University:
Washington State University
Course:
ECONS 350 | Introduction to Farm and Ranch Management
Academic year:

2019
Views:

359

Pages:

23
Author:

Lily Callahan

 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 Basic Accounting Develop a system to track your expenses 2 1 4 3 Track and Measure your progress Plan for growth and profit 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 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 Cash Flow 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?

Farm Accounting for Dummies

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