactions were extracted from Mr. Tembo’s financial books for the year
ending 31st Dec 2003.study and answer the questions that follow:
Particulars cost (ksh)
Milk sale 8 000
Goat sale 500
Purchase of farm tools 1 000
Construction of zero grazing unit 10 000
Depreciation of machinery 800
Closing stock 16 000
Veterinary bills 400
Interest payable 750
Wages 4 800
Sales of cabbages 750
Sales of tea 4 700
Opening stock 12 000
Sales of heifers 9 400
Purchase of pesticides 300
- i) Prepare a profit and loss account for Mr. Tembo’s farm for the year ending 31st Dec 2003
- ii) Calculate the percentage profit or loss made by the farm
- b) i) Give five functions of farmer’s cooperative societies
- ii) Outline five common risks and uncertainties in farming
- At the end year ended 31/12/2005 Bidii farm recorded the following:
Perennial crops 250,000
Bank loans 30,000
Cash at hand 5,000
Bank overdrafts 15,000
Land 350,000
Unpaid wages 3,000
Debts receivable 20,000
Stocks in store 25,000
Livestock 200,000
Bank balances 100,000
(a) Prepare a balance sheet as at 31/12/2005
(b) Did Bidii farm qualify for a loan and why?
- State one condition in which each of the following documents is used.
- i) Invoice
- ii) Delivery note
iii) Receipt
- Below is a transaction showing Mrs.Okello’s financial position in her business for the year 2009
-Purchase of pesticides 3,000 00
-Milk sales 8,000 00
-Sales of goats 5,000 00
-Construction of store 10,000 00
-Closing valuation 16,000 00
-Depreciation of machinery 3,000 00
-Interest payable 1,750 00
-Purchase of farm tools 800 00
-Veterinary bills 1,400 00
-Sales of tomatoes 1,750 00
-Wages 10,000 00
-Sales of heifer 10,000 00
-Opening valuation 12,000 00
-Sales of coffee 5,000 00
- i) Prepare a profit and loss account for Mrs. Okello’s farm
- ii) Calculate the percentage profit or loss that Mrs. Okello made during the year 2009
iii) Explain six ways in which farmers adjust to risk and uncertainties in farming
- Name two examples of liabilities in a balance sheet
ANSWERS
AGRICULTURAL ECONOMICS IV
- three methods of grafting that are used in propagation of plants
- Whip are tongue grafting
- Side grafting
- Approach grafting
- Bark grafting
Notch grafting
- a) i) Prepare a profit and loss account for Mr. Tembo’s farm for the year ending
31st December 2003 (9mks)
PROFIT AND LOSS ACCOUNT FOR MR. TEMBO√
FARM FOR THE YEAR ENDING 31ST DEC 2003
|
|
Sales and receipts |
||
|
sh cts |
|||
|
Opening stock√ Purchase of farm tools√ Zero grazing unit construction√ Machinery depreciation√ Interest payable √ Pesticide purchase√ Veterinary bills √ wages √ TOTAL net profits √
|
12000 00 1000 00 10000 00 800 00 750 00 300 00 400 00 4800 00 30050 00 9300 00 |
Milk sale√ Sale of goats√ Cabbage sale√ Sale of heifers√ Sale of tea√ Closing valuation√ |
8000 00 500 00 750 00 9400 00 4700 00 16000 00 39350 00
|
|
39 350 00 |
39 350√ 00 |
||
- ii) Calculate the percentage profit or loss made by the farm (1mk)
%profit=profit x 100
Total income
=9300 x 100
39350 = 23.6%
- b) five functions of farmer’s cooperative societies
- function of farmers cooperative societies
- marketing farmers produce
- negotiating fair prices for produce and input
- keeping records of the cooperative activities and in forming the members accordingly
- paying dividends to members
- giving loans in kind to members
- educating members on matters relevant to cooperative(5×1=5mks)
- ii) Outline five common risks and uncertainties in farming
- risks and uncertainties
- pest and diseases outbreak
- price fluctuation
- sickness and injury
- natural catastrophes e.g. floods, earth quakes ,storm ,strong wind
- new technologies of production
- ownership uncertainty
- physical yield on what is expected
- four reasons for using certified seeds for planting
- High yielding
- Quality produce
- High germination percentage
- Grow faster
- two financial statements which may be prepared on a farm.
– Balance sheet.
– Cash analysis.
– Profit and Loss Account.
- (a) Profit and loss A/C for Langat’s farm for the year ending 31st December, 2004
|
Purchases & Expenses |
Shs. |
Cts |
Sales & receipts |
Shs. |
Cts |
|
Opening valuation Goats Poultry Casual worker Subtotal Net profit |
150000 4000 15000 12000 181000 112600 |
00 00 00 00 00 00 |
Mohair Rabbits Eggs to hotel Closing valuation |
75000 3600 15000 200000 |
00 00 00 00 |
|
Total |
293,600 |
293,600 |
Awarding:-
– Title (½mk)
– (Purchases & expenses and sales & receipts) ½mk
– Entries each ½ x 10 (5mks)
(b) State the benefit of a profit and loss A/C to Mr. Lang’at
- Helps the farmer to detect whether he has loss or profit
- Helps in tax assessment to avoid over taxation
– Acts as evidence when a farmer requires a loan
- a) – Invoice
- Receipt
- Delivery note
- Purchase order
- Statement of account (4×1=4 mks)
- b) ROBS,
PROFIT AND LOSS ACCOUNT
AS AT 31ST DEC, 2009
|
Purchases and expenses√ ½ mk |
Sales and receipt√ ½ mk |
|
Opening stock 150,000 Vetenary bills 2500 Livestock feeds 2500 Fertilizer 5000 Seeds 4000 Debts payable 4200 TOTAL √ ½ mk 168000 Profit √ 1 mk 94,800
263000 |
Sale of milk 10,000 Sale of cabbages 20,000 Sale of two heifers 10,000 Sale of tomatoes 3000 Debts available 20,000 Closing valuation 200,000 √ ½ mk 263,000 √ 1 mk 263,000 ( ½ mk each entry 6 mks) Total 10 mks |
.
- c) It made profit
Profit ksh. 94,800√ 1 mk
% profit= profit x 100
Opening Valuation
94,800×100
150,000
= 63.2%√ 1 mk
- d) -Diversification- Setting up several and different enterprises on the farm. If one fails the
farmer cannot incur total loss.
- Contracting- farmers can enter into contract with consumers. It guarantees a constant fixed market for goods/services
- Insurance- Taking an insurance cover to compensate them incase of loss
- Input rationing- Farmers can control the quantities of inputs used in various enterprises to reduce losses
- Flexibility in production methods- Ability to change from one enterprise to another in response to demand changes
- Adopting modern methods of production e.g. disease control, irrigation, mechanization e.t.c.
- a) i) profit and loss account for Mr. Tembo’s farm for the year ending 31st Dec. 2003
PROFIT AND LOSS ACCOUNT FOR MR. TEMBO√
FARM FOR THE YEAR ENDING 31ST DEC 2003
|
Purchases and expenses |
Sales and receipts |
||
|
sh cts |
|||
|
Opening stock√ Purchase of farm tools√ Zero grazing unit construction√ Machinery depreciation√ Interest payable √ Pesticide purchase√ Veterinary bills √ wages √ TOTAL net profits √
|
12000 00 1001 00 10000 00 801 00 751 00 301 00 401 00 4801 00 30050 00 9300 00 |
Milk sale√ Sale of goats√ Cabbage sale√ Sale of heifers√ Sale of tea√ Closing valuation√ |
8001 00 501 00 751 00 9401 00 4701 00 16000 00 39350 00
|
|
39 350 00 |
39 350√ 00 |
||
- ii) Calculate the percentage profit or loss made by the farm (1mk)
%profit=profit x 100
Total income
=9300 x 100
39350
= 23.6%
- b) five functions of farmer’s cooperative societies
-
-
- Function of farmers cooperative societies
- marketing farmers produce
- negotiating fair prices for produce and input
- keeping records of the cooperative activities and in forming the members accordingly
- paying dividends to members
- giving loans in kind to members
- educating members on matters relevant to cooperative(5×1=5mks)
-
- ii) five common risks and uncertainties in farming
- Risks and uncertainties
- pest and diseases outbreak
- price fluctuation
- sickness and injury
- natural catastrophes e.g. Floods, earth quakes ,storm ,strong wind
- new technologies of production
- ownership uncertainty
- physical yield on what is expected
- a) Prepare a balance sheet s at 31.12.2005
BIDII FARM BALANCE SHEET AS AT 31.12.2005
|
LIABILITIES SHS CTS Current liabilities Overdraft 15000 00 Unpaid wage 3000 00 Long term liabilities Bank l 30000 00 Net worth 897000 00 945000 00 |
ASSETS SHS CTS Current assets Debt receivable 20000 0 Stocks 25000 00 Bank balance 100000 00 Fixed assets Perennial crops 250000 00 Land 350000 00 Livestock 200000 00 945000 00 |
- b) Yes it qualified for a loan because it was solvent i.e. has more assets than liabilities
- one condition in which each of the following documents is used.
- i) Invoice –when goods //services are sold /bought on credit
- ii) Delivery note-when goods are physically delivered to the buyer
iii) Receipt-when goods/services are bought or rendered on cash
- i) Prepare a profit and loss account for Mrs. Okello’s farm
profit and loss A/C for Mrs.Okello’s farm for the year ending 31/12/2009
|
Purchase and expenses |
Sales and receipts |
|
Opening valuation 12000 00 Pesticides 3000 00 Construction of store 10000 00 Depreciation of machines 3000 00 Interest payable 1750 00 Purchase of tools 800 00 Veterinary bills 1 400 Wages 10,000 Net profit 3800 |
Milk sales 8000 Sales of goats 5000 Sales of tomatoes 1750 Sales of heifer 10 000 Sales of coffee 5000 Closing valuation 16000
|
|
45750 |
45750 |
Award of marks Title -1mk
Purchases and expenses side -1mk
Sales and receipt sales-1mk
Net profit – 1mk
Both totals-1mk (5×1=5mks)
Each of the correct entries in purchase and expenses and sales and receipt sides (14x ½ =7mks)
- ii) Calculate the percentage profit or loss that Mrs. Okello made during the year 2009
3800 x100√1
45750
= 8.3%√1
iii) six ways in which farmers adjust to risk and uncertainties in farming
- diversification-production of services products at the same time to avoid risks due to weather, fluctuation in price and disease
- contracting-make contracts with dealers to supply or buy certain commodities at fixed prices thus transfer the risk of drop in demand and supply
- insurance-purchase security by payment of small sum of money for compensation in case of failure
- input rationing-use of inputs sparingly to avoid wastage
- flexibility in production-combination and substitution of inputs and techniques of products for each other use the cheapest
- use of government price stabilization policies
- adapting modern methods of farming-use of researched varieties, breeds better adapted to local conditions
selecting more certain enterprises-engage in enterprises with more surerity of success i.e. artificial insemination as opposed to natural insernimation (any 6×1=6mks)
- – Bank overdraft
-Bank loans
-Debts payable
-Tax payable
-rent
