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 6 months

Budget• Expenses– Rent $300

– Water $ 15

– Seed $ 35

– Fertilizer $ 22

– Machinery $ 25

– Pest $ 40

– Interest $ 20

• Total Expenses $457

• Income– Grain $750

– Straw $100

• Total Income$850

• Profit $393

• 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 6 months @ 10% interest

Budget• Expenses

10 steers $2100

rent $ 65

labor $ 80

hay $ 540

grain $ 800

pest cont. $ 20

machinery $ 30

interest $ 100

• Total Cost $3735

• Income

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 = $1000

• 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 $4500

• Alfalfa $ 375

• Barley $ 270

• Oats $ 120

• Total Value $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

TOTAL FEED FEEDFEEDDate ITEM EXPENSES LABOR WEIGHT COSTCOST

Enter all Hired and Grain, hayexpenses noncash supplement,in this self-labor salt, pasturecolumn

1 1/1 Barley $125.00 2000# $125.00

2 1/8 Chores $40.00 $40.00

3 1/10 Hay $100.00 4000# $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

7

8 Total $367.00 $142.00 $225.00

Total DETAILS OF TRANSACTIONAmount Student No. of Price Per

Date Received Share To Whom Sold Item Units Weight Unit

1 1/10 $800.00 $800.00 Bubba Jones Calf 1 640# $80/cwt

2 1/12 $25.00 $25.00 County Fair Prem 1

3 1/25 $250.00 $250.00 Farmer Jonson Cull Cow 1 800# $800/hd

4

5

6

7

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