(a) Explain briefly the term farm valuation. (b) Prepare a Profit and Loss Account for a farm from the following information:
maize seeds for planting – N25,000.00
fertilizers used – N14,800.00
pesticides – N20,000.00
purchase of seed yams – N50,000.00
tractor hire – N60,000.00
transport cost – N10,000.00
workers’ wages – N40,000.00
sale of maize cobs – N250,000.00
yam tubers sold – N200,000.00
opening valuation – N440,000.00
closing valuation – N200,000.00
Explanation
(a) Farm valuation Involves the determination of the financial / monetary worth of all items of production e. livestock and crops, machinery, buildings and stored products e.t.c on the farm within an accounting period. - There are opening and closing valuations. Usually, opening valuation is the value at the beginning of the accounting period while the closing valuations is the value at the end of the accounting period. Change in the value of the farm should be included to get the true value of the farm profit or loss
(b) Profit and loss Account for National Farms
| Purchases and Expenses (Debit) | Sales and Receipts (Credit) |
| N K | N K |
| Maize seeds 25,000.00 | Maize cobs 250,000.00 |
| Fertlizers used 14,800.00 | Yam tubers 200,000.00 |
| Seed yams 50,000.00 | Closing valuation 200,000.00 |
| Tractor hire 60,000.00 | 650,000.00 |
| Transport cost 10,000.00 | Net loss 9,800.00 |
| Workers wages 40,000.00 | 659,800.00 |
| Sub-total 219,800.00 | |
| Opening valuation 440,000.00 | |
| 659,800.00 |