Page 40 - Account for Ag - 2019

4-4 Accounting for Agriculture CH 4]

However, it is not uncommon for an accounting system to separate this into sub-accounts; "Office Equipment"
for equipment used in an office setting, such as desks and typewriters; "Store Equipment" for counters,
showcases, shelves, and cash registers; Farm implements, lathes, and welders would be listed under
"Machinery and Equipment."
Buildings. A building used by a business to carry on its operations might be a store front in town, a storage
barn and silo, milking parlor, farrowing barn or employee cottage; this could include a warehouse or factory,
regardless of the use, an account called "Buildings" is commonly employed in recording the increases and
decreases in the buildings owned by a business and used in carrying on it operations.
Land Improvements. Sometimes as an adjunct to the "Buildings" account, or separately, there is a "Land
Improvements" account. Land Improvements include roads, fence lines, irrigation systems and tiling, working
corrals, chutes, squeezes and range stock watering systems. The "Land Improvements" account is used to record
the increases and decreases in land improvements as they apply to the business operations.
Land. An account called "Land" is commonly used in recording increases and decreases in the land owned
by a business. Although land, improvements and the buildings placed upon it are inseparable in physical fact, it
is desirable to account for land as a separate account. Land as an asset is not depreciated as are buildings and
land improvements.
Grain, Hay, Feed, Seed, Fertilizer and Supplies. Each are separate accounts that are established to record
the increases and decreases as they occur in the business operations. They include: Grain -- oats, barley, rye and
wheat; Hay -- Alfalfa, Oat, and Timothy; Feed -- starting rations, growing rations, and finishing rations; Seed --
for planting lettuce, tomatoes, alfalfa, corn, soybeans, barley or wheat; Fertilizer -- Ammonium nitrate,
Ammonium phosphate, and 10-10-10; Supplies -- Pesticides, veterinary medicines, marking paints, ear tags,
syringes, clipping blades, and storage sacks. These are assets when purchased, and continue to be assets until
consumed. As they are consumed, the amounts consumed become expenses.
Market and Growing Livestock. Market and growing livestock are acquired as stock in trade, to be fed
and raised for a designated market. They are assets at the time of purchase or when born. Increases and
decreases in the asset "Market and Growing Livestock" are commonly recorded in this account.
Raised Dairy, Breeding and Work Stock. The account "Raised Dairy, Breeding and Work Stock" is
included for livestock that are not purchased but rather born and raised on the farm or ranch and included in the
farming operations assets as working assets. These include heifers and bulls kept and raised for breeding
purposes and cattle dogs and horses that were born, reared and are used for working livestock. These assets are
not depreciated and thus separated from depreciable assets. This account records the increases and decreases as
it pertains to "Raised Dairy, Breeding and Work Stock."
Purchased Dairy, Breeding and Work Stock. The account "Purchased Dairy, Breeding and Work Stock"
is included for livestock that are purchased, as opposed to those animals that are raised on the farm, and
included in the farming operations as working assets similar to Raised Dairy, Breeding and Work Stock. These
include heifers and bulls purchased for breeding purposes and cattle dogs and horses that were purchased for
working livestock. These assets are depreciable and thus separated into an account to record increases and
decreases as it pertains to "Purchased Dairy, Breeding and Work Stock."

LIABILITY ACCOUNTS
Probably most agricultural businesses do not have as many liability accounts as they have asset accounts;
but the following are common.
ACCOUNTS PAYABLE. An account payable is an amount owed to another individual or company,
known as a creditor, and is incurred from a promise to pay at a future date. Such indebtedness arises from
"purchases on credit" or "purchases on account" and are evidenced by a sales or delivery receipt. These
purchases typically are due to purchases of supplies, fertilizer, feed, and services. Since it is necessary to know
the amount owed each creditor, an account bearing the name of each must be kept.
Short-Term Payables. Wages payable, taxes payable, and interest payable illustrate other short-term
liabilities that the individual firm must account for.
NOTES PAYABLE. Increases and decreases in amounts owed because of promissory notes given to
creditors are accounted for in an account known as "Notes Payable." Notes Payable are typically incurred when
purchasing equipment and machinery and have a payable life of three to seven years.

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