Keeping Ag Records

1. Keeping Ag Records Road to FFA Degrees and Awards Modified by Georgia Agricultural Education Curriculum Office June 2002

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

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

26. 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

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

28. 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