Vocabulary
Balance Sheet
Shows liabilities, assets, equity
What is a budget?
A budget is an estimate of the expected costs/returns for a specified future time period.
Is a budget an estimate or fact?
Estimate
What are the GAAP?
Generally Accepted Accounting Standards
- made in 1930´s
Income Statement
Income + Expenses for given period of time
What are the three major sections of a budget?
1. Revenue
2. Expenses (Variable/Fixed)
3. Income
How do you calculate net income?
Income - Expenses = Net Income
What is the FFSC?
Organization that sets the most widely used standards in farm accounting
Statement of Cash Flow
all money coming in/out during a certain period of time
What are the four common budgets used in farm/business management?
1. Operating
2. Enterprise
3. Partial
4. Cash Flow
Two Main Purposes of Business Budget
1. Used to prove to self/others that plan will work
2. Used as guide to help complete plan
Why should records be kept?
1. To complete tax forms
2. To make management decisions
3. To Acquire Credit/Investments
Partial Budget
A type of budget covering only the costs/income that will change as a result of a decision being considered
Name Two Variable and Fixed Expenses
Ex:
- Fixed - Land Taxes, Depreciation
- Variable - Feed, Vet Expenses
When estimating future costs, what two things need to be separated?
Fixed and Variable Costs
Records can be used to:
1. Make/Update a Successful Business Plan
2. Present Facts to Others
Statement of Owner Equity
Reports the factors that have caused the owner´s equity to change between balance sheets
Enterprise vs. Operating Budget
Operating - costs/returns for total farm/business
Why should you separate farm and family budgets?
So you can have accurate records to pay taxes and to see if your business is actually making money.
Accounting records need to be ____ and ____.
accurate, standardized