Page 330 - Agriculture_Form_Three

Agriculture for Secondary Schools

Net worth statement
This is a statement showing the value of the possessions, debts and capital of
the business remaining after the deduction of all debts from the possessions at a
particular time in accounting period. It shows the financial position of the farm
business at a particular time. It is also known as a balance sheet. It is usually prepared
at the end of an accounting period or financial year. It should also be prepared at the
beginning of an accounting period if applied to a new farm business. The net worth
statement which is prepared at the beginning of an accounting period is known as an
opening net worth statement. The one prepared at the end of an accounting period is
known as closing net worth statement. Usually, the closing net worth statement of an
accounting period is the opening net worth statement of the next accounting period.
Preparation of net worth statement

To prepare a net worth statement, compute the value of all liabilities and assets of
your farm business following the steps described in step 1 to 10 and by referring to
the simplified hypothetical sample of net worth statement given in Figure 15.2.
Steps to prepare net worth statement

Step 1: Find the total amount of cash that you currently have in your hand or cash
box and write it next to number 1.
Step 2: Find the total amount of cash that you currently have in your bank account(s)
and write it next to number 2.
Step 3: Find out the total balance of your debtor’s (borrowerʼs) accounts record
and enter it next to number 3. This is determined by whether your business sells
to your customers on credit. If so, this means that you will not receive money for
the sale until the credit customers pay you. The amount of money that is to be
paid by your credit customers is called accounts receivable. You can find out your
accounts receivable by adding all the current balances in your debtors’ (borrowersʼ)
accounts record. Therefore, this total current balance amount is the one entered next
to number 3.

Step 4: Find out the total amount of money that the stock of your business or inventory
is worth and enter it next to number 4. The current balance of your inventory record
shows how much your stock is worth. Therefore, this current balance amount is the
one entered next to number 4.
Step 5: Find out the total value of assets of your business and enter it next to number
5. This is found by adding up all the amounts in steps 1, 2, 3, and 4.

Step 6: Find out the total amount of accounts payable for your business and enter it
next to number 6. This is determined by whether your business buy inputs on credit
or cash. If it does, you may have debts to your suppliers for what you have bought.

Student’s Book Form Twos Book Form Three
Student’
319

10/01/2025 12:32
AGRICULTURE FORM 3 9.11.2022.indd 319
AGRICULTURE FORM 3 9.11.2022.indd 319 10/01/2025 12:32