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The Income Statement
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Elements Of The Income Statement
Farm Income
Refers to those items that represent the income of the farm business.
Farm Expenditure
Refers to the costs of operating a farm business. Some of the items can be allocated to the specific production enterprise and some cannot. Allocated costs include seeds, fertilizers, feeds, labour costs etc… Non-allocated costs (overhead costs) include permanent labour wage, telephone, fuel, repairs, electricity etc.
Net Farm Income
The net farm income is the income the farm generates after overheads have been deducted. It is calculated by deducting overheads from the total farm gross margin.
Net farm income provides a measure of performance and factors of production including management, capital and land.
Farm Profit
This is the income that remains after all costs have been deducted.
This is calculated by deducting external factor costs from the net farm income. The farm profit is a measurement of the return or reward to the owner, management, capital and land.
Schematic Diagram Of Information Flow In A Farm Income Statement
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