Agricultural Accounting and the Costless “X factor” in Agriculture

Introduction

Accounting is defined as a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. It reveals profit or loss for a given period, and the value and nature of a firm's assets, liabilities and owners' equity. Accounting provides information on the resources available to a firm, the means employed to finance those resources, and the results achieved through their use.

Accounting therefore is a management tool which when applied to agriculture would, among others, effectively keep track of financial information about agricultural activity involving the biological transformation of biological assets (plants or animals) for sale, into agricultural produce or into additional biological assets. Biological transformation comprises the processes of growth, degeneration, production and procreation that cause qualitative or quantitative changes in a biological asset. Hence, the estimated value of the biologically transformed assets during a particular accounting period minus the overall cost incurred in the process represents the profit. This is assuming that the liability (or cost of production) is less than the assets (or products).

This article is not meant to educate the readers about the intricacies of accounting procedures. This is intended to give readers something to think about, the life source of plants and animals which this representation consider as priceless yet conventional accounting system consider it costless.

The ‘Elements of Life’ are considered cost-less in agricultural accounting

Elements make up everything around us including plants, animals, and even humans. Every living thing is made up of small compartments called cells. Very small life forms, such as bacteria, have only one cell, while large animals have millions. The cells of every creature are made of atoms of different elements such as: Hydrogen (H) 59%; Oxygen (O) 24%; Carbon; (C) 11% Nitrogen; and 👎 4%. Others such as phosphorus (P) and Sulphur (S) 2% combined. But these are not the only elements that have important roles for living things.

Plants and animals need a variety of other elements in the atmosphere and earth’s crust (including of course the sun’s energy) to survive and grow. However, despite the abundance of the natural elements including solar energy that supports life to grow and multiply, such a stark reality is not being considered a factor in agricultural accounting in terms of cost. Why? Because those elements of life are so precious that the real value of them cannot just be quantified.  The elements of life therefore as a whole is the “x factor” that is actually priceless but being treated costless in accounting point of view.  Hence, without considering the cost of the “x factor” or the elements of life (as production cost), the profit is readily determined after subtracting only the expenses incurred from revenues generated over a designated period of time.

The agricultural accounting that disregards the cost of the “x factor” in agriculture serves the interest of agricultural entrepreneurship. Without taking it into accounting consideration, the investment cost or cost of capital is being lessened resulting to the company’s reduced opening balance.  Hence, the profitability of agribusiness is apparently enhanced and then the conventional accounting balance sheet can easily be reconciled.

When “giving back” or sharing is actually an equity gain

The “x factor” which is the totality of the elements in nature that gives life is considerably an immeasurable incentive to agribusiness entrepreneurs which they must forever be thankful for. It is the Mother Nature’s investment meant to give life and to support the cycle of life yet the same is not considered as debit for it cannot be balanced by credit. Considering that the “x factor” in agriculture has been there since the beginning and is free for the taking, would it then be too much for those who profit from agribusiness to give back and share the blessings and how can they do it just in case?

As earlier stated, the “x factor” in agriculture is priceless; hence, replacing its life giving properties simply with certain amount of money for instance is not a possibility. Instead, by way of giving back to Mother Nature, agribusiness entrepreneurs can contribute efforts and resources to protect, preserve and enrich our natural resources. Those environmental friendly measures must strictly adhere to and be in line with the very purpose or reason for which the elements of life were created in the first place and that was simply: to see to it that others may live!

Relatedly, agribusiness entrepreneurs must share generosity with the less fortunate sectors of society and must likewise initiate strategic socioeconomic programs in every barangay community to propagate profitable agriculture related livelihood opportunities. In this way, the populace can be motivated to work together in replenishing the land with farm animals and plants that would support man’s need for food security and consequently, his financial needs to better raise his family.

Such “life enhancing” acts of caring and sharing may not be considered gain in equity and not indicated in the balance sheet of agricultural accounting of man. Nonetheless, the consequent multilevel benefits of such shared blessings are actually gains in equity highlighted in the perfectly formulated balance sheet of the Divine. Thanks be to God and to Him is all the glory!