Keeping Ag Records

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Keeping Ag Records

• Road to FFA Degrees and Awards

Modified by Georgia Agricultural Education
Curriculum Office June 2002
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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

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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

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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)

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What is included in a budget?

• 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

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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)

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• 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

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Budget

• 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

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• Develop a budget for the following
• 10 feeder steers _at_300 each at70/cwt......
• facilities rent 6 1/2 months _at_10/month
• 20 hrs labor _at_ 4/hr
• 9 tons hay _at_ 60/ton
• 10 tons grain _at_ 80/ton
• pest control _at_ 2/head
• machinery cost _at_ 10/hr , 3 hrs
• Sale 10 hd weighing 800 _at_ 85/cwt.......
• sale 10 ton manure _at_ 3/ton
• finance charge 2000 loan for 6 months _at_ 10
  interest

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Budget

• 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

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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

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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

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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

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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

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Inventory

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

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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 dont decrease in value (feed,
  market livestock, raised breeding livestock, land)

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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

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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

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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

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Develop a Beginning Inventory

• 10 hd feeder steers
• avg. wt 600 _at_ 75/cwt....
• 5 tons alfalfa hay _at_ 75/T
• 3 tons barley _at_ 90/T
• 1 1/2 tons oats _at_ 80/T

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Beginning Inventory

• Steers 4500
• Alfalfa 375
• Barley 270
• Oats 120
• Total Value 5265

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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

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Concluding Records

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

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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

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What records are summarized?

• Inventory
• Gain or Loss
• Income
• Expenses
• (Income Inventory) - Expenses
• Production Records
• bushels/acre
• cost/bushel
• profit/acre

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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