When making an inventory, a farmer takes stock of all his assets, including tractors and feedstuffs such as bales of hay.
A farm inventory is a list of assets - anything of value - that can be sold. The inventory list can include the price of the item, the value of the stock, the year it was bought, the expected lifetime and the depreciation in value.
How to Make an Inventory
An inventory is generally done at least once a year and involves the counting of everything on the farm, including hectares of land, tons of grain in stock, animals and so on. The inventory will also include the money value in Rand of the assets.
Walk around the farm and make a general inspection of farm assets. Make a list or spreadsheet of items according to main categories such as buildings, land, machinery, equipment, farm supplies and stock.
Details on a Farm Inventory
An inventory usually contains the following details:
Size of the farm, the right of ownership, the size of land that is used for agriculture and a valuation of the production unit.
Description and valuation of fixed improvements such as a new borehole or roof.
Vehicles, machinery and equipment, as well as numbers and types or models.
Numbers and types of livestock.
Stocks, farm supplies and production inputs such as seed, fertiliser.
Finished and semi-finished products at the beginning and end of the financial year.
In separate columns of the inventory indicate the following:
The year when each item of property was purchased.
The purchase price of each item.
The expected lifetime of machinery/equipment.
Then calculate the annual depreciation for each item using the straight-line method or the reducing-value method.
Expected Lifetime of Equipment
Below are the expected lifetimes for some machinery and equipment used on a farm. In brackets is the salvage value as a percentage of the purchase price - the value of the item at the end of its life.
Vehicles - 5 years (10%)
Tractors - 10 years (10%)
Implements - 10 years (10%)
Tools - 10 years (10%)
Pumps and electrical motors - 15 years (0%)
Source Water Research Commission