Theory question 110
Farm Management and RecordsExplain the following terms.
(a) salvage value
(b) farm inventory
(c) farm assets
(d) point of diminishing return
(e) depreciation.
Show the model answer
(a) Salvage value: the value of an asset at the end of its useful life, when sold off as scrap or second-hand
(b) Farm inventory: a record/list of everything the farm owns (land, buildings, machines, livestock, stores) with their values at a given date
(c) Farm assets: things of value owned by the farm – fixed assets (land, buildings, machinery) and current assets (cash, stock, produce, debts owed to the farm)
(d) Point of diminishing returns: the point at which adding more of a variable input (e.g. fertilizer, labour) to fixed inputs gives smaller and smaller extra output
(e) Depreciation: the fall in value of an asset over time due to wear and tear, age or obsolescence
One clear definition for each term.