Financial Statements

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Financial Statements

• Define the terminology used in financial
  record-keeping systems such as asset, liability,
  inventory, etc..

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What is an Asset?
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Asset

• Something tangible of value that a person owns

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Asset

• 1. Current Asset- items quickly converted into
  cash or that will be sold within 12 months
  
• Examples cash, checking, savings, stocks, etc

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Asset

• 2. Non-current- items that have a useful life of
  more than one year
  
• Examples land, machinery, breeding livestock,
  stud dog, etc.

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Liabilities

• DEBTS
• Money owed by the business or individual
• Ex. Car payment,
• soil shipment

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Liability debts

• 1. Current- debts that are due to be paid this
  year
  
• Examples fertilizer and feed bills, tractor and
  building payments, and part of mortgage due this
  year

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Liability- debts

• 2. Non-current Liability- debts not due this
  year
  
• Example mortgages not including this years
  payment

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Net worth
Total assets - Total liabilities Net Worth
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• Current Assets Non-Current Assets
• Total Assets
• Current Liabilities Non-Current Liabilities
  Total Liabilities
  
• Another word for Net Worth is Equity

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Where do they belong?
Current Asset? Non-current Assets?
Current Liability? Non-current Liability

• Holstein Cow
• Lawn mower
• Credit card bill
• Car payment
• 2 acres of land
• Angus bull
• 6-month CD
• Home mortgage
• Power bill

• Cell Phone Bill
• Purchasing a car 0 down no payments til next
  year.
  
• Fertilizer bill
• Checking account
• Weed eater
• Inheritance from your rich uncle

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• Current Asset
• 6 month CD
• Checking account
• Inheritance from your rich uncle
• Non-Current Asset
• Holstein Cow
• Lawn Mower
• 2 acres of land
• Angus Bull
• Weed eater

• Current Liability
• Credit Card Bill
• Car Payment
• Power Bill
• Cell Phone Bill
• Fertilizer Bill
• Non-Current Liability
• Home Mortgage
• Purchasing a car 0 down with no payments til
  next year

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Determine Net WorthTotal assets - Total
liabilities Net Worth

• Used Dodge Dakota Pickup (12,500)
• Home Mortgage (750)
• Fertilizer for lawn (30)
• Beef Cattle Herd, (15 cattle _at_200 each)

• Checking account (1,750)
• Jet Ski (850)
• Cattle Feed (350)
• Hay (1,200)
• Lawn Mower (560)
• Credit card (3,200)

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• Assets
• Dodge truck - 12,500
• Beef Cattle - 3,000
• Checking Acct - 1,750
• Jet Ski - 850
• Lawn Mower - 560
• Total Assets 18,660

• Liabilities
• Home Mortgage - 750
• Fertilizer - 30
• Cattle Feed - 350
• Hay - 1,200
• Credit Card - 3,200
• Total Liabilities 5,530

Total Assets Total Liabilities Net Worth
18,660 - 5,530 13,130
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INVENTORY

• an itemized list of things owned by a business
  with the beginning value
  
• and depreciated value

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INVENTORY

• Non-Depreciable items that will be used up or
  sold within a year example
  
• feed, supplies, etc.

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INVENTORY

• Depreciable items that have a useful life of
  more than one year and lose value because of age,
  wear, or becoming out-of-date because of
  technology advancements.

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• Land is NOT depreciable property

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Depreciation

• If you buy agricultural property such as
  machinery, computers, breeding livestock,
  equipment, etc that has a useful life of more
  than one year, you spread the cost of it over
  several years for record keeping and tax
  purposes. This is called depreciation. Property
  is depreciable if it meets these tests

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Depreciation

• 1. It must be used in business or held for the
  production of income.
  
• 2. It must have a determinable useful life longer
  than one year
  
• 3. It must be something that wears out, decays,
  gets used up, becomes obsolete or loses value
  from natural causes.
  

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Depreciation

• The most common method of depreciation is
  straight line depreciation.
  
• Selling your car..

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Debt to Equity

• How much Debt compared to owned items you have!
• Ratio
• Total liabilities divided by net worth
• Liabilities/ net worth