S 567 .T8 Copy 1 System o^ farm Accounting Book of Instructions Tweeds System of Farm Accounting By Henry E. Tweed Marshall Printing Company Publishers Seattle, Washington I ^9^ farm Accounting COPYRIGHTED 1916 BY HENRY E. TWEED i? JUL 22 1916 ©CI.A431979 SS INTRODUCTION It is necessary for a farmer to know how much he is making or losing on his business each year, how much he is making or losing on each variety of apples, pears, peaches or other crops and how much he can improve his business so as to make more money. Cost accounting, for the grower is the same sort of work which the large manufacturing concerns are doing to learn whether they make a profit on certain commodities. The grower wishes to learn whether his varieties of apples and whether his other fruits or crops pay. All these things will be shown by this set of farm cost accounts. The desire to keep accounts of this sort is evidenced by many growers, but they do not know how to start. Undoubtedly many are deterred from starting because of their ignorance of bookkeeping and because they have in mind no definite method of procedure. It is believed that the system outlined in this book of instructions will be helpful to those who desire to keep accounts and who have not worked out a system for themselves. KNOWLEDGE OF BOOKKEEPING NOT REQUIRED According to G. F. Warren, of Cornel University, bookkeeping knowledge is unnecessary. Commercial bookkeeping training, in most cooperative work, has been a detriment rather than a help. This is due to the fact that trained book- keepers are apt to use complex technicalities, suitable for a business house but which have no place for a practical grower who wishes to do cost accounting. DIFFICULTIES OF FARM BOOKKEEPING There are several reasons why farm accounts are different from those of the city merchant. The storekeeper deals with actual figures; that is, he knows definitely what each article costs him and what he receives for it. His records are not nearly so subject to variations in values from time to time as is the case of the farmer. Professor Bailey says: "The entire subject of farm ac- 4 TWEEDS SYSTEM OF FARM ACCONTING counting must be attacked in a new way. The ordinary bookkeeping will not apply." The reason is obvious. Farming is a much more complicated business than most people suppose. A famer is both a producer and a dealer. He needs financial records as complete as the average merchant and cost records as accurate as those of the manufacturer. But the records must be adapted to the business in hand. "The ordinary bookkeeping will not apply." The farmer is usually a busy man. What he wants is a plain, simple, straightforward history of his business, so arranged and classified as to require the minimum effort to keep it up. SIMPLICITY OF THIS SYSTEM This system of cost accounting eliminates all the disadvantges of writing the different items of expense, income receipts and man and horse hours under the different departments of the farm. The principal idea worked out in this system is to do away with any writing on the part of the grower during the busy season. Instead of writing the different items of expense, etc., the grower keeps a time record of hired help, horses and himself by making a tabulation on the different forms. All that is necessary to keep accurate accounts is to enter the number of hours worked and purchases and sales made. The first three forms of Tweeds System will give an accurate set of costs to complete the remaining outlined forms. REQUIREMENTS FOR FARM COST ACCOUNTS Several records are necessary for a complete set of farm accounts: ( 1 ) An inventory at the beginning and at the end of the year. (2) An account of all money paid out or received. (3) A record of all work done by men and horses during the year. TWEEDS SYSTEM OF FARM ACCOUNTING INVENTORY Generally an inventory requires from two to five hours' work at the beginning and at the end of the year on an average sized farm. Only one inventory is necessary for closing one year's accounts and starting the next, making it possible to do this work all at one time. The inventory should comprise a detailed list with values of the following: The farm, subdivided into buildings and land, each building listed separately, with the number of acres of land and its value per acre; the machinery, each item being listed separately, except collecting the small tools as one item; account of feed on hand; increase or decrease in capital, cash on hand and money in bank; and bills receivable. The mortgage and bills pay- able, if any, should be subtracted from the total and the difference will be what the grower is worth above debts, or his present net worth. The price of a farm should neither be over or under estimated and the value put upon the land should be what it is considered worth at a normal sale. To save trouble it is always best to use fair judgment and be unbiased. VALUE OF INVENTORY An annual inventory will be a better investment for the time and labor expended than any other account. The farmer can accurately compute whether he has made a gain or loss, and how much, by comparing the net worth as shown by the current inventory with the net worth shown by that of the previous year. The annual gain or loss of the farm business will be shown by the annual inventory. The farmer will be surprised to note which accounts show a gain and which a loss when he begins to use the cost account system. A complete system of accounts of this kind is the only way to obtain these results. TWEEDS SYSTEM OF FARM ACCOUNTING CONCLUSION Unless conclusions are drawn enabling one to make his business more profit- able in the future, these farm accounts will be of little value. The study of the different items of cost and returns in an account is just as important as to know whether or not it pays, for from such a study the cost of production may be reduced and a losing enterprise made to pay or a profitable one made more profit- able. Weather, field crop, and market conditions for the year as compared with an average year must be considered and it must be kept in mind that the results are from just a single year. For instance the apple crop in 1912-1914 showed large losses on many orchards because of the low prices and lack of distribution. However, by studying the apple account to find the cost of producing a box, then by considering both an average yield and prices for the locality, one could draw the conclusion that ordinarily it would or would not be profitable business to raise apples on most of the orchards where apples are raised. There are other ways in which the accounts may be useful besides the satis- faction of actually knowing what crops paid and how much. This system of cost accounts may be used to study the seasonal distribution of labor on the farm as a whole and on separate enterprises, and also to determine what enterprises and what crops are the most profitable. Also the grower can find how his efforts compare with those of other growers as to economy of labor and many other points by comparing his results with the facts detailed in this system. The value of labor is especially impressed upon the grower who keeps cost accounts. He finds from this that time represents money and that it is equally as important to save one as the other. He sees that it is more wasteful to keep a horse or team idle than to have one man idle for the same length of time. It may be surprising to note that very often the leargest yields of certain crops do not pay if cost accounts are kept. It may be found that the crop which the grower thinks the most profitable and to which he devotes most of his time is being produced at a loss, while the steadier, more common kind of field crop may be the only one that shows a profit. The purpose of this system of cost accounting is to offer suggestions to growers who have kept accounts but who have not been satisfied with the results obtained. It can also be followed as a guide by many others who have wished to keep accounts but have not known how to make a beginning. TWEEDS SYSTEM OP FARM ACCOUNTING 7 LABOR RECORD The name of the individual employed should be listed on the form as illust- rated below. The number of hours spent on the different operations should be indicated by figures in the date column. At the end of the month the total number of hours consumed on the different kinds of work should be added and listed in the total column. To find the rate per hour: — If hired help is paid $65.00 per month, divide the total number of hours into the wage paid per month. If labor is paid 25 cents per hour as illustrated in this form, a simple method of determining the cost of different kinds of work is obtained by dividing the total number of hours of labor performed by 4. TlP^f^m MAN OR HORSE MONTHLY LABOR SHEET no Timeof Roy Gonnor? . from Oct. / 19/6 to A/ov- / is 3' 16 inclusive ~«o, ' ■ ■ « ' • - ' ' ,„ >' » ,3 » » » - ,. „ ,0 3, » M „ « a6 „ J8 „ . 3, M a.r. 1__ Pruning ZSf * Brush Burning • Spraying O Tree Care 10 /■n 3. in ? Cultivating 1 Irrigating and Dttclifng Cover Croping Fertilizing - Thlnnlnc ■0 Management £ RenairinK 10 1 5 ^ 4 00 ^ FfiCd Haul lo and From Town $ '/ 1. ri Making Boxes 7 7 7,f * Haul to and From Orchard 4 ,? ff ' 10 X SO ID 10 10 ID /o 10 /o 10 10 w It) ll> /I) ^0 l+n IS > Tacking 10 10 JO 5 ft ffl /f) 10 tf < Tf ,V S ' 7-f Land improvements Bulidinc 5 S / 1.5 Alfalfa 01 5 ^ > A. M. A f\ T rtil qIo 1H Field or Block i' M F) *(>S LABOR RECORD If horse record is kept, a separate form should be used for each team or horse if driven separately. In case a man is driving the team continuously, the record for both can be placed on one sheet. If a field or tract account is desired, an initial or number can be placed in the date columns illustrated above. 8 TWEEDS SYSTEM OP FARM ACCOUNTING DISTRIBUTION SHEET OF EXPENSES The most convenient method of using this form is to tabulate the different expenditures from the monthly statement received from the merchant or elsewhere. As an illustration, May 1st a statement is received from Smith Merchantile Co. for $51.50, the different items of expense are segregated into the different named columns. DISTRIBUTION SHEET OF EXPENSES \r~- byslem DEBIT AND CREDIT ACCOUNT i;ij'.\\ l\.. i osts Sn?,tf> 7?Ure«nf; /* Co. £1 Farm ers Q> nheraKuf Store H, qh/ar,rJ Cana/ Co Wg-thrn Lumbtr Co jA.sk For simplicity in keeping a debit and credit account the total amount of statement is entered into the credit account of bills and accounts payable. If part or total payment on account is made the amount is entered into the debit account of bills and accounts payable. As illustrated above $10 is applied on Smith Merchantile Co. debit account, leaving a balance due them of $41.50. DISTRIBUTION SHEET OF RECEIPTS DEBIT AND CREDIT ACCOUNT FRUIT RE' F.IJ'T. Thomas Jortt JA Fi.mrr-r. Co dhrrutiv e Stnre\ UU /:-'• Fr-c f J C/ar/t li Cie n rc/e- Waft- JA l.utAr.r M c Qc usL. DISTRIBUTION SHEET OF RECEIPTS 1 he toal amount of products, etc. sold is entered into the debit account of bills and accounts receivable. When part or total payment is made or the DISTRIBUTION SHEET OF LABOR TWEEDS SYSTEM OP FARM ACCOUNTING 9 products, etc., are sold it is entered into the credit account of bills and accounts receivable. For illustration the total amount of bills and accounts receivable credit, is $107.70, subtract this amount from $157.70 the total debit, which leaves a difference of $50.00, the amount at the close of these accounts still due you, and by referring to the different items of receipts you find Thomas Jones still From AAu Q.Q , Average per acre $/,.Q.OO. , Water right per acre $ Valueof house $£,000 ,Bam$AOO. Storage %X50, . Packing shed * Other buildings ( SO. . Amount paid for land when purchased VALUE OF FARM AND EQUIPMENT Real Estate and Buildings first o i . Stock first \I„. 1.;::, ry and Tools first o Hay, Feed Apples, Etc first .. Hills Receivable first o ( ash "ii I, and and in bank first Total Investment Bills I'ayable Net Win tli eai f, I J, 500. end of year iJf.SOO. ear$ ^0. end of year $ Jf.1.5. ear * &6Z. end ol y, a i J^S- ear* 60, end of year $ 60. ,ar * end of year $ SO. ea r $ /OQ. e nd of year $ tOO- . t%}5l. > / 6 STOCK RECE PTS AMOUNT RATE TOTAL MISCELLANEOUS AMOUNT RATE TOTAL & * Labor * » Team Work /0< .5.00! So. 00 /Oo/As .,^0 30.OO Machine Work Cash Rent for JS.00 Rent of Buildings l&d°> .2.5 4-.OQ -. 1 Total 34-. 00 Total 65. 00 ings will vary with the use and the location. Five per cent is considered a general average. The average capital is obtained by adding the total investment the first and end of the year, and divide by 2. The records for stock and miscellaneous receipts are listed on form 3. TWEEDS SYSTEM OF FARM ACCOUNTING 11 INVENTORY The inventory should be taken at the time the accounts are opened and closed. Only the one inventory is necessary for closing one year's account and opening the next, making it possible to do all the work at one time. The depreciation of farm machinery will vary with the kind of implement, the care given it, and the district in which your farm is located. A depreciation of 1 0% is considered an average for all farm implements. INVENTORY i»JS 1.7 fc MACHINERY I9/J- »/i MACHINERY NO ' Hate 1 Value value K, Hate Value No Bat. Value Heavy Wagons / * 90 / * tl Automobile » * * X. Aulo Trucks Pleasure Wagons Caterpillar Sleighs Packing Press 1 IZ / IO / IS / IS Packing Benches Sulky or Gang Plows Stamping Machines I IS / It Disc Harrows /I 'So 1 +,r Orchard Ladders X it lb 3. r 14- Spike-tooth Harrows ! 1 Picking Buckets * 1 f. & i 4 Spnng-toolh Harrows i ?,4 I t,t Sprayer 1 ■fe?„T 1 ■W i f 1 ,f Spraying Plant Hand Sprayer Pruning Tools ~L /.SO 0 Dairy Utensils Hav Rake 1 .12. / 30 Poultry Equipment Hay Fork and Stacker Bee Equipment Potato Digger Work Harness i SS 1 ,fe Grain Binder Header Binder Total t i SOS 4 1 177 Total ill ' 57* xo So6 LIVE STOCK 15 tS 197(5 PUaCHASED BOLD DIED ANIMALS— KIND NO ; VallJ , ,.„,.,, No Value Total NO Value ■ Total No 1 Value Tolal No. Cows / * to. 3 * 7S -Ui J * -» s Heifers 2. 4u io 1 4-a Calves | --! a. xso. Soo / 7° Ewes Lambs Brood Sows Other Hogs Pigs Chickens *o l.oo 4» 50 1.00 So s 3.oo 15. zo 1.00 xo -2. Bees S bM> 50 L Soo so i ; Loo It Total 8/o \ I'S IS , 3g The inventory on live stock should be taken when the accounts are opened and closed. In illustration above it is noted that young stock increases in value from the first of the year to the end of the year. Many animals may decrease in value from the first of the year to the end of the year due to condition, age, etc. The figures giving the purchases and sales of live stock are obtained from forms 2 and 3. 12 TWEEDS SYSTEM OP FARM ACCOUNTING CROP RECORD To keep accurate record of acreage of different crops the tabulation should be made at the time of planting or seeding. The record of farm sales is obtained from form 3. The production cost is obtained from forms 1 and 2. The differ- ence between farm sales and production cost equals the net worth, for both total and per box, per bushel, and per ton, etc. CROPS FOR YEAR OF /5iif_ C [Id PS TIKI. I) I'MIM SM.I'S Production Costa NET PROFIT KlnJ Acaes r.r.i. «»>.«r TR-ce | v«iKe Total Per Total Per Corn % % I $ Com for Silare / 70'"' 30 1.00 30.oo Field Beans Roots, kind Wheat Oats It.Tl.-V Rye Straw Seeds 1 1 i . Allalfa s 4 xo Berries Apples 14-i. 4-0 O flOOO S/f SO l.oo 5,OQO.QG Interest on Capital at £ % $l,54- < 7 ~>6p Labor Income %rrS £5*60 *- oss SUMMARY The amount showing the average capital is obtained from form 6. The use of receipts and expenses is illustrated above. The income on capital and labor is the difference between expenses and receipts. The interest on capital is obtained by multiplying the rate of interest times the average capital. Subtracting the interest on capital from income on capital and labor gives the labor income. TWEEDS SYSTEM OF FARM ACCOUNTING U THE COST OF PRODUCTION The figures giving the growing and overhead cost can be obtained from forms 1 and 2. The cost of producing a box of apples or other fruits is obtained by dividing the total cost of growing or overhead into the total number of boxes of fruit produced. The cost of taxes per box is obtained by simple division. To de- termine the growing or overhead cost per acre, divide the number of acres into the total growing or overhead cost. COST OF PRODUCING A BOX OF_/4^^ /e$ _ S(|-.lifT GROWING COSTS 19/5" Next year's Estimate OVERHEAD COSTS 19 /S Next year's Estimate 77 a Management Repairing 4- * ? 4 5 so Feed IS It Taxes 3.5*1 S3 4$ Water Assessments xi J.f in Interest on Investment 3.ZQ- i /,f Insurance on Buildings Thinning •*? Blacksmilhing, Hardware. Etc. II Depreciation on Buildings zs Spray Materials 1 Interest on Money lo move crops TOTAL Z7i rfi TOTAL 4-ii Z.o ,s Growing Cost per Acre ss 76 ]| Overhead Tost per Acre \*3 l M HARVESTING COSTS VARIETY ,,.:,, ■mJmu. ^H m i S S ' ,-.„. Pao„ I Boa.. ™.i J4.71 13.6* 4-1 of- 6b%> S+.7X 13 6t I3,ht u*- ■*/.0f lf-3 b*- I3bi HS.ix .04 o3 ,oS .04-\ .Ol .01 .eoS .0.1 ■ 54- Cu'-t- A £■50 33.00 IIS.oF /I »o 3ib t . ' '" U ~^ o4- ,ol oS OS .ot- .ol Ol ooS .ox ./of .Ol .?,i 12. io 'J.$j ■ • o Z.ZO 33.0 /io f>l&s SHOWING NET F. E. RETURNS FROMCrowe rs AiSO ciatlon ALL CHARGES OF EVERY NATURE HAVING BEEN DEDUCTED INCLUDING DISTRIBUTION COST OF /0/ PER BOX EXTRA FANCY FANCY C GRADE BT-PRODUCTS Hosts lv. W '■■ > B Rose. 1 Aver.*. Rosea Average Rosea Averas-e VV,'n«-sayfe f30 111 33, i /.a. r //o .t<0 S fr (fl & ?7 6 U f Q flZ />7 2.6b • 1/5 /3A .fa fi#n Da.\Ji', /&o S6 9f> .4-1 ^ J6 ! TOTAL 1 7fx I og 7'° ! .it, t 3oi J"5, SUMMARY TABLE OF GROSS AND NET RETURNS EXTRA FANCY FANCY BY-PRODUCTS ... P.., ,,i. »vra S Rosea 1:..„t. vvcrai< Rosea He. ,.<->* f n n..,.i v.. «. Rosea Recpl Averam 17 72. 1.0 1 7/o /SOo Sfr?, Return Ai*iso .t>4+ Per Boa 1 .1,0 .&£, | 1 :,., (:-'■■ - ■ 1 .46 I'riio l-.ot< VARIETY ""'' t'""'' . '""'' ; ''"'"' ■•„,, !■;.; c f KrIS." S-'erTyV. ■2&X. g„o!r r r?r. \N'ine.£,Q fi htti\xm Z% -K/n Jitf zs.4 L 7X 4- i^/sifz.e.hi uro tzfi xH ixi. f<» ' :Am „,i\ Co., ATOOO, Co., ''"""'• „„,«, Spr',, Cond,„o». Ul Ar.eo.t. S- 10 0. B 1 >2te.ro\ 1 k- + h )rd Ar.en.te /. , X C •U Ar.en..« Apple Powdery Mildew Apple Roeette Rosy Apple Aphle WlnM r InUrr Pe»ch Twig Borer 1 1 ADDITIONAL SPRAY DATA PICKING RECORD DATES OF PICKING. STORAGE. ETC KffiS ^TJ,\T ■jgy prH"o« "ISJS" T, f:„,':" r TJ* -N^0>^ v Publishers *^fy?^ ^ a^ farm Accounting Pacific Building, Seattle, Washington