DEFINITION OF SOME ACCOUNTING TERMS IN AGRICULTURE

Subject:

Agricultural Science

Class:

SS 2

Term:

THIRD Term / 3RD Term

Week:

Week 8

Topic:

DEFINITION OF SOME ACCOUNTING TERMS

Previous Knowledge: The pupils have previous knowledge of

 IMPORTANCE OF FARM ACCOUNTS/RECORDS

that was taught in their previous lesson.

Behavioural  Objectives : At the end of the lesson, learners will be able to

• GIVE DEFINITION OF SOME ACCOUNTING TERMS

Instructional Materials 

• Wall charts
• Online Resource
• Textbooks
• Laptop
• Crop samples
• Pictures that are related to the subject matter
• Flash cards
• www.edudelighttutors.com

Methods of Teaching 

• Role modelling
• Questions and Answers
• Explanation
• Discussion
• Recitation
• Imitation
• Story Telling
• Dramatization

WEEK EIGHT 

DEFINITION OF SOME ACCOUNTING TERMS

1. Farm Asset: This is anything of value in the possession of a farm business, There are two types;
2. Fixed Assets: These are assets which are not used up during production. Examples are; landed property, farm building, motor vehicles, tools and implements, incubator and milking machine
3. Current Assets: These are assets which are used up during the process of production eg water, feed, drugs, chemical, fertilizers, seeds and cash in bank.
4. Cost: these are expenses made during production. There are two types fixed and variable cost
5. Fixed Cost: This is the component of the total of production cost which does not vary with the level of production e.g. cost of buildings, equipment, machineries, farm structures (Silo, barn e.t.c) 
6. Variable Cost: This is the other component of the total cost which varies directly with the level of production e.g wages, salaries, cost of seeds, cost of fertilizer, cost of agrochemical e.t.c
7. Liabilities: This is the money owed to external persons or corporate bodies e.g. loan to banks. The two types are;
8. Current or short term liabilities: These are debts that must be paid back within one accounting year
9. Long term liabilities: These are debts that cannot be paid within an accounting year
10. Net Capital, Net worth or owner equity: This is the total amount of money supplied by the owner of the farm business.Asset – Liability = Owner’s Equity or Capital
11. Liquidity: is the ability of a farm business to meet its financial obligations as they fall due. It is the ease at which farm asset can be covered to cash.
12. Solvency: This is the ability of the farm business to cover its liquidation of the asset. A business is solvent if the sale of its assets would be sufficient to pay off all debts
13. Appreciation: This is the increase in the value or worth of an asset as the asset is being used over time. Examples of assets that can appreciate are; growing animals, cash crops, land etc.
14. Depreciation: Depreciation refers to the loss or reduction in the value or worth of an asset as the asset is being used over time
15. Salvage Value: This is the amount at which an asset is sold off when it is no longer economical to keep, or when the cost of maintenance is too high
16. Useful life Span: This means the number of years a piece of farm equipment can effectively serve the farmer.

Calculations of Depreciation and Salvage Value

The formula for calculating depreciation is as follows, 

1. Total depreciation = cost price of asset – salvage value of asset
2. Annual depreciation =

Example: A plough was purchased in 1985 at the cost of N 6000 and sold off in 1990 at the cost of N 1000

Calculate;

1. The salvage value
2. Total depreciation
3. Annual depreciation
4. Appreciation

Solution

• Cost price of the plough        = N 6000
• Salvage value            = N 1000
• Lifespan of useful life (1990  – 1985)    = 5years

1. Salvage value = N 1000 i.e the price at which it was sold off
2. Total Depreciation 

= Cost price – salvage value

= N 6000 – N 1000

= N5000

1. Annual Depreciation 

=

=

=

=N1000 (annual depreciation)

1. There is no appreciation

Presentation : 

The topic is presented step by step

Step 1: The class teacher revises the old topic

Step 2: The class teacher introduces the new topic

Step 3: The class teacher allows the pupils to give their own contributions and gives room for pupils” participation

Class Teacher and Pupils Activities. Interaction or Participation 

This involves class teacher and pupils’ interaction, conversation, imitation or modeling through discussion, play method or just by recitation or asking and answering questions that are related to the topic that has just been taught.

EVALUATION 

1. Define the following: (i) Appreciation (ii) Solvency (iii) Liquidity
2. Distinguish between fixed assets and variable assets.
3. What are farm records and account?
4. List five importance of keeping farm records and accounts.
5. List five types of farm account.
6. Distinguish between fixed and variable cost.
7. What is profit and lost account
8. List five types of farm records
9. What is farm asset
10. Distinguish between credit and subsidy

Conclusion : 

The class teacher concludes the lesson by giving the pupils some notes on the topic that has just been taught. He goes round to mark and he does the necessary corrections.