The Farm Balance Sheet
Chapter Forty-Five
Syllabus topic 10, "Preparation of Balance Sheet."
Pages 100 to 101 of 110
In one line
The farm balance sheet is a statement, as at the last day of the year, of what the farm owns and what it owes, so ordered that the two sides are equal.
It is a statement, not an account. It has no debit and credit sides in the accounting sense and it is drawn as at a date, not for a period.
The order of the two sides
Farm accounts are conventionally drawn in order of permanence: the most permanent item first on each side.
| Liabilities | Assets |
|---|---|
| Capital, plus net profit, less drawings | Land |
| Long term loans: term loan, mortgage | Permanent improvements: wells, fencing, farm roads |
| Short term loans: crop loan, cash credit | Buildings |
| Sundry creditors | Deadstock, at cost less accumulated depreciation |
| Outstanding expenses | Livestock |
| Advances received from buyers | Closing stock of produce |
| Closing stock of stores | |
| Sundry debtors | |
| Prepaid expenses | |
| Bank | |
| Cash in hand |
A farm's own bank may want it in order of liquidity instead, most liquid first, and either is acceptable so long as the statement says which order it uses.
Shivneri Farm's balance sheet
Shivneri Farm, Baramati. Balance Sheet as at 31 March 2027.
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Capital as at 1 April 2026, Rs. 34,00,000; add net profit Rs. 8,48,425; less drawings Rs. 2,40,000 | 40,08,425 | Land, at cost | 18,00,000 |
| Term loan | 4,00,000 | Deadstock, at cost Rs. 13,89,000 less accumulated depreciation Rs. 5,10,875 | 8,78,125 |
| Crop loan | 1,50,000 | Livestock, at valuation | 12,30,000 |
| Sundry creditors | 1,86,000 | Closing stock of produce | 2,42,000 |
| Closing stock of stores | 88,000 | ||
| Sundry debtors | 1,42,000 | ||
| Bank | 3,18,000 | ||
| Cash in hand | 46,300 | ||
| Total | 47,44,425 | Total | 47,44,425 |
The seven things that are special about it
1. Land is not depreciated. It sits at cost for as long as the farm holds it. Only the improvements on it are depreciated, and they sit in the deadstock register.
2. Deadstock is shown at cost less accumulated depreciation, and the working is shown on the face of the statement so the reader can see both figures. Rs. 13,89,000 less Rs. 5,10,875 is Rs. 8,78,125, which is exactly what the deadstock register's own total says.
3. Livestock is shown at valuation, not at cost. A herd is not a machine: it breeds, it grows and it ages, and cost tells the reader nothing about it. Under Ind AS 41 the valuation is fair value less costs to sell, and Module I is that rule.
4. Standing crops are an asset. A crop in the ground on 31 March has value, and it belongs in the balance sheet as work in progress at cost, or under Ind AS 41 as a biological asset at fair value less costs to sell.
5. Produce and stores are separate lines. Produce is the output; stores are the unconsumed input. A farm that adds them together loses the distinction between what it grew and what it bought.
The rest of this chapter
Module one is free. The rest of this chapter comes with the B.Com. (Accountancy) Semester 1 notes.
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The rest of this subject
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