Farm Accounts The following were the assets and liabilities of the Carter Family who carry on a mixed farming business on 01/01/2010: Land €600,000; Farm Buildings €280,000; Machinery at cost €75,000; Value of sheep €24,000; Value of cattle/cows €68,000; Electricity due €300; Cash in Bank €8,900 - Leaving Cert Accounting - Question 4 - 2011

The Enterprise Analysis Account for ‘Cattle/Milk’ calculates the profit or loss from these enterprises. The income from Cattle/Milk includes:

• Sale of Milk: €32,000
• Sale of Cattle: €83,000
• Single Farm Payment (75%): $0.75 * €16,400 = €12,300

Total Income:

$ext{Total Income} = 32,000 + 83,000 + 12,300 = 127,300$

Cost of Sales:

• Stock on Hand at 1/1: €68,000
• Purchases: €9,700
• Stock on Hand at 31/12: €29,000 (cost of sales needs to be deducted)

Cost of Sales Calculation:

$ext{Cost of Sales} = ext{Stock 1/1} + ext{Purchases} - ext{Stock 31/12}$

$ext{Cost of Sales} = 68,000 + 9,700 - 29,000 = 48,700$

Expenditure includes:

• Fertilizer: €4,450
• Electricity: €700
• Repairs: €900
• Wages: €20,600

Thus, total Expenditure = 4,450 + 700 + 900 + 20,600 = 26,650

Finally, the profit can be calculated as follows:

$ext{Profit} = ext{Total Income} - ( ext{Cost of Sales} + ext{Expenditure})$

$ext{Profit} = 127,300 - (48,700 + 26,650) = 127,300 - 75,350 = 51,950$

For the Sheep enterprise, income is derived from:

• Sale of Lambs: €10,900
• Sale of Wool: €1,300
• Single Farm Payment (25%): $0.25 * €16,400 = €4,100

Total Income Calculation:

$ext{Total Income} = 10,900 + 1,300 + 4,100 = 16,300$

Cost of Sales:

• Stock on Hand at 1/1: €24,000
• Purchases: €6,200
• Stock on Hand at 31/12: €25,000 (deduct for cost of sales)

Cost of Sales Calculation:

$ext{Cost of Sales} = ext{Stock 1/1} + ext{Purchases} - ext{Stock 31/12}$

$ext{Cost of Sales} = 24,000 + 6,200 - 25,000 = 5,200$

Expenditure includes:

• Fertilizer: €4,450
• E.S.B.: €2,150
• Repairs: €900
• Wages: €20,600

Thus, total Expenditure = 4,450 + 2,150 + 900 + 20,600 = 28,100

Conclusion for Sheep:

$ext{Loss} = ext{Total Income} - ( ext{Cost of Sales} + ext{Expenditure})$

$ext{Loss} = 16,300 - (5,200 + 28,100) = 16,300 - 33,300 = -17,000$

1. Profit Analysis: Farmers keep a full set of accounts to accurately assess the profitability of their operations. By maintaining detailed records, they can identify which enterprises are making money and which are incurring losses. This insight allows them to make informed decisions regarding resource allocation and future investments.

2. Financial Management: A complete set of accounts aids in effective financial management. Farmers can track their cash flow, expenses, and liabilities, which is essential for budgeting and forecasting. This information is vital when applying for loans or assessing the overall financial health of the farming business.