KENTUCKY AGRICULTURAL EDUCATION RECORD KEEPING INSTRUCTIONS & EXAMPLES 1. I can describe how to access my finances in AET. 2. I can determine if an item should be considered as beginning inventory. 3. I can define and explain basic financial terms regarding financial records and beginning inventory. 4. I can calculate depreciation. 5. I can determine if an inventory item is current or non-current/capital. 6. I can define and explain types of non-current inventory and types of liabilities. 7. I can accurately record my SAE beginning inventory.

From the home page, you can get to the Finances link by clicking on the light green box.

This is the Student Financial Page. From here, students can enter any financial entry including beginning values, transactions, and loans.

Students can easily access the Experience Manager from this page, which lists all AET Experiences.

Students can access all financial entries from the Experience Manager once they are entered.

Like the Journal entries, students can also review/edit all of financial entries from this screen once he/she begins making transactions.

All financial entries will be listed here once a student begins recording them. Students can see a total of all debits and credits as well. Students can also select specific years, individual experiences, and types of financials entries to review.

The first type of financial record students will enter will be Beginning Inventories/Values.

Beginning Values Inventory items a student has on hand on the first day of ag education and includes (a) Current Inventory Items Example: feed, supplies, bottle calf, item for resale (b) Non-current inventory items Example: tractor, breeding animal, tools, dog kennel (c) Liabilities/Loans Example: feed bill, lawn mower payment, etc. (d) Cash

Beginning Inventory/Value Requirements In order for an item to be recorded as beginning inventory: a) The student must own at least a portion of the item. b) The item must be agriculture/SAE related. c) The item must have a monetary value. d) The student must possess the item on the first day of their agriculture class.

RECORDING BEGINNING VALUES

To begin, students should click, “Beginning Values.”

This Beginning Values screen will be shown. The date shown should correspond with the student’s first day of Ag classes that was entered in the student’s Profile. All information entered in this tab will automatically show in the Financial Transactions Log and the Capital Item Manager.

Current Projects/Current Inventory Items will be entered first.

Current Inventory Item The inventory items that are used for an AET Experience and are usually: Consumed in one year or converted into cash within one year Lower cost/value Ex: Feed, Seed, Veterinary Medicine, Inventory for Resale, Feeder Steer

Current Inventory Item Student will enter the Vendor, Experience, Expense Type, Value, and a short Memo for each Current Inventory item they have on hand when they begin their agriculture class.

Vendor The business or individual from which you purchase an inventory item Ex: Southern States, John Deere, Tractor Supply, Your neighbor (Kristie Guffey)

Experience The AET Experience (SAE) that the inventory item is used for; if a student has multiple SAEs, all will be options in the drop-down menu.

Expense Type Students will have several options of types of expenses to categorize Beginning Values. Students should accurately select the expense type that best matches the Current Inventory item.

Value Students should input the monetary value of the Current Inventory item. This value should not be the purchase price of the item, but the value of the item on the student’s first day of agriculture class.

Unit and Quantity The number of items and the type of units for a particular inventory Ex: 10 gallons, 3 head, 2 bags

Save After students enter a Current Inventory item, they should click, “SAVE/Add a new line.”

Beginning Values Example (Current): On Brandon’s first day of Agriculture class, he had the following Current Inventory items on hand: A. $100 worth of hay (5 rolls): Purchased from Jeff Albright to be used for feed for Breeding Beef Project B. $50 worth of hay (2 rolls): Purchased from Jeff Albright to be used for feed for Market Beef Project C. $15 worth of Banana Pepper Seed (3 packets): Purchased from Southern States D.$5 worth of Trimmer Line (1/2 spool): Purchased from Lowe’s E.Market Steer 201 valued at $1087, Purchased from Dyehouse Farms, 645 lbs F.Market Steer 202 valued at $1095, Purchased from Dyehouse Farms, 648 lbs G.Female Calf 099 valued at $572, Raised on Brandon’s farm, 318 lbs

Beginning Values Example Brandon’s Beginning Values would be recorded as shown below:

Beginning Values Example Remember that Current Inventory will automatically show within the Financial Transaction log.

Beginning Values Example The date of the transaction will automatically be set to the student’s first day of agriculture class.

The next category of Beginning Value that should be recorded is Non-Current Inventory Items.

Non-Current Inventory (Capital Items) The inventory value of items that is (a) high in monetary value (b) has a long-term use value in supporting AET Experiences (SAE projects). Ex: Tractors, show box, equipment, and other related items that may be used to support several projects across several years

The student will record the asset name, item type, useful lifetime, beginning cost, and salvage value of the items.

Asset All items of property having a monetary or dollar value, which are the legal possessions of that person. Ex: Livestock, machinery, buildings, equipment

Types of Non-Current (Capital) items Non-depreciable draft, pleasure, or breeding Depreciable draft, pleasure, or breeding Machinery, equipment, and fixtures Depreciable land improvements, buildings, and fixtures Land

Non-depreciable Draft, Pleasure, and Breeding Livestock This includes all home raised draft, pleasure or breeding livestock and poultry that will be kept over a year. Examples: Raised boars, raised replacement heifers, raised mules, raised show horses

Depreciable Non-Current (Capital) Items Non-Current Inventory Items should be recorded at Book Value. AET calculates Book Value for these items after the student enters the beginning value, useful life, and salvage value for each item. Book Value= Acquisition Cost - Depreciation

Depreciation Expense Some Non-Current Inventory items are considered depreciable. Depreciation represents an annual cost for the use of a capital item. Depreciation is a noncash transaction that is calculated by: (cost of the capital item - the salvage value) the useful life of the item

Depreciation Expense (cont.) Ex: A laptop costs $800 at acquisition. The laptop has a salvage $50 and useful life of 10 years. What is the depreciation cost per year? Depreciation cost: ($800-$50) /10 years = $75 depreciation per year

Depreciation Practice Use the depreciation guide and depreciation worksheet for additional practice.

Depreciable Draft, Pleasure, and Breeding Livestock This includes all purchased draft, pleasure, or breeding livestock that will be kept over a year. Examples: Purchased boars, purchased replacement heifers, purchased mules, purchased show horses

Machinery, Equipment, and Fixtures This includes all machinery, equipment, tools, and fixtures. Examples: Cultivator, Socket set, Drill, Tractor, Leaf blower, Wheelbarrow

Depreciable Land Improvements, Buildings, and Fences This includes land improvements such as terraces, tiling, buildings, and fences. Examples: Barn, Dog house, Board fence

Land The student’s investment in property/land.

Capital Item Useful Life The estimated number of years the item will perform its intended use. Ex: Breeding animals is usually 5-10 years, equipment 10 years and buildings usually have a 20-year life.

Beginning Cost The purchase price for an inventory item, also known as acquisition cost

Capital Item Salvage Value The estimated sales price of capital items once usage is complete or the asset has served the intended purpose for the current user. Ex: A laptop cost value of $800, but will be sold in 4 years for an estimated $500. The $500 is the estimated salvage value.

Save After students enter a Current Inventory item, they should click, “SAVE/Add a new line.”

Beginning Values Example (Non-Current/Capital): On Brandon’s first day of Agriculture class, he had the following Non-Current Inventory items on hand: A. Angus Heifer 100: Raised on Brandon’s farm, will be used for breeding, valued at $800, useful life 10 years, salvage value $500 B. 4 Angus Cows: Purchased from Bustle’s Black Angus, will be used for breeding, useful life 8 years - Cow 101 ($1475 acquisition cost, salvage value $950) - Cow 102 ($1560 acquisition cost, salvage value $950) - Cow 103 ($1525 acquisition cost, salvage value $950) - Cow 104 ($1500 acquisition cost, salvage value $950)

Students need to list each capital item separately as shown below. Because Brandon’s Heifer 100 was raised on his farm, it is considered Non-Depreciable breeding livestock. Because the 4 cows were purchased, they are considered Depreciable breeding livestock.

It is important that once students enter non-current inventory items, additional details for each of item should be specified by using the “Capital Item Manager.”

Capital Item Manager (Used for Non-current Inventory) Feature used to record the purchase, sell, or record the usage of capital items. Ex: Buying new breeding animals, show tack, lawn mowers, barns, land, trailers and other high value items

The “Capital Item Manager” will list all non-current items. If a student sells a beginning inventory item that is non-current, this is the location to make that sale (not as a transaction).

If a student has more than one AET Experience, non-current items will not be reflected on any degree or proficiency report if students do not set the usage of each item. However, the usage for items cannot be set until transactions for the year have been made. It is important to remember to go back and set the usage for capital items at the end of the year.

Capital Item Usage The annual percent allocation of depreciation cost from a capital item to each AET Experience (SAE). Ex: A laptop in one year is used 50% for breeding beef records and used 50% for a research project.

Beginning Values Example Remember that Non-Current Inventory will also automatically show within the Financial Transaction log.

Beginning Values Example The date of the transaction (purchase) will automatically be set to the student’s first day of agriculture class.

The next Beginning Value that should be recorded is Liabilities/ Loans.

Students should enter the Vendor/Bank, a short description (Memo), Loan Type, Amount of the Loan, the number of Payments per Year, and the Total Number of Payments for the life of the loan.

Types of Liabilities Short Term Loan (within 1 year) Capital Loan (Notes & Chattel Mortgage) Real Estate Mortgages, Contracts Other non-current/Capital Liabilities

Short Term Loan A loan that will be paid within one year Ex: Operating loan, farm store account

Capital Loan (Notes & Chattel Mortgage) A loan taken on a non-current/capital item that will take longer than 1 year to pay off *Chattel- a mortgage on a movable property item Ex: Loans for machinery, equipment, tools, breeding livestock

Real Estate Mortgages, Contracts A loan used to purchase property/land or permanent fixtures Ex: Loans for land, long-term contracts buildings, fences

Other non-current/Capital Liabilities Loans for any property not covered by short term, chattel, or real estate/ mortgage

If a student had already begun paying on a loan prior to their first day of agriculture class, the student would enter only the remaining balance and remaining number of payments, as of the student’s first day of Ag class, to reflect what will be paid during their SAE experience.

Beginning Values Example (Liabilities/Loans): On Brandon’s first day of Agriculture class, he owed the following amount on an existing loan: A. Feed Charge Account: On December 2012, Brandon had a $443 charge account at Southern States for feed. The account had a 3% interest rate. Payments were due the first of each month.

Beginning Values Example (Liabilities/Loans): On Brandon’s first day of Agriculture class, he owed the following amount on an existing loan: A. Feed Charge Account: Therefore, on Brandon’s first day of Agriculture class (August 8, 2013), he owed $ in payments. September Payment $37.52 October Payment $37.52 November Payment $37.52 December Payment $37.52

Beginning Values Example (Liabilities/Loans): Remember, students only record what expenses will be recorded when they are enrolled in agriculture education. Therefore, Brandon would record his charge account as: AET rounds to the nearest whole number

Beginning Values Example Remember that Liabilities/Loans will also automatically show within the Financial Transaction log.

Beginning Values Example The date of the transaction (credit) will automatically be set to the student’s first day of agriculture class.

The final Beginning Value that should be recorded is Cash/Checking.

AET will automatically calculate the required monetary amounts that a student has available to cover all Beginning Values. Then, AET will record all Beginning Values as “purchases” on the student’s first day of Agriculture Class. Therefore, the student essentially starts his/her SAE with a $0 balance unless they have actual Cash-on-Hand (checking/savings account).

Beginning Values Example (Cash/Checking): On Brandon’s first day of Agriculture class, he had a the following balance in his checking/savings account: A. Checking Account: $750 B. Savings Account:$3275

The additional Cash-on-Hand will not be reflected in the Financial Transactions Log.

However, the additional Cash-on-hand will be reflected as Cash/Checking. This number will fluctuate as students have income and expenses. If a student does not have enough cash- on-hand to make a purchase, AET will automatically reflect this as a negative number.

After entering Beginning Values (before Financial entries), those students who have Entrepreneurship SAEs involving animals will need to set up the appropriate Livestock Manager for their AET Experience.

To access the Livestock Managers, select the appropriate Livestock Manager at the bottom of the Financial Page. The steps for using these managers are explained in later lessons.

THIS CONCLUDES THE INSTRUCTION FOR THE AET BEGINNING INVENTORY SECTION.