Record Keeping by yaoyufang

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									Record Keeping


  Chapter 2
Why Keep Records?
 Income tax
 Assist in planning and management
   Obtaining credit
   Government programs
   Deciding what to produce
Kinds of Records
   Cash flow summary
   Net worth statement
   Income statement
   Detailed enterprise analysis
Usefulness of records
 Cash flow projections
 Whole farm budgets
 Risk management plans
Steps to set up a record system
 Select a record system suited for your
  needs
 Select an accounting system suited to
  your business situation
 Select a method of reporting farm
  income and expenses
 Develop a procedure to get exactly
  the information needed from the
  records
Levels of record keepings systems
 Income tax purposes only
 Income taxes plus some business
  analysis
 A complete farm or ranch business
  analysis
Kinds of records
 Financial records
   Receipts and expenses
   Net worth, income, and cash flow
    summaries
 Physical records
   Crop yield records, livestock births and
    deaths, bushels harvested
Records for income taxes
   Farm income and expenses
   Nonfarm tax deductions
   Nonfarm income and expenses
   Debt payments
   Depreciation schedule
   Hired labor
Two accounting systems
 Double entry
   Keeps balance in financial transactions
   Keeps track of current changes in
    transaction
 Single entry
   Lists the receipts and expenses without
    any effort to maintain a current balance
Reporting income and expenses
 Cash method
   Based on actual cash transactions
   Flexibility in choosing when to take
    income and deduct expenses
   Farmer shows profit when cash is
    available to pay income tax
   Expenses are not deductible until cash is
    paid
   Inventory adjustments must be made
   Income my be erratic
Reporting income and expenses
 Accrual method
   Levels out peaks and valleys in income
   Easier to determine net farm income and
    analyze farm business from year to year
Procedures
 Learn about the record keeping
  system
 Develop a habit of keeping records
 Do most business through a bank
  account
 Balance your checkbook and record
  keeping system
Record keeping steps
 Enter beginning inventories
 Set up depreciation schedules
 Enter receipts, expenses, and
  production
 Enter end of the year inventories
 Complete farm or ranch analysis
Why inventory?
 True picture of the business and
  nonbusiness situation
 Reflect noncash income and expenses
 Provide a management tool
 Place values on business and
  nonbusiness assets
Items to inventory
 Unsold items
 All items purchased for resale but not
  yet sold
 Crop and livestock supplies
 Capital assets
 Accounts receivable
 Accounts payable
 Liabilities
Valuing an inventory (pg 2-14)
   Cost minus depreciation
   Cost minus depletion
   Market cost
   Net market price
   Farm production costs
   Cost or market value
   Actual amount
Business income
   Crop sales
   Government payments
   Custom work
   Patronage dividends
   Refunds
   Resales
Business income
   Cash rent
   Commodity credit loans
   Crop insurance
   Livestock products
   Raised nonbreeding livestock
   Items purchased for resale
   Capital sales
Nonbusiness income
 Wages, salaries, and other earnings
 Investments such as dividends, stock
  distributions
 Depletions income from oil and gas
  royalties, gravel sales, timber sales
 Interest from saving account
Business expenses
   Hired labor
   Repairs and maintenance
   Interest paid
   Feed
   Seeds and plants
   Fertilizer, lime and chemicals
   Machine hire
Business expenses
   Supplies
   Breeding fees
   Veterinary medicine
   Fuel and oil
   Storage
   Taxes
   Insurance
   utilities
Business expenses
   Cash rent
   Freight and trucking
   Conservation and land clearing
   Miscellaneous expenses
   Items purchased for resale
   Capital purchases
Nonbusiness expenses
 Family living
 Nonbusiness expenses such as
  investments and travel to a nonfarm
  job
 Gifts, fines, penalties, hobbies, and
  principle paid on debt
Cash flow summary
 A record of the cash inflows and cash
  outflows
 Provide the opportunity to compare
  the cash flow summary to their cash
  flow projection
Other records
 Credit
   Track accounts receivable and accounts
    payable
 Hired labor
 Enterprise
   directly related to each farm enterprise
 Supplemental
   Record of yields and production

								
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