Theory question 106
Farm Management and Records(a)(i) Prepare a balance sheet for Newlife Farms for the year ended 31st December, 2016 using the information below:
Closing valuation N600,000.00
Cash in bank N250,000.00
Loan payable to cooperatives N250,000.00
Debt payable to feed millers N100,000.00
Debt receivable from egg sellers N100,000.00
(ii) State two reasons why the balance sheet is important to a farm manager.
(b) List five sources of agricultural loans in West Africa.
(c) Give three reasons why the floor of a deep litter house is preferably covered with wood shavings instead of saw dust.
Show the model answer
(a)(i) Newlife Farms balance sheet as at 31 December 2016. Assets: closing valuation N600,000; cash in bank N250,000; debt receivable from egg sellers N100,000; total assets N950,000. Liabilities: loan payable to cooperatives N250,000; debt payable to feed millers N100,000; total liabilities N350,000. Net worth (capital) = 950,000 − 350,000 = N600,000.
(ii) Any two: shows the financial position/net worth of the farm; shows whether the farm is solvent; helps in getting loans; guides planning and decisions.
(b) Any five: commercial banks; agricultural/development banks (e.g. Bank of Agriculture); co-operative societies; government agencies/schemes; money lenders; friends and relatives; microfinance banks; insurance companies; NGOs.
(c) Any three: wood shavings absorb moisture well and stay dry; they are less dusty, so fewer respiratory problems; birds do not eat them as feed (sawdust may be eaten); they do not cake easily and stay loose; fewer mould problems.
Assets minus liabilities gives net worth.