Keeping Ag Records
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Transcript of 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 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
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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
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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