Farm & Business accounting
Why are records important?
Records can be useful in making and
updating a business plan.
Identify problems and weaknesses
Records can be used to present
facts to others
Lenders, shareholders, investors
Determine the farm’s value for sale or merger
What is a budget?
Often used to mean "placing a limit" on
what one can spend.
In general, a budget is "an estimate of
expected costs and returns for a specified
time period into the future, usually a year."
In business, a budget is a tool used in
planning and making decisions for the future.
FFSC says records should include these 4 at a minimum:
Balance sheet – shows assets, liabilities and
equity
Income statement – income and expenses for a
given period
Statement of cash flow – all money coming in or
going out during a time period
Statement of owner equity – reports the factors
that have caused the owner's equity to change
between one balance sheet and another.
Whats an operating budget?
covers all expected income and expenses for a family, a farm or a business for one year.
Three basic uses of records.
Completing tax forms – so you don’t pay
more than is required
Making management decisions – day to
day and long-range planning and analysis
Acquiring credit and investments – to show
how you plan to make a profit or to sell the
farm or business
Whats an enterprise budget?
covers only income and costs associated with a single enterprise
When are records useful?
if they're organized into a system.
What is partial budget?
covers only the costs and income that will change as a result of the decision that is being considered.
What is FFSC?
Set standards now used most widely in farm
accounting systems
Nonprofit organization representing producer
groups, lenders, agricultural accountants and
university agricultural business specialists.
The FFSC was formed following the farm
debt crisis faced by U.S. agriculture in the
early to mid 1980s.
What is cash flow budget?
an estimate of cash to be received vs. cash to be used to pay bills, make investments and cover other needs.