Page 320 - Agriculture_Form_Three

Agriculture for Secondary Schools

(a) Valuation at market price

This involves computing values of assets at their purchase or market price. This
method is used for recently purchased assets that will be used in a relatively short
period of time, for example, feeds, fuel, fertilisers, and seeds. It is commonly
used to value inventories for tax purposes.

(b) Valuation at net market price
This method computes financial resources that are left after selling a product.
Thus, it uses the market cost less transportation and marketing charges. This
method can be used when estimates are needed in liquid (cash) form. The method
could be used for livestock and crops.

(c) Valuation at farm production costs
This method involves determining the value of asset by considering the cost of
producing a commodity on the farm. It is useful for farm produced commodities
that in turn will be used in other farm enterprises.

(d) Valuation at reproductive value or replacement cost
This method is used to value assets in terms of what would cost to reproduce
them at present prices and under existing methods of production. It involves
computing with the actual cost of purchasing the farm assets.

(e) Valuation at production cost and market price
This is commonly used for valuing crops and livestock. A good approach is to do
the valuation of each item on the farm using both methods. First, determine the
value based on costs of production. Second, determine the value of the item on
the basis of its purchase or market price. After doing this, compare between the
two. Take the lower value of each item. However, valuation using this method may
not be possible for some of the farm assets on the farm that would be challenging
to estimate production costs and get their realistic market prices.

Livestock that are raised for sale, for example, broilers, beef cattle and porkers
should be valued on the basis of the average market price. Productive livestock
such as layers, breeding animals, lactating cows and goats should be valued on
the basis of average costs of producing them. The value of those livestock should
be maintained constant from year to year while ignoring fluctuations in market
prices. Crops for sale and crops which are still growing in the field should be
valued on the basis of their costs of production. If there are no proper production

records, a value that is a little bit less than the market price should then be taken
as the value of the crops.

Student’
Student’s Book Form Twos Book Form Three
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