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Basic Accounting Documents. Accounting System Purpose. An accurate picture of firm’s current profitability An estimate of firm’s current and future financial position Input to firm’s management information system An accurate record of past financial performance.
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Accounting System Purpose • An accurate picture of firm’s current profitability • An estimate of firm’s current and future financial position • Input to firm’s management information system • An accurate record of past financial performance
Accounting & Agribusiness Manager • Agribusiness managers must understand • Balance sheet and profit and loss statement • Evaluate financial business performance
Accounting & Agribusiness Manager • The balance sheet and the profit and loss statement are starting points of most financial analysis
Balance Sheet • Statement of financial conditions of business on specific date • Assets = Liabilities + Owners’ Equity • Assets: something of value firm owns or uses • Current assets: either cash now or will turn into cash within accounting period • Fixed assets: something firm owns or uses that will not turn into cash within accounting period
Balance Sheet • Liabilities: obligation to pay debt • Current liabilities: debt must be paid within next accounting period • Long-term liabilities: debt where payment or repayment of obligation will be made after next accounting period • Owners’ Equity (Net worth) • Accounting equation: Assets = Liabilities + Owners’ Equity
Balance Sheet AgBiz CorporationDecember 31, 20__ • Assets • Current Assets • Cash-Accounts Receivable-Inventories • Fixed Assets-Land-Bldgs & Equipment • Investments-Accounts Receivable • Liabilites • Current Liabilities • Notes Payable-Accounts Payable-$ Due this YR on LT Debt • Long Term Liabilities • Owners’ Equity-Stock-Retained Earnings Total Assets Total Liabilities & OE
Profit and Loss Statement • Summarizes revenue and expenses of business over given period • Revenue: refers to amount of money firm earned from sale of its goods and service this period • Cost of goods sold: represents direct costs to business of just goods that are sold this period
Profit & Loss Statement AgBiz CorporationFor the Year Ending December 31, 20__ Revenues from SalesLess: Cost of Goods Sold Beginning Inventory + Purchases Goods Available - Ending Inventory Cost of Goods Sold Gross MarginLess: Operating Expenses Income Before Taxes Less: Allowance for Income Taxes Net Income (to Retained Earnings)