3773063
Description
Flashcards by jake.homich, updated more than 1 year ago
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Created by jake.homich
over 8 years ago
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| Question | Answer |
| Unique Characteristics of Farming | * Production depends on biology *High fixed cost *Sources of risk |
| Production systems: | Labor, management, capital |
| Net worth Equations (3) | Net Worth = Assets - Liabilities Equity= Assets - Liabilities Assets= Equity + Liabilities |
| Labor Productivity | =Output per hour; sales per dollar spent on labor |
| Factors under the farmers control | *Efficiency *Volume *Combination of Effects *Production Systems *Buying and Selling *Net Worth |
| Functions of Management | *Planning *Implementation *Control |
| Implementation | acquiring resources and materials necessary to put plan into affect |
| Challenges in US Agriculture Today | *Changing Structure * Technological change *Trade and Global issues *Risks *Environmental/ Legal concerns |
| How is structure changing in US farms | *fewer, larger farms *more specialized farms *more capital intensive *retailers, processors, and cooperatives merging *market power concerns * New technology |
| what is the response to changing structures? | *sign long-term contracts *form or join cooperatives *integrate with input providers or retailers *produce specialty crops *establish a brand name |
| How must farms be sustainable | *Economically *Environmentally *socially |
| Strategic Farm Management | Charting the overall long term course |
| Tactical Farm Management | Short-run actions that keep the business moving along that course |
| Purposes of farm management records: | *Income Taxes *credit application *cash flow and financial control *business management |
| Income tax management | *state and federal gov can require minimum set of documents *no set standards for records *"if a tax return cannot be supported penalties can be assessed" |
| what are major farm activities? | *production *investment *financing |
| What are the minimum records needed? | Cash Transactions a. Receipts - cash inflow b. Expenditures - any cash outflows |
| Financial Inventories | a. Cash accounts b. Loan Balances c. Accounts payable and receivable d. Futures markets and other securities accounts |
| Barn Door, Shoe box | 1. simple and cheap (don't need accountant) 2. If used faithfully and consistently may be sufficient. Disadvantages: 1. often lose information 2. difficult to get useful business analysis |
| Cash Journal and Check Processing | cash journal- record containing all receipts Check processing- where the bank creates a cash journal out of checks and deposit slips |
| Hybrid system of Own Design | *A combination off cash and accrual accounting system Advantages 1. flexible- can be made to fit your business 2. You understand the system Disadvantages 1. Need a working knowledge of records kept 2. Takes time away from other management activities |
| Prepared systems | * Developed by experts Advantages 1. no time or knowledge needed to build it 2. usually well thought out Disadvantages 1. manager must learn the system 2. can be inflexible |
| Supervised Systems | * system where someone outside the business is used to audit the system EX: tax consultant Advantages 1. More efficient in long term for retaining information 2. can keep all documents on file 3. can back up records Disadvantages 1. costly to start up 2. may have minimal amount of computer knowledge |
| An Accountant | Advantages: 1. increase time the farm manager can allocate to the farm 2. knowledgeable on tax law 3. can file tax return on farm 4. Records are orderly and can easily create financial statement Disadvantages 1. Manger can lose control of financial matters 2. Manger might turn over financial management to accountant 3. Can be expensive 4. can be difficult to find accountant with knowledge of ag |
| What is an Asset? | Any item of value *owned by the business |
| What is a Liability? | A debt or financial obligation that must be paid sometime in the future. |
| Account payable | An expense that has been incurred but not paid |
| Account receivable | Revenue for a product that has been sold or services rendered but for which no payment has been received |
| Accrued expenses | An expense that has been incurred but not paid |
| credit | An entry (usually on the right side of account) which denotes a decrease in assets or an increase in liability's or net worth |
| Debit | An entry which denotes an increase in assets or a decrease in liabilities or net worth (left side of account) |
| Expense | A cost or expenditure incurred in production |
| Inventory | The physical and financial value of products produced for sale that have not sold yet. |
| Net Farm Income (profit) | Revenue minus expenses |
| Owner Equity | the difference between assets and liabilities, the part of the business owned outright by the owners. |
| Prepaid expenses | a payment for a product or service in an accounting period before the one in which it will be used in a Production. |
| Revenue | the value of products and services produced by a business during an accounting period. |
| Accounting period | Period of time used to summarize revenue and expenses and estimate net income(profits) * calendar year or fiscal year ex: university July 1 fiscal year us gov. Oct 1 fiscal year |
| Single Entry | Means that only one entry is made in the books to record a receipt or expenditures. (asset and liability changes are not recorded) * transactions are assumed to be in cash |
| Double Entry | Changes in the value of assets and liabilities are recorded in addition to the changes in revenue and expenses *debits must equal credits for all transactions |
| Balance sheet | A financial report summarizing assets, liabilities and equity of a business at a point in time. |
| Income Statement | A report that summarizes the income and expenses and computes the resultiing profits of a business over a period of time |
| Transaction Journal | A record of all financial transactions, including checking and deposits, dates, payees and payers, amounts, and descriptions |
| General ledger | *contains the financial accounts for the business and balances in these accounts *income and balance sheet can be created from them |
| Deprecation schedule | annual depreciation of all depreciable assets computed and recorded as expenses for the income statement |
| Inventory report | Tracks the quality and value of crops and invested or had by recording purchases, sales, births, deaths, amounts of livestock and amount fed |
| Enterprise reports | Income statements for individual enterprises |
| Employment Records | hours worked, gross pay, deductions for income and social security tax |
| Cash-Flow Statement | summaries all services and uses of cash during the account period |
| Statement of owner equity | identifies the sources of change to owner equity |
| Value at cost | Value asset at the actual amount of money invested in the asset at purchase |
| Available net selling price | Value at the price that can likely be obtained from the asset, less the cost of marketing. * works well with crops and livestock |
| Reproduction Price | value at what it would cost to reproduce the asset at the present prices with current production methods. *works well with long lives assets such as buildings |
| Value at capitalization of earning power | the net present value of all potential future earnings *EX buy 100 acres, will receive all returns of off the land |
| Why is a dollar today worth more than a dollar tomorrow? | * it can be invested to earn interest *the dollar can be used for the consumer goods that can be enjoyed in the mean time *risk in the future |
| Current Assets | Products that are easily sold like grains and livestock should be valued at a conservative market values. |
| Depreciation | the annual loss in asset value due to use, wear, age and technical obsolescence *Applies only to long lived assets (tractor) Non-depreciable long-lived assets *Land *personal or non-business assets *inventories *leased property or machinery *assets that have no basis |
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