41 _“Family labour earnings” is the remainder when cash expenses and interest on capital have been subtracted from cash receipts, adjustments have been made for changes in inventory and the value of perquisites has been added. The farm business, however, is to a large degree integrated with the life of the operator and his family. That is to say, certain basic living expenses must have a priority over capital return and can be treated as a farm expense for a farm family must have a living before a surplus is available for debt retire- ment, farm expansion or savings accumulation. Agricultural progress and farm solvency, then, depend largely on this farm surplus. Moreover, it is a particularly important measure on farms where capital must be invested in farm development such as land clearing. The advisability of making the investment and the ability to repay principal and interest if money is borrowed for the investment both depend upon a surplus above living expenditures. In order to arrive at the family farm surplus, farm income was calculated first. Farm income is cash farm receipts minus expenses with adjustments for inventory changes. From farm income $700 was subtracted to obtain farm surplus. This sum is the average expenditure on living on all farms in the area.! It also closely represents the average living expenditures of a man, wife and two children under 15 years of age. Farm Income in British Columbia and the Study Areas In 1943 the average farm income per farm for the whole of British Columbia was estimated at $1,149. On 159 farm records analysed in the Prince George- Vanderhoof districts, 1943-44, a comparable figure was $363. In 1944 farm income increased to $1,517 per farm in British Columbia. On 104 farms at Smithers-Francois Lake it averaged $414. In neither of the districts studied, then, was the farm income equal to the average living expenditure of $700 per farm.