Page 11 - Account for Ag - 2019

CH 1] Introduction 1-3

PRIVATE ACCOUNTING. When the accountant is employed solely by a business concern, he is said to be a
private accountant. The small business, such as the family farm, may employ only one accountant or it may
depend upon the services of the public accountant and employ none. The larger, incorporated family farm or an
agricultural supply service company such as a cooperative having scores of employees may have an accounting
department, working under the supervision of a chief accountant or controller who is often a C.P.A.
An accountant for a small business and the accounting department of a large concern do a variety of work.
Their work includes general accounting, cost accounting, budgeting, and internal auditing. 1
General accounting deals primarily with recording transactions and preparing financial and managerial
reports used by owners, lenders, and governmental agencies.
Cost accounting is that phase of accounting that has to do with collecting, determining, and controlling
costs. Particularly the costs of an individual enterprise, product or crop, or service provided. Since a knowledge
of costs and controlling costs are vital to good management and profitability, a good deal of attention should be
paid to this area. A large agricultural concern may have a number of accountants engaged in this activity.
Budgeting is a process whereby the business resources (land, labor, capital, and management) are allocated
for production. The objective of budgeting is to provide management with an intelligent, workable plan in
which to employ the business resources. After the plan has been put into operation, then provide summaries and
reports comparing actual accomplishments with the plan. Many large companies have individuals within their
accounting departments devoting all of their time to this phase of accounting.
Some companies maintain a staff of internal auditors whose responsibility it is to constantly check the
records prepared by each department within a the company and insure that the established accounting
procedures and management directives are followed uniformly.
GOVERNMENTAL ACCOUNTING. Providing governmental services is as vastly complex with regard
to accounting as in any business concern. Our elected and appointed officials must rely on accumulated
accounting data in order to effectively carry on the business of government. Accountants are responsible for
collecting this data. Accountants will also check and audit the millions of income, payroll and sales tax returns
that government depends upon for its income. The Agricultural Commissioner, Department of Agriculture,
Interstate Commerce Commission, Securities and Exchange Commission, Federal Power Commission and so
on, use accountants in many capacities in their regulation of business.
THE STUDY OF ACCOUNTING
Accounting and the keeping of records for the agricultural business, whether farm or supply service, is not
solely a way of increasing profits. Record keeping points the way to where changes may be made, and the
efficiency of operations may be increased. The student should seek to learn the following from their study of
accounting: (1)The kind and scope of information obtainable from a well kept set of books. (2)What records are
needed to record pertinent and desirable data properly. (3)The mechanics of opening, keeping, and closing a set
of books. (4)How to use the farm records to improve farm and business management and efficiency. (5)What
records to use in the enterprises which are of major interest.
The study of accounting might begin by learning how transactions are recorded and how financial reports
are prepared from those recorded transactions. It might begin by examining the financial reports and then how
the transactions are prepared. The author will begin by introducing the accounting equation and then illustrate
the financial reports. Knowing where one is going always helps to understand why certain mechanical methods
are used allows the student to maintain a particular view of direction; especially when accumulating accounting
data.

OBJECTIVES OF RECORDS AND ACCOUNTS
Agribusiness records are essential for both legal and business purposes. Legal purposes are many, but of
main concern is the payment of tax obligations. There are also many business applications; an important one
being the profitability of the business year. Of course the legal and business uses of records and accounts
extend far beyond these two uses. The aims of record keeping may be summarized as follows:

1. To furnish information that facilitates preparing the annual income tax return and determining other
tax obligations.
2. To provide an aid to control and facilitate day to day operations.
3. To furnish data concerning the historical performance of the business operation.
4. To supply basic information and data for planning future operations.
5. To aid in determining the equity position and results of the current year's operations.
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