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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 ?.

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Keeping Ag Records

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  1. Keeping Ag Records Road to FFA Degrees and Awards

  2. 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

  3. 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

  4. 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)

  5. 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 What is included in a budget?

  6. 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)

  7. 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

  8. 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 Budget

  9. 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

  10. 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 Budget

  11. 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

  12. 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

  13. 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

  14. 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

  15. Inventory • Beginning Inventory: complete after business agreement • Physical count: how many? • Determine value: • Current Market Value (if sold today) • Remaining Investment Value (depreciation)

  16. 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)

  17. 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

  18. 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

  19. 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

  20. 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

  21. Beginning Inventory • Steers $4500 • Alfalfa $ 375 • Barley $ 270 • Oats $ 120 • Total Value $5265

  22. 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

  23. Concluding Records • When should record books be closed? end of calendar year or production cycle • Summarize records

  24. 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

  25. What records are summarized? • Inventory Gain or Loss • Income • Expenses (Income + Inventory) - Expenses • Production Records • bushels/acre • cost/bushel • profit/acre

  26. 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

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