Rwentanga farm institute

P.O.BOX 132

Agriculture economics notes

Law of diminishing returns

As you add more successive units of variable factor to affixed factor while holding other factors
constant ceteris paribus) total production increases but beyond a certain point(point of
inflection/bliss point) the resulting increase will become smaller and smaller.

Assumption of the law of diminishing returns

 It assumes that there is fixed factor of production and others are variable
 It assumes that technology does not change/constant level of technology.
 It assumes that all units of variable factors are efficient
 It assumes a short run period of time.
 It assumes that variable factors are divisible and easy to vary in proportion in which they
combine.

Application of the law of diminishing return

 Increase the plant population in a fixed are of the land will give increased yields but the
marginal return will decrease as competition among the plants for the growth factor raises
 Increasing the level of feeding in farm animals increase the yields but later the marginal
yield will decrease.
 Increase the amount of fertilizers added to the crop in the area will increase yields at the
first but later, yield decrease because of fertilizer becomes toxic to crops

Costs of production
Fixed costs /overhead costs /Unavoidable costs
These are expense that a farmer has to meet whether in production or not. They don’t
vary with the level of production. They include; rent, deprecation, salaries for permanent
workers.
 These are expenses that depend on the level of outputs or vary with output e.g
costs for inputs ( pesticides ,seeds), wages for casual workers increase with
output.
VC

Cost

O Output

Total cost

This is the sum of fixed costs and variable costs. They are considered when calculating the net
income i.e Net income= Total income –total costs

VC

FC

FC

O Output

Implicit cost

These are expenses that are not easily recognized in the production process. OR indirect or non-
cash expenses of owned resources e.g. own labour, family labour etc

They are valued using their opportunity cost

Note They are not included in the calculations of profits of the farm of accounting

Explicit costs
They are direct expenses paid for resources bought or hired. They are easy to recognize and their
quantities can be determined i.e. salaries, wages, transport costs, insurance depreciation in
machinery.

Marginal costs: This is the additional cost to the total costs as a result of raising the level of
production by a single unit

Nominal cost: These are obtained when the cost of production are converted to monetary value.
I.e. costs of transport, amount of money used to hire land.

Opportunity cost: This is the cost for the best alternative forgone in making a decision e.g. if
the farmer forgoes poultry farming and takes on dairy, then the opportunity cost is that one for
poultry.

Total variable cost (TVC): This is the total of the cost of all variable resources used in
production (price x quantity)

Total fixed cost: this is the value of the all direct cost of fixed resources used

In production. Its constant at all levels of output.

Average variable cost: it is the amount spent on variable inputs per unit of output.

AVC= TVC

Y (output)

Average fixed cost: it’s the cost of the fixed resources per unit of output.

AVC = TFC

Y (output)

Average total cost: it’s the total cost of all resources (fixed and variable) per unit of output

ATC = AVC + AFC

Y (output)
Marginal cost: This is the change in total cost resulting from a change in one unit of output i.e
its cost of producing an additional unit output.

Marginal production: This is output created by using one additional unit of a factor of
production.

Real cost: real pain and sacrifice of labour given by labour in the process of production.

Reduced cost: This the money saved when carrying out farm activities e.g transporting milk to
the market and eggs on the same truck saves transport costs for one of the products.

Added costs: these are expenses as a result of investment in field e.g. constraction of a farm
buildings may involves expenses of clearing obstacles from the site.

Added receipt: money got by a farmer unexpectedly.

Concept of Demand and supply

Demand

This is the quantity of a commodity that an individual is willing and able to buy at a given price
and time.

Effective demand: This refers to the amount of a commodity buyers are willing and able to
purchase in the market at various prices for a particular period of time.

Latent demand: this is the desire but not backed by the ability to purchase a given commodity
at a particular price and period of time.

Demand schedule: a table expressing the quantity of goods buyers a willing and able to buy at
various prices at particular time periods.

Demand schedule for bean in lugazi market between march and April 2010

Price (Shs) Quantity demanded(kg)

1000 20
900 40
800 60
700 80
600 100
500 140
Demand Curve

It is a graph showing the different quantities of a commodity that consumers buy at different
prices at a period of time.

Change in demand and change in quantity demanded

Change in demand is a shift in the entire demand curve either to the lift or to the right due to
changes in determinants of demand other than in the price of the commodity.

A shift fromd0 to d2 is increase in demand

Ashift from do to d1 is a decrease in demand

Change in quantity demanded is the movement along the demand curve due to change in price
of the commodity.

A-decrease in quantity demanded

B- Increase in quantity demanded

The law of demand

It states that “the high the price, the lower the quantity demanded and the lower the price,the
high the demand other factors remain constant (cetris paribus).

Factors influencing market demand for agriculture products

Price: when the price falls, consumers buy more because they leave substitutes and buy more of
the cheaper commodity i.e. more consumers join the market to buy cheap commodity but when
prices raises, consumers do not demand commodity in question.

Price of other commodities e.g. substitute and complements.

Substitutes are two commodities that can be used to satisfy the same demand e.g Beans and peas-
increase in price for beans will lead to low demand for beans and high demand for peas
supposing their price is constant.

Complementary commodities are jointly demanded e.g. petrol and car, shoe polish and shoes.
Increase in demand for cars will lead to an increase in demand for petrol.

Incomes of the consumer consumers with higher income buy more than the poor hence command
a high demand.

Size of population Increase in population increases demand for commodities more especially
necessities while decline in the population leads to low demand

Population composition in term of age and sex: A population full of aged people is less
productive hence

Has a low purchasing power and demand.

Tests and preference: if people lose taste for one commodity in preference for another then
demand for such commodity will be low and if they gain taste for the commodity, demand will
be high

Future expectation: When prices are expected to rise in future due to anticipated shortages
buyers will buy more and stock increasing demand at that time but when prics are expected to
decline in the future demand will decline in the present
Change in savings: a family wishing to increase savings will reduce consumption expenditure
lowering demand ad reduction in saving increases demand

Level of advertisement: increasing advertisement will increase the awareness of such a

commodity hence increased demand than reduction in advertisement

Level of taxation: Increased taxes on goods by government increases the prices hence reduced
demand

Culture and religion (taboos): Some communities and religions forbid consumption of certain
items e.g. pork by moslems and seventh day Adventist. This lowers demand for such items in the
community

State of economy: A booming economy will experience a high demand for commodities as
people have money to spend.

Types of demand

Joint/ complementary demand

Demand for commodities that are used together such that increase in demand for one increases
for the other e.g. demand for fuel and car

Competitive demand

This refers to the demand for commodities purpose such that increase in demand for one reduce
the demand for one reduces the demand for another e.g. Blocks and bricks, beans and peas,
coffee and tea

Composite demand

Demand for a commodity which serves several uses such that its total demand is got by adding
up quantity demanded of it by those several uses

Derived demand

This refers to demand for a commodity not for its own sake but as a result of demand for another
e.g. demand for factors of production is derived from demand for commodities which such
factors of production are used to make

Independent demand

Demand for a commodity does not affect the demand for other commodities.

Elasticity of demand(ED)
This refers to the degree of responsiveness of change in quality demanded to change in factors
which influence quality demanded like price, income and price of other commodities.

Price elasticity of demand- this is the measure of the responsiveness of change in quantity
demanded to changes in the commodity’s own price

ED= percentage change in quantity demanded

Percentage change in price

ED= Change in quantity demand

Change in price

X original price

Original quantity

Example

When I he price of maize was 100shs/kg quantity demanded was 1000kg when the price was increased
to 200shs/ Kg quantity demanded was 400Kg

ED= Percentage change in demanded

Percentage change in price

Percentage change in demand

=1000- 400 × 100 = 60%

1000

Percentage change in price

200-100 × 100= 100%

100

ED = 60 = 0.6

100

Interpretation of price elasticity of demand

Perfectly or completely inelastic- this is a type of elasticity of demand where a change in price does not
cause a change in quality demanded. Price ED is zero
Inelastic demand- this is a type of elasticity of demand where a large proportion change your n price
leads to a smaller proportionate change in quantity demand. ED is greater than zero but Les than 1

Elastic damand. This is a type of elasticity of demand where a slight change in price leads to a large
proportionate change in quantity demanded. ED is greater than 1 but t less than infinity
Unit elasticity of demand: This is when the percentage change in quantity demanded PED= 1 eg quantity
demanded changes exactly as price change.

Perfectly elastic demand/ infinite demand: When price elasticity is equal to infinity. The buyers are
prepared to buy all they can at the same price

Determinants of price elasticity of demand

Availability of substitutes: A commodity with many substitutes has elastic demand since customers shift
from it when cost is increased

Degree of necessity: Price elasticity of demand for necessities tend to be inelastic since they are
indispensable e.g When the price of salt increases the quantity demanded is the same. Luxuries have
elastic demand

Customer's income: When consumers are of low income (poor) Elasticity of demand tend to be elastic as
price increase because it reduces their demand since they cannot afford the commodities.

Cost of the commodity.If a commodity takes a small fraction of the consumer's income, it's demand
tends to be price inelasic e.g. match box, salt

Habit in use of the commodity. This makes the demand to be inelastic e.g. Demand for alcohol and
cigarettes, drugs may not be affected easily by change in price for the addicts

Disability of the commodity.Durable commodities like radios, cars have low price elasticity of demand.
Even when price is lowered, one cannot buy one if he/ she has one.
Price expectations: If prices are expected to increase in the future, demand will be inelastic as people
would buy and stock and vice versa.

Number of uses a commodity is put to , A commodity with several uses (composite) has elastic demand
for example electricity when price is increased people use less of it

Time lag. consumers take time to respond to price changes.Elasticity tends to be inelastic in the short
run and elastic in the long run

Time of the year. Towards and during public holidays, demand tends to be inelastic since even when the
price is increased people still buy more e.g at Christmas

Consumer's ignorance. Consumers may buy commodities at high price when they don't know where
such commodities or their substitutes are sold.

Supply Theory

This is the quantity of a commodity that producers offer for sale at various prices and period of time

Quantity supplied- the amount of a commodity producers are willing to bring to the market at various
prices per period of time

Supply schedule for beans (kg) for a stall in Nakasero Market for June 2011

Price(shs) Quantity supplied

200 50
300 100
400 250
500 200
600 250
800 350
Supply curve
Law of supply

State that" The higher the price, the higher the quantity supplied and the lower the price, the lower the
quantity supplied and the lower the price, the lower the quantity supplied other factors affecting supply
remaining constant( Ceteris paribus)"

Determinants of quantity supplied for agricultural products

Price: According to the law of supply, the higher the price, the higher the quantity supplied and the
lower the price, the lower the quantity supplied

Weather conditions: For Agriculture products, good weather with adquate rainfall and a sunny
harvesting period is necessary for higher yields and high supply.

Technology of production.Farmers using tractors and other machines in production produce more than
those using traditional implements like pangae hence higher supply

Marginal efficiency. A well organized farm enterprise yields more than a poorly organized one since
activities are done on time and as required

Cost of production: If the cost of inputs like fertilizers band seeds are low then it's easy for farmers to
buy them and produce more increasing supply

Number of sellers/ producers: If many sellers bring more produce more produce to the market , then
supply will be high

Government policy: if the government levies high tax on a particular good more especially agriculture
inputs, then this automatically increases the price of such a good and will reduce supply of Agriculture
products due to increased costs of production

Transport: Improved and efficient transport facilitates the delivery of farm produce to the market
increasing supply.

Prices of other(substitutes products: Increase in the price of one will increase the demand for the
product whose price has not been increased hence lowering the supply of the product in question.

Political stability: enough security will encourage production hence increasing supply of products to the
market.

Aims of the producer: if a producer's objective is to produce large quantities of a product for the market,
then this will increase production than if he aims at maximizing profit with limited supply to the market
Future price expectations: if the prices are expected to increase in future,veuppliers will hosted/ store
the product for the future good prices reducing supply in the present

Availability of factors of production

When the prices for labour, land and capital are low then it becomes more profitable to produce more
for the market hence increasing supply.

Demand:High demand for increased production and supply as well as low demand calls for low supply.

Gaststion period: This refers to the period of maturity. If the gestation period of a commodity I'd short
the production/ supply can be increased in the shortest time.

Elasticity of supply (ES)

Price ES- is the measure of the degree of responsiveness of changes in the quantity supplied to change
in price of the commodity

ES= Percentage change in quantity supplied

Percentage change in price

Types of ES

Perfectly/ completely inelastic supply

This is where the quantity supplied of the commodity remains the same irrespective of changes in the
price of the commodity

Inelastic supply

This is where the percentage change in price from s greater than percentage change in quantity supplied
ES is greater than zero but less than one(1)
Unit elasticity of supply

This is when ES is equal to 1. Percentage change in quantity is equal to percentage change in price

Perfectly elastic supply

Suppliers are willing to offer an infinite quantity of a commodity at the same price offered by the buyers
ES= Infinity
Elastic supply

This is where the percentage Change in quantity supplied is greater than percentage change in price of
the commodity. Elasticity of supply is greater than 1 but less than infinity.

Factors influencing price elasticity of supply

Nature of product: Durable commodities have high ES since they can be stores for a long time as
compared to perishables

Gaststion period: When a commodity had a short gaststion period, it's elasticity of supply is higher than
that with along gaststion period since vtske a short period of change.

Time:in short time the ES of a commodity is small but can be big in the long run. It takes some time for
suppliers to get used to the new price after a change

Method of production (technology):

Products produces with simple technology have a high elasticity of supply because they can easily be
produced when the price inreases

Risks and Uncertainties

Risks

A risk is an avoidable and unforeseeable circumstance or hazard that affects the outcome of an
investment and can be measured in an empirical and quantitative manner. Since the risks are
measurable, they can be insured against

Examples of risks

Change in weather or bad weather which causes destruction to crops, buildings and animals.

Pest and diseases. This can cause losses in both plants and animals.

Fire outbreak. This can cause destruction to property and life.

Theft. This can be of farm produce and machinery yet it's hard to predict when it will happen.

Strikes of workers. Some of the strikes are very destructive and lead to loss of property and life at the
extreme cases.

Ill health. The farmer, members of his family, all the workers can fall sick which can greatly affect the
production level of the farm.

Low crop yields. This may be caused by many factors like poor soils, natural hazards, pests and diseases,
poor management etc

Death of the farmer. This is unpredictable snday be a source of management problems on the farm

Guarding against risks

Insurance. This is the most common method of guarding against risks where the farmer insures his
property with an insurance company against risks. The company can compensate the loss once it occurs
as prior agreed.

Building owner's equity. This is where a farmer saves some money that can be used in case there is a
risk(net worth).

Input rationing. Here a farmer buses less than optimum quantities of inputs to save on the amount
spent on inputs

Improving storage facilitates i.e. one can hoard produce and sale later.

Choosing an Enterprise with less or limited risks hence helping a farmer to easily escape risks

Diversification. This is where a farmer engages in more than one enterprise so that in case one fails the
other may succeed and compensate the loss made.

Production flexibility. This is where a farmer investsb in flexible enterprises that easily allow a change e.g
keeping dual purpose breeds of cattle and poultry.

Uncertainties

This is unforeseeable and unavoidable circumstances or hazard that affects the outcome of an
investment but cannot be measured in an empirical and quantitative manner hence cannot be insured
against

Examples

Price fluctuations: It's very difficult to know when you get prices will fluctuate and the loss which will
come out of this is extremely difficult to calculate.

Change in demand: The demand for agricultural products keep on changing yet the loss as a result of
this is difficult to measure.
Change in technology: Because of rapid technological changes, machinery and farm techniques quickly
becomes outdated.

Change in government policies: The government may reduce prices of commodities by covering taxes
and vice versa.

Bleach of contract: This can happen anytime without notice and may cause immeasurable loss
depending on the commodities

Unavailability of labour: This may happen during planting and harvesting time yet the losses . Causes is
immeasurable. This change and n labour supply is due to number of factors affecting it

Unavailability of Agriculture inputs: The supply of such inputs is affected by a number of factors
therefore btheir scarcity once experienced can cause uncertainty

Control of Uncertainties in farming

Producing on contract

Building owner equity

Diversification in production to distribute the impact of the losses

Input rationing to guard against loss as a result of price fluctuation

Flexibility i.e easily changes from one type of production to another

Improving storage facilities

Adding value of agriculture products through processing

Specialization

This is where one engages in the production of one item where he can feature best

Specialization by craft: This is where families specialize in different activities like farming, iron Smith,
witch craft etc.

Specialization by process: This is where every stage of production in a factory or an industry is carried
out by a different person.

Regional specialization: This is where each region produces the best it can and then exchange it with
what bit can't produce.

International specialization:This is where each country produces what it can do best and exchange it
with what is produced by other countries.

Advantages of Specialization
It is time saving. There is no wastage of time in moving from job to job or training for different jobs.

High efficiency in production since the workers gain a lot of experience and skills in doing one type of
work.

It enables the farmers to exploit their natural talents by concentrating on the work they can do best.

It encourages the use of machines at various production levels which increases production.

Regional and international specialization enables countries vto exploit their natural resources and get
what they cannot produce.

It encourages farms to employ specialists at different stages of production leading to efficiency.

It increases production which helps farmers to gain from the economies of scale.

Disadvantages of Specialization

Large scale production may be limited by a low market for the produce

It may lead to unemployment in case of change in technology and fashion.

It may lead to boredom due to repetition of the same work.

It encourages the use of specialized machines which cannot serve more than one purpose

It encourages loss of craftmanship since workers depend on machines to do the work

Diversification

In Agriculture, diversification is the raising of the variety of crops or animals as opposed to one
enterprise

Advantages

Resources are effectively utilized in the production process

It reduces risks that are associated with producing one type of crop or animal.

It increases a variety of products produced in a country

It encourages the participation of many people in the production process to produce the different goods

It reduces over dependence on products from one place or country.

Disadvantages

The practice is limited by inadequate capital to engage in different enterprises

Limited market for a variety of products may affect diversification

It's very difficult bto carry out research on a variety of crops and animals to increase their production.

Limited farm implements may discourage diversification

It's very difficult to carry out research on a variety of crops and animals to increase their production.

Climate may not favour the production of various products

It encourages subsistence farming which is less profitable

The animals on the farm may destroy the crops

It requires a large piece of land that most farmers are lacking

It is difficult to manage different crops and animals on the farm.

Farm accounts, these include, financial documents, financial books and financial statements.

Financial documents are invoices, delivery notes, purchase order and statements

Invoice, this is issued to the farmer when he orders for farm inputs and it shows the quantity,bprice you
and cost of delivered goods.

Receipt, it's a fineancial dodr she 44f Drdtddzfd free as a e do day trd Dr to 4rredd rfffrdrcument issued
by the seller to the buyers as a proof that the items bought have been paid for.

Delivery notes, it is preparedrrdrter by the seller to the buyer showing the items included in the order
and supplied to the buyer

Purchase order, this is prepared by the buyer to the seller on the goods he wants to obtain.

Statement, this is a bill showing details of various orders over a period of time after receiving several
supplies.

Financial books are inventories and chash books

Inventory, this is where a farmer records everything he owns on the farm

Cash books, this shows the receipts and expense on the farm over a specified period.

Financial statements, These are records that show the financial status of the enterprises. They include,

Budgets,

Trade accounts

Profit and loss account and

Balance sheet
Budget

This is a detailed quantitative statement of farm plan regarding cost estimates for the different
production resources and expected financial returns from different farm enterprises

This is a financial statement outlining the anticipated farm revenue and expenditure for farm enterprise
or the whole farm for the fourth commit financial period

Types of budgets

Partial budget, this is a financial statement outlining the anticipated revenue and expenditure for an
Enterprise or a part of the whole farm in the fourth coming financial period

Complete budget- this is a financial statement outlining the anticipated revenue and expenditure for the
whole farm in the fourth coming financial period.

Importance of farm budgeting

Enables the farmers to achieve the set farm objectives.

Acts as a guide for the farmer in executing financial decision.

Motivates the farmer to work hard to achieve the set goals for the budget

Helps a farmer in forecasting profit and losses i.e estimating profitability of the farm.

It can be used during allocation of funds to various areas of production

Used in decision making when comparing enterprise

Helps a farmer to control production on the farm

Helps the farmer in making effective change in the Organization.

Helps the farmer in estimating the required resources in terms of labour, capital etc.

Guide and helps a farmer in soliciting for funds to run the farm(loan)

Can be used as a reference during future planning.

Procedure of making complete budget

State the objectives of the farming business so that the budget can answer some objectives

List all enterprises found on the farm

List all available resources that can be used in production

Estimate the number of units of production for the given resources e.g number of plants, number of
acres, number of animals etc

Estimate physical inputs and their costs

Estimate the output and expected returns

Calculate the fixed costs in the next trading year or period.

Work out the cost that would occur in the year's business directly as a result of change in the net income

Add up the estimates for all the Enterprises on the farm

Points considered in budgeting

Least combination of the factors used on the farm

Farmers expectations and through time

Opportunity cost for factors of production

Important information in budgeting

Results from research stations-these can show the expected production of an Enterprise

Data on input-output and output information so as to forecast losses and profits

Farm records on operations of the farm

Cost of input and output information so as to forecast losses and profits

Constraints in budgeting

Failure to see or identify supplementary or complementary enterprises

Inadequate knowledge about budgeting

Inadequate technical information needed in budgeting

Bias in choosing enterprises instead of aiming at optimizing profits

Inadequate market information on prices of inputs and outputs

Price fluctuations in Agriculture that make anticipations to be unachievable

Profit and loss account

It is a projection of sales and receipts against purchases and expenses to determine the profit or loss of
the business. This is a financial statement drawn by the farmer to find out the net profit of his farm
business i.e
Net profit= gross profit-fixed costs

Gross profit is the difference between total revenue and total variable expenses i.e

Gross profit= Total Revenue- variable expenses

Components of a profit and loss account

Tittle, with the he name of the statement profit and loss account, name of business and prefix for year
ending followed by financial year e.g. Aprofit and loss account for Mr. Katoto's farm for the year ending
31st December 2020.

Purchases and expenses, A list of commodities and services spent on. They normally appear on your left
hand

Sales and receipts, a list of commodities offered by the farm that generate earnings. They normally
appear on your right

Closing valuation- this is the value of assets a farm has at the end of a financial period e.g feeds in
store.This appears on the side of purchases and expenses

Example

Given the following information, prepare a profit and loss account for Mr. Katoto's farm for the year
ending 31st June2021(UGX)

Depreciation of mower. 270,000

Closing valuation. 1,800,000

Interest on loan. 200,000

Drug purchase. 45,000

Heifer sales. 1,500,000

Milk sales. 750,000

Crop sales. 350,000

Seed purchase. 190,000

Feed purchase. 235,000

Fertilizer purchase. 290,000

Payment from rented tractor. 700,000

Opening valuation. 1,050,000

Egg sales. 350,000

Labour. 250,000

A PROFIT AND LOSS ACCOUNT FOR Mr. KATOTO'S FARM FOR THE YEAR ENDING

31st June 2021

Purchases and expenses UGX Sales and receipts UGX

Opening valuation 1,050,000 Closing valuation 1,800,000
Depreciation of Mower 270,000 Heifer sales 1,500,00
Interest on loan 200,000 Milk sales 750,000
Labour 250,000 Crop sales 350,000
Drug purchase 45,000 Tractor payment 700,000
Seed purchase 190,000 Egg sales 350,000
Feed Purchase 235,000
Fertilizer Purchase 290,000
Sub total 2,530,000 Sub total 5,450,000
Profit 2920,000
Total 5,450,000 Total 5,450,000

Balance sheet

This is a financial statement that shows the financial status of an Enterprise as of a given date. It shows
the value of assets and liabilities of an Enterprise at the end of the financial year. A farmer draws up a
balance sheet to find out the Net capital/worth or net capital deficit.

Format of a balance sheet

Heading, with name of statement business enterprise "As at" date at which bit is drawn

Liabilities, the value of claims against the farm by outsiders

Type of Liabilities, these are claims that must be paid in a short time not exceeding a year e.g rent,
wages, bank overdraft, creditors, etc

Long term liabilities, these are claims that must be paid within along period of time exceeding a year e.g
capital shares, development bloan, treasury bills and bond

Assets, this is the value of all items or the money that belong to the business

Types of assets

Current/ permanent assets, these are items that stay in the business and can be used for a long period
of time e.g land, machinery, buildings, furniture, fixtures and fittings
Current/short term/ liquid assets

These are assets are assets that can be easily converted into cash e.g. stock(meat, milk, eggs, crop
produce, feeds etc), cash at bank, cash at hand, prepaid expenses etc

If the value of assets exceeds that of liabilities, the business is said to solve the i.e can meet all it's
liabilities and have a balance left(net capital or net worth)

If the value of liabilities exceeds that of assets, the business is said bto be insolvent i.e cannot meet all
it's liabilities and a balance is called net capital deficit.

Example

Prepare a balance sheet for Kagongo farm as at 31st December 2020 given the information

Bank overdraft. 1,000,000

Value of crop. 1,500,000

Buildings 7,000,000

Furniture &fittings. 2,200,000

Cash in bank. 1,450,000

Long term loan. 3,200,000

Value of a tractor. 2,000,000

Prepared expenses. 740,000

Short term loan. 80,000

Depts payable. 1,200,000

Treasury bills. 700,000

Chemicals in store. 1,000,000

A BALANCE SHEET FOR KAGONGO FARM AS AT DECEMBER 2020

LIABILITIES SHS ASSETS SHS