Transcript Keeping Ag Records

Keeping Ag Records
Road to FFA Degrees and Awards
Why are records kept?
•
•
•
•
•
•
•
•
Inflow and outflow of money
Determine earnings
Observe financial progress
Determine which enterprises are profitable
Income taxes
Management Decisions
Future Planning
FFA Degrees and Awards
What is a Budget?
• List of anticipated income and expenses
for a given period of time
• Will the business be profitable?
• Summarizes where money will be needed
• Basis for business agreements
• Information for securing credit
• Standards for checking progress
• Basis for business planning
When should a Budget be
developed?
• First step in planning an enterprise
• Decision to carry out enterprise should
not be done until budget is completed
• Cover period of natural production (yr)
What is included in a budget?
• Expenses:
–
–
–
–
–
–
land or facilities rent
machinery
feed
seed
fertilizer
pest control
• Income:
– sales of products
– products used at
home
• Include both cash
and noncash items
– increase or decrease
in inventory
– used at home
Budgeting Practices
• Use Current Prices
• If prices vary, use highest cost, lowest
income
• Custom rates for machinery
• Depreciate capital items (buildings)
• Products used at home = income
• Self -labor not included
• Change in inventory = income or expense
(which ever is appropriate)
• Develop a budget for the following:
10 acres of land renting at $30/acre
3 acre-feet of water at $5/acre-foot
seed at $5/cwt...... planted at 70#/acre
Fertilizer at $2.20/acre
Machinery $2.50/acre
Pest control $4/acre
Sale of grain at $3/bu at 25 bu/acre
sale of straw at $10/acre
finance charges: borrow $400 with 10%
interest/yr for 1 year
• Expenses
–
–
–
–
–
–
–
Rent
Water
Seed
Fertilizer
Machinery
Pest
Interest
Budget
• Income
$300
$ 15
$ 35
$ 22
$ 25
$ 40
$ 40
• Total Expenses $477
– Grain
– Straw
$750
$100
• Total Income
$850
• Profit
$373
• Develop a budget for the following:
10 feeder steers @300# each at$70/cwt......
facilities rent: 6 1/2 months @$10/month
20 hrs labor @ $4/hr
9 tons hay @ $60/ton
10 tons grain @ $80/ton
pest control @ $2/head
machinery cost @ $10/hr , 3 hrs
Sale 10 hd weighing 800# @ $85/cwt.......
sale 10 ton manure @ $3/ton
finance charge: $2000 loan for 1 year @ 5%
interest
• Expenses
10 steers
rent
labor
hay
grain
pest cont.
machinery
interest
• Total Cost
Budget
• Income
$2100
$ 65
$ 80
$ 540
$ 800
$ 20
$ 30
$ 100
$3735
steer sale $6800
manure sale
$
30
• Total Income
$6830
• Profit
$3095
What is a Business Agreement?
• Lists responsibilities of each party
involved
• states how profits will be divided
• states who will perform the labor
• who will make managerial decisions
• when and how expenses will be paid
• provides a legal document should
problems arise
When should a Business
Agreement be developed?
•
•
•
•
•
•
•
•
After the budget is done
dates, names of all parties
kind, size, location, duration of enterprise
equipment, facilities, labor, financing
what student receives
what parent or other provides
financing arrangements
signatures
What is an Inventory?
• itemized list of all personal and real
property (assets) on hand at any time
• assets = items owned
• Beginning Inventory
• Ending Inventory
• Ending Inventory becomes Beginning
Inventory of next cycle
Value of an Inventory
•
•
•
•
•
•
used to determine Net Worth
may be only place where a profit appears
business management decisions
show change in resources
needed for credit
depreciation for income taxes
Inventory
• Beginning Inventory: complete after
business agreement
• Physical count: how many?
• Determine value:
– Current Market Value (if sold today)
– Remaining Investment Value (depreciation)
What is depreciation?
• Method of expensing capital items
• Depreciable Assets have a useful life of more
than one year
• decrease in value
• used in business
• machinery, equipment, purchased breeding
stock, buildings
• Non-depreciable: don’t decrease in value
(feed, market livestock, raised breeding
livestock, land)
How do you calculate
depreciation?
• Straight Line:
– Cost divided by years of use
• If asset is only owned for part of a year,
depreciation is taken for that part of a
year
–
–
–
–
buy cow in July for $1000
useful life of 10 years
normal depreciation = $100 / yr
half year depreciation = $50
How do you calculate
depreciation?
• Remaining value = cost minus total
depreciation taken
• Buy a cow for $1000 on Jan 1, 1995
• Useful life of 10 yrs
• Annual depreciation = $100
• What is the remaining value on Jan 1,
1997?
• $1000 - ($100 x 2) = $800
Inventory Practices
•
•
•
•
include all enterprise resources
current prices for non-depreciable assets
raised livestock are not depreciated
use salvage value for depreciated assets that
are completely depreciated
• develop depreciation schedule
Develop a Beginning Inventory
• 10 hd feeder steers
– avg. wt = 600# @ $75/cwt....
• 5 tons alfalfa hay @ $75/T
• 3 tons barley @ $90/T
• 1 1/2 tons oats @ $80/T
Beginning Inventory
•
•
•
•
Steers
Alfalfa
Barley
Oats
• Total Value
$4500
$ 375
$ 270
$ 120
$5265
Income and Expense
• record of all cash and non-cash
transactions
• begin this section when project begins
• record all transactions as soon as they
occur
• date, item, cost or amount
• describe entries as much as needed
• qty and price should be directly related
– qty = 75 pounds, price = $.04/LB
– qty = 10 tons, price = $50/T
Date
ITEM
TOTAL
EXPENSES
LABOR
Enter all
Hired and
expenses noncash
in this
self-labor
column
1
1/1 Barley
$125.00
2
1/8 Chores
$40.00
3 1/10 Hay
FEED
WEIGHT
FEED
COST
Grain, hay
supplement,
salt, pasture
2000#
$125.00
4000#
$100.00
$40.00
$100.00
4 1/15 Chores
$45.00
$45.00
5 1/22 Fixed Barn Roof
$25.00
$25.00
6 1/25 Worked Cows
$32.00
$32.00
$367.00
$142.00
7
8
Total
$225.00
Total
DETAILSOFTRANSACTION
Amount Student
No. of
Price Per
Date Received Share ToWhomSold Item
Units Weight Unit
1
1/10 $800.00
2
1/12 $25.00
3
1/25 $250.00
4
5
6
7
$800.00 Bubba Jones Calf
$25.00 County
Fair Prem
$250.00 Farmer JonsonCull Cow
1 640#
$80/cwt
1
1 800#
$800/hd
Concluding Records
• When should record books be closed?
end of calendar year or production cycle
• Summarize records
Why should records be
summarized?
•
•
•
•
•
basis for new enterprises
help to adopt approved practices
basis for expansion of enterprises
help in making accurate budgets
help in setting up goals
What records are summarized?
• Inventory
Gain or Loss
• Income
• Expenses
(Income + Inventory) - Expenses
• Production Records
– bushels/acre
– cost/bushel
– profit/acre
What is a Net Worth Statement?
•
•
•
•
Lists all assets (items owned)
Lists all debts (money owed to others)
Assets - Debts = Net Worth
True measure of financial growth