Turf Planting
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Profit:
Profit is determined by preparing a profit and loss statement. In order to prepare and interpret the profit and loss statement it is necessary to classify costs into several categories. These are:
• Overheads – costs which do not vary directly with production - these are sometimes referred to as fixed costs, such as telephone, electricity, rent or land value, rates and farm insurance;
• Costs of sales - The cost of goods sold is the costs actually incurred in producing the turf and/or services. It does not include the indirect costs, which may be things like administration and marketing costs. These costs vary directly with production - if you were to double the turf area then you would need to double the amount of fertiliser, seed, labour and sprays; and
• Capital costs - these are costs where the benefit will last over a number of years - the actual cost such as a tractor does not appear in the profit, calculation depreciation does. The best way to calculate farm profit is to use management accounts. Management accounts are very similar to tax accounts, but there are important differences. In management accounts costs are analysed into variable expenses to calculate gross margins. Management accounts uses depreciation based on the life and value of the asset and distributes these cost among the farm enterprises (varieties).
Management accounting recognises the expense of the owner operator. These differences give a clearer picture of your actual costs and are therefore preferred to calculate your profits.
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