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Agriculture for Secondary Schools

(i) Permits the farmer to find out the net income which is derived from the farm.
(ii) Enables the farmer to know the total value of the farm enterprise and find out

which part is actually owned by the farmer and which one is not.
(iii) Enables the farmer to detect loss or gains hence measure performance and take
necessary measures.
(iv) Provides the necessary data for correct income tax assessment so as to avoid

being overtaxed and it enables claiming expenses for work done by farm labour.

Accounting documents in farming business

Accounting documents are documents issued during transactions involving purchase
and/or sale of goods and services related with farm enterprise. Accounting documents
are also known as financial documents or written proofs for farm business financial
records. This is because they are used to countercheck whether the farm business is
solvent (assets exceed liabilities) or is deficit (liabilities exceed assets) and proof of
monetary and non-monetary transactions. There are various accounting documents
in farming business such as purchase order, delivery note, pro-forma invoice, cheque,

receipt, statements, pay-in slip, agreements as well as credit and debit notes. These
documents and their uses are elaborated in the following sub-sections.

Purchase order

This is a document written by the buyer to the seller/supplier listing the particulars
of the goods/services that he/she intends to buy. The commonly used purchase
orders are in pre-printed forms. Figure 13.1 shows the template of a pre-printed
purchase order form. Purchase order may also be in the form of ordinary business
letter. The pre-printed order may be local or international. However, the commonly
used purchase order is the Local Purchase Order (LPO). When the seller/supplier is
preparing an invoice to demand payment for goods/services delivered, the purchase

order number is quoted. Otherwise, a photocopy of the purchase order may be
attached to the invoice. Therefore, later when the goods/services with the invoice is
delivered, the purchase order will warrant payment.

Note: Purchase order is a contract document between the buyer and the seller/
supplier. Therefore, all cautions must be taken when drafting it. Precise
details should be given to avoid any misunderstandings that may cause delay
in supply or result in wrong goods/services or quantities delivery.

Student’s Book Form Three
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