A Positive Cash Flow Does
Not a Profit Make!
The Income Statement
The Accrual Adjusted Income
Statement
Revenues
Livestock and crop sales
Changes in inventories
Government payments & other farm income
Gain/loss from sale of culled breeding stock
Change in value due to change in raised
breeding livestock numbers
Accrual adjustments in asset accounts
Changes in Inventories
Market livestock
Raised crops/feed inventories
Gains/Losses on Sale of
Culled Breeding Livestock
Purchased breeding stock: subtract cost
basis from the sale proceeds
Raised breeding stock: subtract base
value from the sale proceeds
Change in Value Due to Change in
Raised Breeding Livestock Numbers
Number of head transferring from one
classification to another, e.g., replacement
heifers to cows
Differences in base values of the two
classifications
Accrual Adjustments (Assets)
Change in:
Accounts receivable
Prepaid expenses
Cash investment in growing crops
Supplies
Contracts and notes receivable
Investment in cooperatives
The Accrual Adjusted Income
Statement
Expenses
Purchased market livestock
Cash operating expenses
Changes in feed inventories
Accrual adjustments for liability accounts
Depreciation
Cash interest paid
Change in accrued interest
Accrual Adjustments
Changes in:
Purchased feed inventories
Accounts payable
Ad valorem taxes
Employee payroll witholding
Accrued expenses
Accrued interest
Depreciation
Straight line depreciation:
Cost - Salvage value
Years of life
Tax depreciation as a proxy
The Accrual Adjusted Income
Statement
Net Farm Income, Accrual Adjusted =
Gross Farm Revenues
- Total Operating Expenses
- Total Interest Expense
+/- Gain/Loss on Sale of Farm Capital
Assets
Gains/Losses on Sale of
Farm Capital Assets
Difference between the value for which
the items is sold and the adjusted basis
(cost minus depreciation taken)
What is the effect on net farm
income?
Increase in crop inventories?
Decrease in accounts receivable?
Increase in cash?
Decrease in accounts payable?
Decrease in prepaid expenses?
Increase in accrued interest?
Increase in notes payable?
Decrease in growing crops?