Preparing a Farm Resource Appraisal Free Essay Example, 2000 words

Farm resource assessment should be accurate in order for the farmers to manage the farm properly. Resource appraisal is a farmer s doorway to the type, quality, and quantity of his resources and the obligations created from these resources. Farming business is generally very liquid but still, the level of liquidity varies. So every farmer must be familiar with all the details of his farm. Therefore, a resource appraisal is an important objective to accomplish. It takes the form of a balance sheet which will be described later. Resource appraisal helps the farmer and other institutions to assess the financial standing of the farm. To prepare a resource appraisal, one must possess adequate knowledge of the assets and liabilities. Assets are simply the property of the farmers from which future economic benefit is expected. Assets can be divided into two categories depending on their liquidity. These two categories are current assets and fixed assets. Fixed assets have a useful life of several years, for example, Land and buildings. Current assets, on the other hand, are short term and have higher liquidity. Cash in hand, livestock and feed are some examples of current assets. We will write a custom essay sample on Preparing a Farm Resource Appraisal or any topic specifically for you Only $17.96 $11.86/pageorder now Liabilities, on the other hand, are the financial obligations created from the assets. Liabilities too can be divided into current and fixed liabilities depending upon the term of their payment. Current liabilities contain obligation that is due within a year such as principal payments of a loan. Liabilities that are due beyond the time frame of one year such as long-term contracts are categorized as fixed or long term liabilities. The basic understanding of assets and liabilities can help in categorizing the items in the resource appraisal. The next step in preparing a resource appraisal is the valuation of assets. All the assets need to be expressed in monetary terms on the balance sheet. Asset valuation depends on the nature and purpose of the asset. Assets with higher liquidity are generally valued at market value while low-liquidity assets are measured by other methods.