Page 14 - Account for Ag - 2019

1-6 Accounting for Agriculture CH 1]

Feed Records
Livestock feeders and poultrymen keep records of feed for cattle and birds. Usually records are kept
separately for each kind of livestock, each age group, or for each different ration or feeding treatment. These
records when supplemented by figures on sales and purchases are used to compute the return on feed or the
profit margin per animal unit. These records may be kept as a part of the overall accounting system. The same
applies to breeding and similar records.

Comparative Inventories
An agricultural inventory is a classified list, with values assigned, of the various physical assets and
resources used for developing, equipping, maintaining and operating any given agricultural business. The
inventory includes land, buildings, improvements, equipment, feed, seed, livestock and other physical assets at
the time of establishing an accounting system. The simplest possible inventory is taken once a year to identify
assets and liabilities against them. It is usually taken the same time each year and will show the financial status
of the business with regard to the assets and their debts.
Properly prepared inventories allow the manager to determine quantities on hand and establish operational
needs for the future. A comparison of inventories will show the growth in the capital from year to year and the
distribution of capital among the various enterprises and the types of property. It shows the amount of capital
in land, equipment, improvements, livestock, crops, cash or supplies.

Production Records
A production record is a record of physical output of product being produced. For a tractor manufacturer,
this is a record of tractors built on the assembly line. The farm or ranch contends with the land as its assembly
plant and the feed, fertilizer, cows, hens, water, and climatic elements as inputs for the product. The production
record summarizes the amount of feed, labor, seed, and fertilizer for any given enterprise. Records of yields in
different fields over a period of years may give valuable clues to needed soil treatments or changes in cropping
plans. As with financial data, physical measures must be interpreted in view of the specific conditions under
which the farm operates. Production records are as useful as financial records in that the information they
provide are indispensable to budgeting and operational planning.

Accounts Payable
Money owed to others is a debt and an account payable. These actually represent loans extended to the
borrower, that usually have a principal loan amount, interest rate and interest paid on the loan, date of
payments, balance owing and to whom the monies are owed. Accounts payable are generally incurred for the
purchase of feed, fertilizer, machinery and equipment, and land. Accounts payable are typified in three forms,
(1)short term, (2)intermediate term, and (3)long term. Each carry similar and different obligations that will be
explained in later chapters.

Accounts Receivable
Money owed by others to you is an indebtedness and an account receivable. These actually represent loans
extended to others from the sale of crops, machinery and equipment, supplies, and land. They have a principal
loan amount, interest rate and interest paid on the loan, date of payments, balance owing and from whom the
monies are due. Accounts receivable are represented in three forms, (1)short term, (2)intermediate term, and (3)
long term. Each carry similar and different obligations that will be explained in later chapters.

RECORDING TRANSACTIONS AND COSTS
Whatever records are kept, they must be recorded. This involves consideration of the technological
performance of the business as well as its financial returns. The various records must be integrated and each
aspect of the business studied in the light of the information available. Some years back all transactions were
recorded with pen and ink and many small farms still use this method; farms and agricultural businesses small
enough that the bookkeeping may be done by one individual --the owner or hired-- working as the bookkeeper
as a part of their day. Larger, concerns will have computerized the bookkeeping tasks in recording the daily
transactions. However, all students need to begin their study of accounting by learning how pen and ink
records are kept. There are several reasons for this. First, it is the simplest and easiest system to learn, and there
is little lost effort from it being learned since almost everything about pen and ink records is applicable to
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