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Credit improvements to farm land. Provision for depreciation. Closing Entry: Deduct the total of the account from the total of improvements to farm land investment account, 261, in the balance sheet at the close of the fiscal year.

Account No.[271—Farm Buildings. Provision for Depreciation

This account should be subdivided into accounts to correspond with those of account 262.

Debit depreciation expense, 294B, with the total amount of depreciation to be charged for the year.

Credit farm buildings. Provision for depreciation.

Closing Entry: Deduct the total of the account from the total of farm buildings and improvements to building investment, 262, in the balance sheet at the close of the fiscal year.

Account No. 272–Farm Machinery and Equipment. Provision for Depreciation

This account should be divided into sub-accounts to correspond to those of account, 263.

Debit depreciation expense, 294D, with the total amount of depreciation to be charged for the year as arrived at according to instructions under account 263.

Credit farm machinery and equipment, provision for depreciation, 272, with the amount.

Closing Entry: Deduct the total of the account from the total of farm machinery and equipment investment, 263, in the balance sheet at the close of the fiscal year.

Account No. 273—Farm Livestock. Provision for Depreciation

This account should be divided into the same sub-accounts as account, 264.

Debit farm depreciation expense, 294C, with the amount of depreciation computed according to the instructions following:

Credit farm livestock, provision for depreciation, 273.

Note: Do not use any fixed percentage of depreciation on livestock purchased for work or breeding purposes. Make an appraisal of such livestock at the close of the fiscal year. Allow a fair depreciation for impaired usefullness due to increased age and the difference between such appraisal and the original cost of the livestock will represent the depreciation.

Note: Livestock purchased for resale should not be depreciated. Closing Entry: Deduct the total of the account from the total of live stock investment 264 in the balance sheet at the close of the fiscal year. Account No. 280-Farm Unearned Insurance

For instructions for keeping this account, see account No. 296, farm insurance expense.

Closing Entry: Balance sheet. Deferred charge to operation. Farm unearned insurance.

Account No. 285-Farm Reserve: Interest on Investment

Create this account at the close of the fiscal year in accordance with

the instructions given in account No. 303, farm interest on investment expense.

Debit farm interest on investment, 303, with the amount of interest determined.

Credit farm reserve, interest on investment, 285.

Closing Entry: Balance sheet. Liability. Reserve of profit. Reserve interest on investment. Not deductible from assets.

Account No. 286-Farm Reserve for Income Taxes

Create this account at the close of the fiscal year in accordance with instructions given in account 305, farm income tax expense.

This account will be balanced at the time the income taxes are paid. Debit farm income tax expense 305, with the amount of the tax determined.

Credit farm reserve for income taxes.

Closing Entry: Balance sheet. Liability. Reserve of profit. Reserve for income taxes. Not deductible from assets.

Account No. 287-Farm Reserve for Contingent Expense

Debit contingent expense, 304 and Credit this account with an amount equal to 2 per cent of the estimated value of all farm crops and livestock to be marketed during the year.

Note: 2 per cent is an arbitrary figure. Each firm should make a careful estimate of the possibility of contingent expense accruing and allow a sufficient percentage to cover such losses as those resulting from crop failure, uninsured losses by fire, uninsured accidents to employees, uninsured losses on livestock, etc.

Closing Entry: Balance sheet. Liability. Reserve of profit. Farm reserve of profit. Farm reserve for contingent expense. Not deductible from

assets.

Account No. 290-Farm Labor

Debit this account with the total amount of all wages paid each week, or month. This labor will include salary of farm superintendent and all general help engaged in the care of livestock, plowing, fertilizing, seeding, cultivating and harvesting crops and for pruning, spraying and irrigating orchards, fields, etc. Credit cash, 2.

Closing Entry: At the close of the fiscal year, transfer by journal entry, the balance of this account to profit and loss, 310.

Account No. 291—Farm Livestock Expense

Divide this account into the following sub-accounts: 291A, horses and mules, expense; 291B, cattle and livestock expense; 291C, poultry expense.

Debit this account with the cost of all horseshoeing, veterinary services, stock medicine, poultry supplies, feed purchased (but not for feed grown on the farm) and all other miscellaneous expenses. All labor should be charged to farm labor, 290.

Credit the firm from whom purchased, or cash, 2.

Closing Entry: At the close of the fiscal year take an inventory of all expense accounts and make credits to the proper sub-accounts, of the inventory value. Transfer the balance to farm profit and loss, 310.

The value of the inventory will be transferred to the balance sheet as a

current asset.

Account No. 292-Farm Rent

Debit this account with the amount of the rent paid for lands, orchards or farms which are rented or leased from others.

Credit the lessor, or cash, 2.

Closing Entry: At the close of the fiscal year transfer, by journal entry, the balance of this account to farm profit and loss, 310.

Account No. 293—Farm Repairs and Maintenance

Divide this account into sub-accounts as follows: 293A, improvements to farm lands, repairs and maintenance; 293B, farm buildings, repairs and maintenance; 293C, farm machinery and equipment, repairs and maintenance.

Debit this account with the cost of all repairs and maintenance charges to wells, replanting occasional dead trees, buildings, fences, machinery and equipment, etc.

Credit the firm furnishing the materials or cash, 2, if a cash transaction. All labor repairing, painting, etc., will be charged to farm labor, 290. Closing Entry: At the close of the fiscal year transfer, by journal entry, the balance of this account to farm profit and loss, 310.

Account No. 294-Farm Depreciation. Expense

Divide this account into the following sub-accounts: 294A, improvements to farm lands, depreciation expense; 294B, farm buildings depreciation expense; 294C, farm livestock depreciation expense; 294D, farm machinery and equipment depreciation expense.

Debit this account with the amount of depreciation computed each

year.

Credit the proper depreciation expense account.

Closing Entry: At the close of the fiscal year, transfer, by journal entry, the balance of this account to farm profit and loss, 310. Account No. 295-Farm General Expense

Divide this account into the following sub-accounts: 295A, Oils and gasoline; 295B, fuel, light and power; 295C, water purchased; 295D, telephone and telegraph charges; 295E, miscellaneous.

Debit the account with the cost of all oils and gasoline, fuel, light, power, water, telephone and telegraph expense, supplies, furniture, auto hire, cost of all small tools, trays for drying fruit, etc.

Credit the firm from whom purchased, or cash, 2, if a cash transaction. Closing Entry: At the close of the fiscal year transfer, by journal entry, the balance of this account to farm profit and loss, 310.

Do not inventory these expense items.

Account No. 296-Farm Insurance Expense

Divide this account into the following sub-accounts: 296A, farm buildings, insurance; 296B, farm crops insurance; 296C, farm livestock insurance; 296D, farm liability insurance.

Debit the account with the amount of all premiums paid on insurance policies of any nature.

Credit the insurance company, agent or cash, 2, if paid in cash. Closing Entry: At the close of the fiscal year review all charges appearing in the insurance expense account and compute the amount of unearned premiums on policies still remaining in force. This will represent the unexpired insurance. Inventory this unexpired insurance in detail to show the amount unearned on each policy charged to insurance and make journal entry.

Debit unearned farm insurance, 280; Credit insurance expense, 296 with the aggregate amount of the inventory.

Then by journal entry: Debit farm profit and loss, 310; Credit insurance expense, 296 with the remaining balance of insurance expense, 296. When the books are reopened after closing, close out farm unearned insurance account, 280, by journal entry:

Debit farm insurance expense, 296; Credit farm unearned insurance, 280.

Note: If self insurance is desired on farm risks, create a reserve fund to take care of it. Use method described under 86.

Account No. 297-Farm Taxes. Real and Personal

Debit this account with the amount of all taxes paid on real and personal property.

Credit cash, 2.

Closing Entry: At the close of the fiscal year transfer, by journal entry, the balance of the account to farm profit and loss, 310.

Account No. 300-Farm Green Produce Sold

This account should be divided into sub-accounts with each variety of green produce sold.

Credit the account with the proceeds from all sales of fruit, vegetables and produce to the factory or to others.

Debit the factory, the purchasers, or cash, 2, as the case may be.

Closing Entry: At the close of the fiscal year transfer, by journal entry, the balance of this account to farm profit and loss, 310. Account No. 301-Farm Incidental Sales and Income

Divide this account into the following sub-accounts: 301A, horses and mules, 301B, cattle and livestock; 301C, poultry and eggs; 301D, miscellaneous.

Credit the account with the proceeds of all sales of horses, mules, cattle, hogs, sheep, poultry, eggs and livestock and all miscellaneous sales of products, by-products and manure for which there is no regular account. Also with all income derived from hauling, plowing, or farming for others, rent of tractors and equipment and rent of houses to others.

Debit the purchasers, or cash, 2, if sold for cash.

Closing Entry: At the close of the fiscal year transfer, by journal entry, the balance of this account to profit and loss, 310.

Account No. 302-Unallowable Expense, Farm

This account takes care of all expense items that are not deductible from revenue and all revenue items that are non-taxable under the Federal income tax laws.

Debit this account with the balance of farm interest on investment, 303; farm contingent expense, 304; and farm income tax expense, 305. Credit these accounts.

Credit this account with the balance of any farm accounts producing a revenue that is non-taxable. Debit these accounts.

Closing Entry: Transfer, by journal entry, the balance of this account to profit and loss, 310.

Account No. 303—Farm Interest on Investment

Debit this account with interest on the following investment accounts: Farm lands investments, 260.

Farm lands improvements, 261.

Farm buildings and improvements, 262.

Farm machinery and equipment, 263.
Farm livestock, 264.

Figure the rate of interest at the prevailing bank rate for the year.
Credit farm reserve, interest on investment, 285.

Closing Entry: At the close of the fiscal year, transfer, by journal entry, the balance of this account to unallowable expense, 302.

Account No. 304-Farm Contingent Expense

Create this account as soon as an estimate has been made of the seasons crops by figuring 2 per cent on the value of the crop estimated to cover such contingent expenses as crop failures, uninsured losses by fire, accidents to farm employees, uninsured losses on livestock, etc.

Debit the account with the amount computed.

Credit farm reserve for contingent expense, 287.

Closing Entry: At the close of the fiscal year transfer, by journal entry, the balance of this account to unallowable expense, 302.

Account No. 305-Farm Income Tax Expense

Create this account at the close of the fiscal year as follows:

After all income and expense accounts have been transferred to farm profit and loss, 310, so as to show the total income subject to income taxes, compute from this amount the income tax to be paid.

Debit farm income expense, 305, with the amount of tax computed. Credit farm reserve for income taxes, 286.

Closing Entry: At the close of the fiscal year transfer, by journal entry, the balance of the account to unallowable expenses, 302.

Account No. 310-Farm Profit and Loss

At the close of the fiscal year farm profit and loss account will be created by debiting and crediting it with the balance of certain accounts as set forth in detail in the foregoing explanations.

Schedule 1-Farm Operating Costs

Debit farm profit and loss, 310; Credit each of the following accounts: Farm labor, 290.

Farm seed, 252.

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