Crop Method

AAA

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.

INVESTOPEDIA EXPLAINS '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. Indirect Method

    A method for creating a statement of cash flows a company may ...
  2. Direct Method

    A method of creating a statement of cash flows during a given ...
  3. Crop Year

    The time period from one year's harvest to the next for an agricultural ...
  4. Accident Year Experience

    Premiums earned and losses incurred during a specific period ...
  5. Book Value Reduction

    Reducing the value at which an asset is carried on the books ...
  6. Inherent Risk

    The risk posed by an error or omission in a financial statement ...
RELATED FAQS
  1. What impact does a higher non-farm payroll have on the forex market?

    Traders are constantly monitoring various economic indicators to identify trends in economic growth. Some of the most watched ...
Related Articles
  1. Investing Basics

    Economic Indicators That Do-It-Yourself Investors Should Know

    Understanding these investing tools will put the market in your hands.
  2. Options & Futures

    Harvesting Crop Production Reports

    Find out what grain investors need to know to analyze USDA reports.
  3. Home & Auto

    No Longer Nomads: The History Of Real Estate

    From caves to condos, we look at how homo sapiens hunted for a home.
  4. Investing

    What's a Debit Note?

    A debit note is a document used by a seller to inform a purchaser of a dollar amount owed. As the name indicates, it is a note from the seller that a debit has been made to the purchaser’s account. ...
  5. Investing

    What's Capitalization?

    Capitalization has different meanings depending on the context.
  6. Fundamental Analysis

    The Best 5 Online Accounting Systems For Small Business

    Running a small business can be difficult, but thanks to these online accounting services, taking care of payroll doesn't have to be.
  7. Investing

    Understanding Cost Accounting

    Cost accounting is the method of financially allocating expenses to goods that are manufactured for resale. Cost accounting is also referred to as managerial accounting, because managers use ...
  8. Investing

    What are Prepaid Expenses?

    A prepaid expense is an asset on the balance sheet. Due to accounting principles, expenses are often accrued on the balance sheet and expensed in a later period.
  9. Investing

    What's a Sunk Cost?

    A sunk cost was incurred in the past, is independent of future events and cannot be recouped. Economists teach that sunk costs should not be considered when making a financial decision. Rather, ...
  10. Investing

    What are Fixed Costs?

    Fixed costs are business expenses that do not change as the level of production goes up or down. They are one of two types of business expense, the other being variable costs. Variable costs ...

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center