Ag & Resource Economics Farm Record-Keeping Written by Annette Dunlap, MBA Extension Associate Ag & Resource Economics NC State University

The Value-Added & Alternative Agriculture Start-up Toolkit Program Outline The importance of record-keeping Transactions to record Record-keeping methods Production and Financial Record Financial Statement Basics Resources The Value-Added & Alternative Agriculture Start-up Toolkit

The Importance of Record-Keeping Provide proof of income and expenses to government agencies (IRS, NC Dept. of Revenue) Use for decision-making Show regulatory compliance Obtain and maintain financing The Value-Added & Alternative Agriculture Start-up Toolkit

Transactions to Record Business checking to keep personal and business funds separate Monthly income and expense ledger Inventory ledger Depreciation schedule Pro forma statements (balance sheet, income statement, cash flow statement) The Value-Added & Alternative Agriculture Start-up Toolkit

Record-keeping Methods Cash method: January 1 to December 31 Records income as received and expenses as paid Accrual method: fiscal year determined by the enterprise Records income as earned (but not necessarily received) and expenses when deducted or capitalized The Value-Added & Alternative Agriculture Start-up Toolkit

The Value-Added & Alternative Agriculture Start-up Toolkit Production Records Production records: inputs and outputs crop yields plant populations livestock births and deaths The Value-Added & Alternative Agriculture Start-up Toolkit

The Value-Added & Alternative Agriculture Start-up Toolkit Financial Records Financial records: operating expenses equipment, feed and seed expense fertility costs wages and salaries depreciation expense loan interest and payments The Value-Added & Alternative Agriculture Start-up Toolkit

Decisions aided by financial records Where income was produced Strengths and weaknesses of the enterprise Returns on labor and management Trends in net worth Production efficiencies The Value-Added & Alternative Agriculture Start-up Toolkit

Financial Statement Basics Balance sheet: Assets = Liabilities + Owner’s Equity Income statement: Revenue - Expenses = Profit (loss) Cash flow: Sources and Uses of funds The Value-Added & Alternative Agriculture Start-up Toolkit

The Value-Added & Alternative Agriculture Start-up Toolkit Next Step Resources For a more detailed discussion of record-keeping basics, visit: http://www.utextension.utk.edu/publications/ pbfiles/pb1540.pdf http://agbiopubs.sdstate.edu/articles/ ExEx5054.pdf US Internal Revenue Service: http://www.irs.gov/businesses/index.html The IRS web site contains a special section on tips for farmers, located at: http://www.irs.gov/businesses/small/farmers/index.html The Value-Added & Alternative Agriculture Start-up Toolkit