The Iola register. [volume] (Iola, Allen County, Kansas) 1875-1902, 1885-08-07
FARM FINANCE.

FARM FINANCE.
How Farm Accounts Should BE Kept,
and What Elements of Calculation
Should he Considered.
In all, or nearly all, reports of farm
transactions relating to money, there
seem to be certain faults which spring
from lack of knowledge of the prin-
ciples of finance; capital owned is con-
founded with capital borrowed, inter-
est with profit, and wages with profit.
These mistakes lead to confusion. The
greatest pains may be taken to arrive ut
Just conclusions, but if care is not taken
to give each account its proper position
or value, the result, on paper, will often
be at variance with the reality. l have
seen printed reports of farm crop &C
counts from which, after the closest
study, l could not arrive at conclusions.
The accounts were jumbled. and the re.
suits misleading. The foundation of
every mans business is capital. The
result Of the proper use of capital is
profit. The cost of the means of arriv-
ing at this profit is wages. If capital is
borrowed. or land rented. the cost of
the use of either is called interest or
rent. The two are exactly similar. In
terest is rent paid for the use Of
money. Of the two, rent il generally
less than interest, because land is safer
in an other persons hands than money.
1t is generally from the improper use of
interest, that confusion arises in ac-
counts. Interest should never enter into
an account at all. 1t should be used
only on the outside, as it were, or
(more plainly after the account is COM
pleted. We must remember that to
make an account exact, only actual
value and cost must enter into it. In
terest bears no relation whatever to the
account, but only to the capital invested
that is, interest is neither apart of the
value nor part of the cost, but only a
part of the profit, and rs such should be
considered. What has been said of in
terest will also apply to rent
Briefly, farm bookkeeping may be
divided into two classes business &C
counts and crop accounts. BY the first,
we ascertain the gain or loss on our cap
ital invested. In this will appear all
real and personal accounts; all actual
business transactions, and thus all
moneys paid for rent, interest, taxes,
labor, stock. etc. Be sure never to al
low anything but actual 6usiness trans
actions to enter into this account. II
no land is rented, there will be no rent
account; il no money is borrowed OF
lent, no interest, and so on. Make nc
charge for your own labor, or for any
member of your family-your living
family keep and profits are your pay.
It is altogether unnecessary to keep &C.
count of hay, grain, straw, ETC., grown
and fed upon the farm. The returns fol
these will be found in the increase in
value of the stock and manure. (O1
course all feed and manures purchased
will come into the accounts). Neither
is it necessary to make charges for any
thing grown on the farm and used in
the family, for reasons as obvious.
Open these accounts by taking stock Of
everything you possess at fair market
value. Add any notes or accounts ow.
ing to you, and cash on hand; subtract
all notes or accounts owing by you.
The result will represent your capital
Open accounts for gyain, implements
and stock, charging only actual trans
actions in each; keep separate accounts
for labor, interest. expenses, etc: AT
the end of the year, take stock again,
balance your books, and the difference
between your stock at the end, and at
the beginning of the year will represent
your loss or gain. In practice it is unnec-
essarv TO take stock of household furni-
ture, clothing. or even goods or produce
on hand that are to be used in the fam
lily, as these are not part OF your busi-
ness investment, and are practically the
same at any time. All small articles
about the house used in connection with
milk, ETC., must be taken into account
as we'll as everything used in connection
with the farm, such as feed and imple-
ments.
In the crop accounts, the capital in
vested on the crop (value of land. seed
and manure), wages (cost of working
land, putting in, taking off and market
ing crops) and taxes represents the debit
/ side, or actual value of investment plus
the cost. The credit side or actual val
he of returns, is represented by the val
ne of land. manure left in land, and
market value of crop. The difference
between the debit and credit represents
the loss or gain. Neither rent or inter-
est has anything to do withithis account.
The reason for this will be plain, if we
consider why these accounts are entered
'nto. We keep an account with crop
that we may ascertain whether that par
ticular crop pays or not. The transac-
ton is exactly similar to one in trade or
manufacture. The price of the land is
represented by the cost of raw material
to, the manufacturer, and the Wholesale
cost Of the traders goods. The means
taken to arrive at profit in either case
are. eMsctly similar. Again, the profit
on, a crop depends more upon the seed.
manure and labor used, than upon tha
valne of the land; We may so. use the
land that it will return no profit what
even If we own the land, the land,
seed and manure represent our capital
invested; and the profit represents the
peroentage made upon the capital. II
we hire the land, our capital is repre-
senisd by seed ard manure only: there
fora. the rent represents that share Of
the. profit which belongs TO the owner Of
the. land. and should bededucted from
the. profit, and, not added to. the cost.
LII money is borrowed to.purchase seed
and manure, ID is,clear we cam have nc
capital, and therefore. no profit II
there does appear a profit, it is false, il
is not profit, SUIT wages. Here is the
caaaSe of har3 times, among the tenant
farmers. They do not consider enough
the relation between. capital, wages and
pzoft.-COr: Country Gentleman
-.