Crop Method

DEFINITION of 'Crop Method'

This method of accounting is available for farmers who do not harvest and sell their crops in the same year that they planted and grew them. The crop method allows the farmer to deduct the full cost of crop production in the year that the crop is actually sold. This effectively allows the farmer to write off the production cost against the revenue received in the same year.

BREAKING DOWN 'Crop Method'

The cost of production in this case includes the cost of purchasing seed or baby plants. The crop method is one of several special methods of accounting available for farmers. However, the farmer must petition the IRS for approval before using this method of accounting.

RELATED TERMS
  1. Crop Year

    The time period from one year's harvest to the next for an agricultural ...
  2. Crop Yield

    A measurement of the amount of a crop that was harvested per ...
  3. Accounting Method

    The method by which income and expenses are reported for taxation ...
  4. Seed Stock

    An investment security that is based on shares of a publicly ...
  5. Farm Price Index - FPI

    An index that monitors the prices received by farmers for sales ...
  6. Modified Cash Basis

    An accounting method that combines elements of the two major ...
Related Articles
  1. Insurance

    Futures Fundamentals: A Brief History

    Before the North American futures market originated some 150 years ago, farmers would grow their crops and then bring them to market in the hope of selling their inventory. But without any indication ...
  2. Active Trading

    Investing Seasonally In The Corn Market

    Each month can bring new growth opportunities, if you know where the right investment seeds are.
  3. Investing

    Follow This Insider's $106 Million Bet On A Potential Industry Boom

    <p>Few sectors have been hit as hard this year as agriculture. Record-high crop production and a strong dollar are driving grain prices to m...
  4. Options & Futures

    How to Use Commodity Futures to Hedge

    Both producers and consumers of commodities can use futures to hedge. We explain, using a few examples, how to achieve commodity hedging with futures.
  5. Stock Analysis

    Farmer Mac Steps In It, Again

    The financial crisis is spreading to America's heartland. Learn how a truckload of toxic Lehman Brothers debt could hurt Farmer Mac.
  6. Stock Analysis

    Investing In The Crop Report

    The USDA crop report sent commodities higher; now's your chance to invest in the ETNs and stocks that benefitted from the report.
  7. Fundamental Analysis

    The Industry Handbook: The Agriculture Industry (COW, LSTK)

    Learn about the major lines of businesses involved in the agriculture industry and why this industry as a whole may be the most important in the world.
  8. Stock Analysis

    Bullish News For Agriculture

    The recent USDA crop report highlights the long-term potential for ag-related equities.
  9. Budgeting

    5 Groceries Going Up In Price This Summer

    Keep an eye on the cost of these food staples as you may be paying more in the near future.
  10. Stock Analysis

    5 Agriculture Stocks That Pay Dividends

    Food prices will likely continue to rise as our population grows and biofuel development gains popularity. As a result, the companies mentioned in this article could be a good addition to any ...
RELATED FAQS
  1. When do I need to file an IRS Schedule F form?

    If you are a farmer, your farming business may require you to file a Schedule F with the IRS. Read Answer >>
  2. How do externalities represent profit opportunities?

    Find out how externalities can present profit opportunities for entrepreneurs who help direct efficient market outcomes by ... Read Answer >>
  3. What is the best method of calculating depreciation for tax reporting purposes?

    Learn the best method for calculating depreciation for tax reporting purposes according to generally accepted accounting ... Read Answer >>
  4. How can I calculate the notional value of a futures contract?

    Learn how the notional value of a futures contract is calculated, and how futures are different from stock since they have ... Read Answer >>
  5. How does accrual accounting differ from cash basis accounting?

    The main difference between accrual and cash basis accounting is the timing of when revenue and expenses are recognized. ... Read Answer >>
  6. What is the difference between accrual accounting and cash accounting?

    Understand the differences between the two basic methods of accounting commonly used by businesses: cash accounting and accrual ... Read Answer >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center