2. Keeping Ag Records The only way to winning FFA Awards Or Advancing in Degree

3. Why are records kept? Inflow and outflow of money Determine earnings Observe financial progress Determine which enterprises are profitable Income taxes Management Decisions Future Planning FFA Degrees and Awards

4. What is a Budget? List of anticipated income and expenses for a given period of time Will the business be profitable? Summarizes where money will be needed Basis for business agreements Information for securing credit Standards for checking progress Basis for business planning

5. When should a Budget be developed? First step in planning an enterprise Decision to carry out enterprise should not be done until budget is completed Cover period of natural production (yr)

6. What is included in a budget? Expenses: –land or facilities rent –machinery –feed –seed –fertilizer –pest control Income: –sales of products –products used at home Include both cash and noncash items –increase or decrease in inventory –used at home

7. Budgeting Practices Use Current Prices If prices vary, use highest cost, lowest income Custom rates for machinery Depreciate capital items (buildings) Products used at home = income Self -labor not included Change in inventory = income or expense (which ever is appropriate)

8. Develop a budget for the following: 10 acres of land renting at $30/acre 3 acre-feet of water at $5/acre-foot seed at $5/cwt...... planted at 70#/acre Fertilizer at $2.20/acre Machinery $2.50/acre Pest control $4/acre Sale of grain at $3/bu at 25 bu/acre sale of straw at $10/acre finance charges: borrow $400 with 10% interest/yr for 6 months

9. Budget Expenses –Rent$300 –Water$ 15 –Seed$ 35 –Fertilizer$ 22 –Machinery$ 25 –Pest$ 40 –Interest$ 20 Total Expenses $457 Income –Grain$750 –Straw$100 Total Income$850 Profit$393

10. Develop a budget for the following: 10 feeder steers @300# each at$70/cwt...... facilities rent: 6 1/2 months @$10/month 20 hrs labor @ $4/hr 9 tons hay @ $60/ton 10 tons grain @ $80/ton pest control @ $2/head machinery cost @ $10/hr, 3 hrs Sale 10 hd weighing 800# @ $85/cwt....... sale 10 ton manure @ $3/ton finance charge: $2000 loan for 6 months @ 10% interest

11. Budget Expenses 10 steers $2100 rent $ 65 labor $ 80 hay $ 540 grain $ 800 pest cont. $ 20 machinery $ 30 interest $ 100 Total Cost $3735 Income steer sale$6800 manure sale$ 30 Total Income$6830 Profit$3095

12. What is a Business Agreement? Lists responsibilities of each party involved states how profits will be divided states who will perform the labor who will make managerial decisions when and how expenses will be paid provides a legal document should problems arise

13. When should a Business Agreement be developed? After the budget is done dates, names of all parties kind, size, location, duration of enterprise equipment, facilities, labor, financing what student receives what parent or other provides financing arrangements signatures

14. What is an Inventory? itemized list of all personal and real property (assets) on hand at any time assets = items owned Beginning Inventory Ending Inventory Ending Inventory becomes Beginning Inventory of next cycle

15. Value of an Inventory used to determine Net Worth may be only place where a profit appears business management decisions show change in resources needed for credit depreciation for income taxes

16. Inventory Beginning Inventory: complete after business agreement Physical count: how many? Determine value: –Current Market Value (if sold today) –Remaining Investment Value (depreciation)

17. What is depreciation? Method of expensing capital items Depreciable Assets have a useful life of more than one year decrease in value used in business machinery, equipment, purchased breeding stock, buildings Non-depreciable: don’t decrease in value (feed, market livestock, raised breeding livestock, land)

18. How do you calculate depreciation? Straight Line: –Cost divided by years of use If asset is only owned for part of a year, depreciation is taken for that part of a year –buy cow in July for $1000 –useful life of 10 years –normal depreciation = $100 / yr –half year depreciation = $50

19. How do you calculate depreciation? Remaining value = cost minus total depreciation taken Buy a cow for $1000 on Jan 1, 2002 Useful life of 10 yrs Annual depreciation = $1000 What is the remaining value on Jan 1, 2004? $1000 - ($100 x 2) = $800

20. Inventory Practices include all enterprise resources current prices for non-depreciable assets raised livestock are not depreciated use salvage value for depreciated assets that are completely depreciated develop depreciation schedule

21. Develop a Beginning Inventory 10 hd feeder steers –avg. wt = 600# @ $75/cwt.... 5 tons alfalfa hay @ $75/T 3 tons barley @ $90/T 1 1/2 tons oats @ $80/T

22. Beginning Inventory Steers$4500 Alfalfa$ 375 Barley$ 270 Oats$ 120 Total Value$5265

23. Income and Expense record of all cash and non-cash transactions begin this section when project begins record all transactions as soon as they occur date, item, cost or amount describe entries as much as needed qty and price should be directly related –qty = 75 pounds, price = $.04/LB –qty = 10 tons, price = $50/T

26. Concluding Records When should record books be closed? end of calendar year or production cycle Summarize records

27. Why should records be summarized? basis for new enterprises help to adopt approved practices basis for expansion of enterprises help in making accurate budgets help in setting up goals

28. What records are summarized? Inventory Gain or Loss Income Expenses (Income + Inventory) - Expenses Production Records –bushels/acre –cost/bushel –profit/acre

29. What is a Net Worth Statement? Lists all assets (items owned) Lists all debts (money owed to others) Assets - Debts = Net Worth True measure of financial growth

30. The End