2. accounting involves keeping
a box of receipts and contracts and taking them to
an accountant to get tax records prepared, get
ready for a visit to the banker.

3. FARM ACCOUNTING includes systematic
records which is maintained by farm
manager, so as to put them to good use farm
decisions.
RECORDS are required for :
Keeping track of the financial position.
Knowing the cash balance situation.
Identifying the weak areas in the business.
Strengthening business decisions.

4. FARM ACCOUTING includes
ACCOUNTING CYCLE, which refers to
the sequence of accounting
procedures. Understanding the
accounting cycle is very important for a
manager so as to comprehend the bulk
of the information provided in order to
take better decisions.

5. THERE ARE SIX STEPS IN ANALYSING FINANCIAL
STATEMENTS:
1.Classifying documents: The information is organized to be
used for further analysis.
2.Recording: Entering all transactions into journals.
3.Posting into ledger: Debit and credit changes in the
account balance are posted from the journal to the ledger
accounts. This step makes the transaction clear in terms of
assets, liabilities and owner’s equity account.
4.Preparing the trail balance: Summarize data to check
whether the figures are correct and balanced.

6. 5. Preparing income statement, balance sheet and
statement of cash flows: This is the most important step to
analyse and evaluate the financial position. Here, all the
three statements are prepared as they all have their own
utility. A balance sheet reports the business’s financial
status on a specific date. An income statement shows the
revenue, costs, expenses and profit/loss for any specific
period of time.
6. Analysing: This involves a manager making notes,
disclosing facts, evaluating the success and planning to
carry the business forward

7. Farm budgeting is the practice of making
proper record of cost, returns and profit of a
farm or particular crop. This is good
technique and helps the farmer to select the
profit making crop and farm operations.
Budget helps evaluate alternative plans and
select the one that is the most suitable.

8. DIFFERENT TYPES OF FARMBUDGETING
There are three main types of farm
budgeting:
oEnterprise budgeting
oPartial budgeting
oFull or complete budgeting.

9. Enterprise budgeting
The enterprise budgets are the input-output
relationship for individual enterprises. An
enterprise budget includes all the variable
resources required per unit (a hectare/animal/tree,
etc.) of an enterprise & its cost, the expected
output, gross returns, etc.
A format of an enterprise budget is shown in the
next slide

10. Items Quantity(kg/litre) Value(Rs)
GROSS RETURNS
Main product
By-product
Total
CASH VARIABLE EXPENSES
1. Seed & seed treatment
(i)Seed
Sub-total
2. Manures & fertilisers
A. Farmyard manure
B. Chemical fertilisers
(i)CAN urea
(ii)Superphosphate
(iii)Muriate of Potash
Sub-total
3. Insecticides & fungicides
4. Tractor fuel cost
5. Irrigation hours
6. Human labour
7. Threshing hours with diesel engine
8. Cost of typing material
9. Marketing charges
Sub-total
10. Interest on variable expenses for half the period of growth
11. Total variable expenses
12. Returns over variable expenses
13. Man-hours
14. Bullock labour (pair hours)
15. Machine(tractor hours)

11. Partial Budgeting
Partial budgeting is a method of making a comparative study of
the cost-and-return analysis resulting from a change in a part of
the business organisation. This change may be made through a
careful selection from among alternative methods of production or
practices, the choice of which is based on the opportunity cost of
relative profitability & does not affect the total farm organisation
vitally. This technique helps to make decisions whenever small
changes in the existing farm organisations are contemplated. The
following four points are important in setting up a partial budget:
oAdditional returns from change
oReduction in unit cost
oReduction in yield, if any
oAddition in cost incurred.

12. FORMAT OF PARTIAL BUDGETING
Debts (Rs) Credit
(Rs)
(a)Increase in costs (a)Decrease in costs
(b)Decrease in returns (b)Increase in returns
Gain Loss
Total Total

13. Complete planning & budgeting
In preparing complete plans for the farm, all the sophisticated
analysis of studying an individual cultivator's opportunities,
constraints & problems is done. Every little aspect of the farm
organisation is examined & then suitable adjustments are studied
& a suitable combination as fits in rationally with that given farm
organisation is suggested. Various recommendations in terms of
augmenting resources, if the need may arise, are also made. It
implies the following steps.
1.FARM MAP. The farm is carefully mapped out, giving its salient
features, like soil type soil-fertility & rotations followed. Low-lying
areas or other such features are also shown in the map. Then
based on the previous crop history, land-capability classification is
done & is also shown in the map.

14. 2. INVENTORY OF FARM RESOURCES. Every asset on the
farm, ranging from hand-tools to sources of power, etc. are
inventoried. It does not provide us with the picture of the
resources as owned by a farmer, but we can also work out their
use-patterns & their condition, i.e. whether they will have to be
replaced or whether they will be sufficient for the new plan or
some augmentation will be needed.
3. EXAMINING THE EXISTING ORGANISATION. having
prepared an inventory of the existing resources & their
availability, what we are interested in is their use-pattern within
the framework of the existing crop mix, whether the resources
are understocked or overstocked. A careful analysis of the
restrictions & weaknesses of the farm organisation is made. The
weaknesses maybe many, such as:
oLumpy units may not be fully utilised.
oIrrigation may not be adequate.
oThe peak-season labour requirements may not be met.
oShort-term capital may be inadequate.