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DEFINITION: A farm account can be defined as the statement of various transactions which take place in the farm enterprise within a special period of time.

It refers to as statements of money paid out or received due to sales of goods and services used in a farming business. Money is received due to sales of farm produce or loans from other sources while money is paid out for purchases of farm produce or settlement of debts. At the end of a given period of time, the farmer should be able to know whether the business is yielding profits or losses. OR Farm accounts are financial records of what the farmer spend and receives

It shows the total receipt and payment made by the farm at a particular time. It shows the movement of cash in and out of the business. It also records the income and expenditure made in the farm within the season

IMPORTANCE OF FARM ACCOUNTS: Farm accounts are kept by farmers for the following reasons:

  1. It enables the farmer to know whether he is running the farm at a profit or loss
  2. It guides the farmer to take sound management decisions
  3. It shows the financial weakness or strength of the farm
  4. It enables the farmer to obtain loans from the banks
  5. It makes accurate determination of his annual tax possible
  6. It is important in transferring a business from one person to another


These include

  1. Sales account
  2. Purchase account
  3. Farm valuation
  4. Cash analysis account
  5. Farm income statement
  6. Balanced sheet /Net worth statement
  7. Profit and loss account
  • SALES ACCOUNT: It is also called sales and receipt account. It shows the details of farm produce sold (type of produce, quantity, date sold, to whom, and at what price)
  • PURCHASE ACCOUNT: it is also known as purchase and expenses account. It shows in details, all items purchased and used during the production period. The detail includes inputs name, date purchased, quantity, cost per unit and from whom
  • FARM VALUATION: Farm valuation is carried out in order to get a time value of the farm. It involves the complete listing of assets and their values. Farm valuation carried out at the beginning is called opening valuation while that carried at the end is known as closing valuation. Every valuation must be based on the market value or production cost. The value of each item in stock is estimated. Changes in the value of the farm should be included to get the true value of the farm profit and loss
  • CASH ANALYSIS ACCOUNT: It shows the income and expenditure of a farm over a given period of time. In preparing this account, sales and receipts are recorded on the debit side(containing columns for date, name, and details or particulars) while purchases and payment are entered on the credit side(purchase and expenses)

 Importance of cash analysis account

  1. It helps in planning of farm activities
  2. It is useful in preparing balance sheet.
  3. It is also used in the preparation of profit and loss account.

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