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Basic Farm Accounting

This document discusses tracking farm income and expenses for profitability. It covers financial statements, basic accounting concepts, developing a bookkeeping system, pricing, budgeting and forecasting. The presentation provides an overview of accounting principles and financial management strategies for small farms.

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remeceldo dagamac
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405 views23 pages

Basic Farm Accounting

This document discusses tracking farm income and expenses for profitability. It covers financial statements, basic accounting concepts, developing a bookkeeping system, pricing, budgeting and forecasting. The presentation provides an overview of accounting principles and financial management strategies for small farms.

Uploaded by

remeceldo dagamac
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Presented by: Peggy Hall, Legacy Accounting and Software Training

Sponsored by:
KCAA (Kitsap Community and Agricultural Alliance)
WSU Regional Small Farms Program
 Introductions
 The Workshop
 Why bother tracking Income and Expenses?
 The Financial Statements:
 Income Statement
 Statement of Cash Flows
 Balance Sheet
 Basic Accounting Concepts
 The Accounting Equation
 Cash vs. Accrual Accounting
 Current vs Long Term
 Expenses vs Capital transactions
 Developing a Bookkeeping System - spreadsheets vs. an accounting program
 Pricing, Budgeting, and Forecasting for Profitability
 Q & A and Survey
 Know how profitable your business has been
 Aid in securing business loans and grants
 Avoid cash crisis
 Makes preparing tax returns so much easier
 Aid in achieving financial goals
Understand Develop a
Basic system to track
Accounting your expenses
2

Track and
Measure your Plan for growth and
progress profit
4
Revenue
 Net Sales
COGS
 Seeds/Seedling
 Produce or other products for Resale
Operating Expenses
 Direct Operating
 Labor
 Occupancy
 G&A

 Repairs and Maintenance


 Income Taxes
Operating Income = Revenue – Expenses
Other Income & Expense
Net Income = Operating Income + Other Income/Expenses
Cash Flow from Operations
Inflow – Sale Revenue
Net Income Cash Flow
Outflow – Operating Expenses
Cash Flow from Investments
Inflows – Sale of Equipment, Land or other Assets (ELA)
Outflow – Purchase of ELA
Cash Flow from Financing
Inflows – Cash received from loans, grants or investors
Outflow – Repayment of loans
Assets = Liabilities + Owner’s Equity (Capital)
Assets – Liabilities = Owner’s Equity (Capital)
“have” - “owe” = “what you are worth”

Assets – something that you own – Cash, Inventory, equipment, land, buildings, vehicles,
livestock, accounts receivable (AR)

Liabilities – what you owe to others – loans, credit cards, accounts payable (AP)

Owner’s Equity (Capital) – your ownership in the business, past years retained earning,
owner contributions/capital, investor capital
Debit normal balance Credit normal balance
Left side Right Side
Assets = Liabilities + Owner’s Equity (Capital)
Assets = Liabilities + Net Income (Income – Expenses)+ Capital
Assets = Liabilities + (Income – Expenses) + Capital
Assets + Expenses = Liabilities + Income + Capital

A – Assets
L - Liabilities
I – Income
C - Capital
E – Expenses`
 Assets
 Current – highly liquid, can be converted to cash quickly
 Fixed Assets – equipment, vehicles, land

 Liabilities
 Current – short term, up to 1 year
 Accounts payable
 Short term loans
 Long Term –over 1 year
 Loans
 Credit Cards
 Cash Basis – revenue and expenses are recorded when cash is received or
expenses is paid
 No AP/AR
 If you sell CSA shares, all money is received and recorded early in the year, but expenses
related to the income are incurred later

 Accrual Basis
 Record revenue when earned and expenses when incurred
 Better matches expenses with revenues (Matching Principle)
 Operating Expenses – Short lived, inexpensive improvements
 Hand tools
 Animal feed
 Fixing fences

 Capital Expenses – Long lived, life extending improvements, possibly depreciated


(expensed a little every year)
 Greenhouses
 Breeding stock
 Fixed Costs - Periodic charges do not vary
 Insurance
 Rent
 Bank Fees

 Variable Costs – Expenses vary with production


 Seeds/Seedlings
 Animal Feed
 Labor/Payroll
See additional hanout
Cost of getting crops in the ground (by Acre)
 Seeds
 Seedlings
 Fertilizer/Amendments
 Stakes
 Labor – transplanting/planting/weeding

Getting the Crop to the Market (by case/pound)


 Packaging
 Labor – harvesting/packing
 Distribution
Measurements
 Acreage Planted: 1 acre
 Yield: 34 cases = 25 lbs each per week
 Harvesting Season: 8 weeks

Conversions:
1 acre = 272 cases = 6,800 pounds
Labor -
 Starting seed - $20
 Watering - $20
 Transplanting - $60
 Staking - $40
 Weeding - $40
Potting Soil/Trays - $100
Seeds - $60
Black Plastic/Amendments - $50
Total Cost per Acre: $3.90
Cost per case: $1.43
Labor ($12 per hour)
 Harvesting – 15 minutes per case
 Sorting/Packaging – 10 minutes per case
 $5 per case
Supplies
 Packaging - $.60/case
Total by case cost - $5.60
 Add all costs of production: per acres costs + per case/pound cost = base price
By Acre Cost - $1.43
By Case Cost - $5.60
Total base price = $7.03

 Do market research, compare your base price with competitors (other farmers
markets, grocery store etc)

 Set yourself apart by showing your added value (i.e., organic certification)
Wholesale
 Calls to customers/place orders – 10 minutes
 Packaging for wholesale,/loading truck – 10 minutes
 Delivery time – 40 minutes
 Fuel - $5
 Truck Expenses - ??

Total cost per delivery/market - $17 +


Delivery of 1 case (based on $7.03 per case
base price)
Sale Price $25.00
Gross Profit $17.97 ($25.00-$7.03)
Delivery $17.00
Profit $.97

Delivery of 10 cases
Sale Price $250.00
Gross Profit $179.70
Delivery $17.00
Profit $162.70
 Review Previous Year, if this is your first year, use estimates
 Consider Changes for coming year (adding more livestock, growing more crops,
expanding into another market)
 Outline
 Revenue
 Expenses
 Capital Purchases
 Financing

 Check Cash Flow at least monthly


 Adjust as Necessary
 Revenue
 Is it going up or down?

 COGS
 Are you marking up resale items enough?

 Operating Expenses
 What are the major expenses?

 Operating Profit
 Is it positive?

 Other Income & Expenses


 Are they driving losses?

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