Farm Income

In one line

Farm income is everything the farm earned in the year, whether or not any money came in, and whether or not anything left the farm.

The second half of that sentence is what makes farm income a topic of its own. A trader's income is what he sold. A farm's income includes what it ate, what it paid away in kind, what it fed to its own animals, and what grew.

The heads of farm income

1. Sale of crops. Sugarcane, cotton, jowar, vegetables, fruit. Recorded when sold, not when the money arrives, so a crop sold in March and paid for in May is income of the year ended 31 March.

2. Sale of livestock products. Milk, eggs, wool, manure.

3. Sale of livestock. Animals sold, and the profit on them where they were carried as assets.

4. Closing stock of produce. Produce grown and not yet sold, valued as the chapter on the stock book sets out.

5. Increase in livestock. The closing value of the herd against the opening value, which captures births, growth and price change together.

6. Produce consumed by the household. The proprietor's family ate it, so the farm has earned it. Credit the crop, debit drawings.

7. Produce given to labour in place of wages. The farm has used its own produce to settle a wage. Credit the crop, debit wages, and the ration book is the record.

8. Produce fed to the farm's own livestock. Fodder and grain grown on the farm and eaten by its animals. Credit the crop, debit the livestock enterprise.

9. Hire charges. For the tractor, the thresher, the pump or the bullock cart, let out to a neighbour.

10. Rent received. From letting a field, a shed or a part of the land.

11. Miscellaneous. Sale of empty bags and drums, sale of old implements as scrap, compensation and insurance claims received, and interest on deposits.

The three that carry the marks

Heads 6, 7 and 8 are the farm-specific ones and they behave the same way.

In each case the crop is credited because it produced something of value, and something else is debited because it consumed it. No cash moves and no outsider is involved, and that is exactly why they are forgotten.

Leaving them out does two things at once. It understates the income of the crop that grew the produce, so the crop looks unprofitable. And it understates the cost of whatever consumed it, so the household looks cheap, the labour looks cheap, or the dairy looks profitable when it is not.