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Packaging Criteria I | Week 12 Topics
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Packaging Criteria II | Week 22 Topics
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Criteria for Selecting Materials for Packaging Agricultural Produce | Week 34 Topics2 Quizzes
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Pricing & Advertising | Week 46 Topics
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Marketing in Agriculture | Week 53 Topics2 Quizzes
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Farm Records & Book Keeping | Week 63 Topics
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Types of Farm Records | Week 79 Topics
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Computer-Aided Farm Records and its Benefits | Week 83 Topics
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Farm Accounting and Bookkeeping | Week 96 Topics1 Quiz
Quizzes
Topic Content:
- Definition of Profit and Loss Account
- Importance of Profit and Loss Account
- Worked Example – Preparing a Profit and Loss Account
- Evaluation Essay Questions
What is a Profit and Loss Account?
A profit and loss account is an account that is prepared at the end of a business period, usually a year, by the farmer to know whether his business is making a profit or loss.
In this account, all expenses and purchases are listed on the left-hand side, i.e. debit side and all receipts or sales are recorded on the right-hand side i.e. credit side.
The farmer can determine his profit or loss by simple subtraction.
The formula for net profit is:
Net Profit = Total Revenue – Total Expenditures
Importance of Profit and Loss Account:
- It helps to detect if the farm enterprise is making profits or losses.
- It helps to determine the overall performance of the farm at the end of the accounting period.
- It aids future planning of the farm for better results.
Worked Example:
Prepare a profit and loss account for Femi’s Farm Limited for the year which ended 31/12/2022, using the following data:
| ₦:K | |
| Cost of seeds | 600.00 |
| Cost of drugs | 300.00 |
| Sales of tomatoes | 3200.00 |
| Cost of hiring plough machine | 1500.00 |
| Sales of maize grains | 2700.00 |
| Farm wages | 400.00 |
| Cost of transportation | 600.00 |
| Cost of rice given to friends | 1200.00 |
| Cost of repairs | 1200.00 |
Solution:
Femi’s Farm Limited Profit and Loss Account as at 31st December, 2022
Calculation for Net profit:
- Total Revenue = ₦7,100.00
- Total Expenditures = ₦4,600.00
- Net Profit = Total Revenue – Total Expenditures
- Net Profit = ₦7,100.00 – ₦4,600.00
- Net Profit = ₦2,500.00
Evaluation Essay Questions:
1. What is bookkeeping?
2. What are source documents?
3. List five examples of a source document.
4. What is an advertisement?
5. What is packaging and list any two examples?
6. What are journals and list the types of journals.
7. What is a farm account?
8. List four importance of Farm Account.
9. List five types of Farm Accounts.
10. State the use of a farm income statement.
11. What is a profit and loss account?
12. What is the formula for calculating net profit?