Upload
danny-burge
View
221
Download
0
Embed Size (px)
Citation preview
Farm Financial Statements• Net Worth Statement √
• Statement of Cash Flows
• Net Income Statement
• Statement of Owner Equity
Recording Transactions in the Cash Journal
• Date• Description• Value• Amount (bu., lb., etc)• To (from) whom• Enterprise (optional)• Production period (optional)
Transactions can be:
• Receipts (cash inflows)
• Expenditures
(cash outflows)
Transactions are Posted to 4 Types of Accounts
• Production
• Investment
• Financing
• Nonfarm
Statement of Cash FlowsSources(inflows)
Uses(outflows)
Production Income Expenses
Investing Sales ofcapitalassets
Purchases ofcapitalassets
Financing Loansreceived
Principalrepaid
Nonfarm Wages, rent Living, taxes
Chart of Accounts Detail• 101Corn sales• 102Hog sales• 110 USDA payments• 201 Machinery sales• 301 Operating loan received• 410Nonfarm interest earned
Chart of Accounts Detail• 112Soybean seed• 131Cash rent paid• 210Hog equipment purchase• 333Cow loan payment
(principal only)• 42 Family medical
insurance
Cash Flow Summary for Year 3Farm Number
Operating Income: Borrowing: Corn Sales $ 25,200 Emergency $ 1,101 Soybean sales 23,917 Operating 10,000 Feeder cattle 90,000 Crop insurance payment 0 Machinery 0 Cattle sales 266,929 Combine 0 Hog sales 101,041 Hog facilities 0 Sow and boar sales 4,386 Land 0
Capital Asset Sales: Machinery and comb. sales 0 Carryover operating 0
Total cash inflow 522,574
Cash Outflows Operating Expense: Capital Assets:Seed, fertilizer, chem. 21,540 Machinery purchase 0Crop insurance premium 0 Combine purchase 0Fuel and oil 3,832 Hog facilities purchase 0Custom machine hire 9,525 land purchase 0Machinery repairs 1,158Cash rent 0 Principal paid:Feeder cattle purchased 92,400 operating 10,000Grain purchased 45,886 cattle 162,000Hay and supplement 31,126 machinery 24,600Veterinary and health 10,250 combine 0Hauling, commission 7,200 swine facilities 0Boars, gilts purchased 1,600 emergency loan 1,101Property tax 5,506 land 10,000Insurance on bldg., mach. 1,148Building repairs 675 Nonfarm:Utilities 5,900 Family living expenses 30,000Hired labor 3,000 Income tax paid 0Grain storage 0
Interest paid 28,809 Total cash outflow 507,257
Summary
Cash on hand, Jan. 1 16,261
+ Total cash inflow 522,574
- Total cash outflow 507,257
= Cash remaining, Dec. 31 31,578
Net Farm Income Statement(Profit and Loss Statement)
Total Income
- Total Expenses
= Net Farm Income
Step 1. Record Cash Income and Cash Expenses from the Statement of Cash Flows
=Cash Net Farm Income
(do not include loans, capital assets, or nonfarm transactions)
Step 2: Make Accrual Adjustments at end of the Year
• Include income in the year it is produced (rather than in year sold)
• Include expenses in the year the products or services are used (rather than in year paid).
Accrual Adjustments to IncomeAdd change in the value of:
• Crops in inventory• Growing crops• Market livestock in inventory• Accounts receivable
+ Ending NW value – Beginning NW value Use values from Current Assets.
Profit and Loss Statement for End of Year 3
Income Total Crops Hogs Cattle
Sales $421,473 $49,117 $105,427 $266,929
Ins payments 0 0
Inventory chg -46,297 21,650 1,653 -69,600
Gross income 375,176 70,767 107,080 197,329
Feed purchased -77,013 0 -42,323 -34,690
raised crops fed 30,642 -10,843 -19,800
Livestock purch -94,000 -1,600 -92,400
Value farm Prod 204,162 101,409 52,314 50,439
Accrual Adjustments to ExpensesChange in accounts payable:= Ending value – Beginning value
(from Current Liabilities)
Change in expenses paid in advance:• prepaid expenses• supplies on hand= Beginning value – Ending value
(from Current Assets)
Capital Assets
Accrual adjustment to intermediate and long-term assets is made through:
Depreciation expense
Capital Gain or Loss• Difference between the selling price of a
capital asset and its cost (depreciated) value.• Can be positive (capital gain) or negative
(capital loss)
Cash Income +/- adjustmentsminus
Cash Expenses +/- adjustments equals
Net Farm Income from Operations
+/-Capital gains (or losses)equals
Net Farm Income
Net Worth and Net Farm IncomeBeginning
Net WorthEnding Net Worth+ Net Farm Income
Net Worth is also affected by:
• Contributions of nonfarm capital (+)• Withdrawals for nonfarm expenses(-)
• Changes in the market values of capital assets (affect market value net worth, only)
Statement of Owner Equity
Beginning Net Worth
+ Net Farm Income (accrual)
- Nonfarm withdrawals or + contributions
= Ending Net Worth (cost value)
+/- adjustments to capital asset values
= Ending Net Worth (market value)
Statement of Owner Equity for Year 3
Farm Number 150Cost Value Market Value
Beginning farm net worth $ 520,865 $ 546,465Plus change in market value of land
XXX -6,400
Plus accrual net farm income 84,671 84,671
Minus withdrawals for family
living and income taxes 30,000 30,000
Equals ending net farm worth 575,536 594,736
Change in net worth 54,671 48,271
Single and Double-Entry Accounting
• Single Entry: record only income and expenses
• Double Entry: record changes to assets and liabilities as you go (credits and debits)
Advantages to Double Entry
• Net Worth Statement is always up to date.
• Can check accuracy by comparing account values to actual balances and inventories.
• Accrual adjustments are made automatically
Double-Entry Example
1. Harvest grain and sell it+Increase Grain Sales account (income)
+Increase Cash on Hand account (asset)
2. Buy skid loader for cash+ Increase Machinery account (asset)
– Decrease Cash on Hand account (asset)
Double-entry Examples3. Pay back cattle loan--principal
– Reduce Cash on Hand account (asset)– Reduce Bank Loan account (liability)
4.Pay electric bill– Reduce Cash on Hand account (asset)+ Increase Utilities Expense account
(expense)