(a) Reasons why farm accounts are kept by farmers: It enables the farmer to know whether he is running the farm at a profit or loss. It enables the farmer to make sound management decisions. It shows the financial weakness/strength of the farm. It enables the farmer to obtain loans from the bank. It makes accurate determination of his annual tax possible. It enables the farmer to determine the actual worth of his farm for any given purpose. For transferring a business from one person to another. Facilitates farm auditing. Provides data for planning and budgeting. It enables the farmer to detect fraudulent practices e.g. theft. For comparing management efficiency over a period of time. Assists farmers to monitor changes in prices of commodities.
Alternative 1: Double Entry Method
(b) Profit and Loss Account for Unity Farm For the Year ending December, 2005

Expenditure (Debit)	D	Income (Credit)	D
Cost of maize seeds	1,400.00	Sales of Maize	29,000.00
Cost of fertilizers	1,200.00	Sales of yam	7,000.00
Cost of insecticides	1,900.00	Sales of Cassava tubers	5,500.00
Tractor hiring	2,000.00	Maize Consumed	300.00
Cost of herbicides	1,100.00	Potato gift	1,000.00
Cost of processing cassava tubers	1,500.00	Total income	42,800.00
Wages of workers	6,000.00
Miscellaneous expenses	4,400.00
Total Expenditure	D20,700.00
Net Profit	D22,100.00
Grand Total	D12,800.00	Total	D42,800.00

Alternative 2: Single method
Profit and Loss Account for Unity Farm for the Year ending December, 2005

Sales/Income	D
Sales of Maize	29,000.00
Sales of yam	7,000.00
Sales of Cassava tubers	5,500..00
Maize Consumed	300.00
Potato gift	1000.00
Total income	D42,800.00
Less Expenses
Cost of Maize	1,400.00
Cost of fertlizers	1,200.00
Cost of insecticides	1,900.00
Tractor hiring	2,000.00
Cost of herbicides	1,100.00
Cost of processing cassava tubersCost of processing Cassava tubers	1,200.00 1,500.00
Wages of workers	6,000.00
Miscellaneous expenses	4,400.00
Total Expenditure	20,700.00
Net Profit	22,100.00
Grand Total	D42,800.00