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This needs to be accounted under IAS - Biological assets given the company may be harvesting cows for milk production.
Cows need to be fair valued at each accounting period and the change in the valuation needs to be accounted in the income statement.
An entity recognises a biological asset or agriculture produce only when the entity controls the asset as a result of past events, it is probable that future economic benefits will flow to the entity, and the fair value or cost of the asset can be measured reliably. [IAS.] - The new born calf satisfies this criteria if it is a female. Even if it is a male, it may be used as a stud to produce other females and hence can satisfy this criteria.
Biological assets within the scope of IAS are measured on initial recognition and at subsequent reporting dates at fair value less estimated costs to sell, unless fair value cannot be reliably measured. [IAS.]. The fair value of a calf can be measured using a number of techniques including the price at which you could buy such a calf from an open market.
The gain on initial recognition of biological assets at fair value less costs to sell, and changes in fair value less costs to sell of biological assets during a period, are included in profit or loss. [IAS.]. Not that the standard categorically stated profit and loss and not equity.
Hope i have answered your question.
Asset account Dr.
Capital account Cr.
BABY COW A/C (asset) DR
To Capital A/c
(capitalize the new baby)
Asset A/C DR
Capital A/C CR
