1. Unit 4: Agribusiness Management Lesson: AM2
Agribusiness Records
Unit 4: Agribusiness Management
Lesson: AM2

2. Objectives Lesson Objective:
After completing the lesson on agribusiness records, students will demonstrate their ability to apply the concept in real-world situations by obtaining a minimum score of 80% on an Agribusiness Records News Report.
Enabling Objectives:
Identify the use of agribusiness records, describe the three types of accounting systems, define three special journals used in agribusiness, and illustrate the double entry accounting system.
Complete an income statement by identifying revenue, cash expense, and noncash expense; and calculating gross revenue, net income from operations, and net income.
Complete a balance sheet by identifying assets and liabilities; calculating total assets, total liabilities, and net worth; and calculating solvency and liquidity.
Complete a cash flow statement by identifying income and expenses and calculating net total and complete a cash flow statement by identifying operating, financial, and investing activities; and calculating net totals.

3. Key Terms Inventory Accounts receivable Accounts payable Credit Debit
Income statement
Balance sheet
Assets
Current assets
Fixed assets
Noncurrent assets
Liabilities
Current liabilities
Noncurrent liabilities
Long-term liabilities
Net worth
Cash flow statement
Statement of cash flow

4. What Can I Learn? Why is this document important to a business?
What can we learn from this document?
What is this document lacking?
What else would you like to know?

5. Agribusiness Records Monitor progress of the business
Project tax liabilities
Are needed to prepare Financial Statements
Identify sources of receipts/revenue
Keep track of deductible expenses
Assist with tax preparation
Support business deductions reported on tax returns

6. Management Accounting
Accounting Systems
Financial Accounting
Used to determine the results of a business on a periodic basis
Provides information about a business to external parties
Treats money as a factor of production
Cost Accounting
Seeks to determine the value of direct and indirect costs involved with production
Management can make informed decisions regarding improving production performance
Cost is the measure of economic performance
Assists in setting prices
Management Accounting
Used to assist and advise management in making important business decisions
Makes management aware of economic implications and consequences of decisions
Measures economic factors of production

7. Special Journals for Agribusinesses
Inventory
Detailed record of inventory received, inventory shipped, and inventory on hand
Includes date, beginning inventory and type, amounts received, amounts shipped, and ending inventory
Accounts Receivable
Journal from all accounts of goods and/or services provided
Includes dates of service, name, amounts, date due, and aging
Accounts Payable
Journal for goods and/or services received but not paid for
Includes dates, to whom, amounts, date due, and aging
Contracts and Market Positions
Reflects contract obligations for deliveries of products or goods at future dates
May include grain contracts, feed, fertilizer, or commodity positions like a hedge, options, or other market positions
Details include to whom, number of contracts, dates of delivery or option months, and other contract obligation details

8. Credit vs. Debit Asset Accounts Liability Accounts Revenue Accounts
Increases in assets recorded as debits on left side of ledger
Decreases in assets are credits and recorded on right side of ledger
Liability Accounts
Increases in liability accounts are credits and recorded on right side of account
Decreases in liability are debits and recorded on left side of account
Revenue Accounts
Increases in income or revenue are recorded as credits on the left side of ledger
Decreases in income or revenue are recorded as debits on the right side of ledger
Expense Accounts
Increases in expenses are debits recorded on right side of ledger
Decreases in expenses are credits recorded on left side of ledger

9. Double Entry Accounting
Standard method of accounting that involves recording transactions in at least two accounts
A debit to one or more accounts
A credit to one or more accounts
Provides a method of checking accuracy because the sum of all debit accounts should equal the sum of all credit accounts

10. INCOME STATEMENT
BALANCE SHEET
CASH FLOW

11. Generally reported on a calendared or fiscal year reporting period
Income Statement
Profit and loss statement, operating statement, income and expense statement
Key to measuring success of a business over a certain period of time in terms of net income and profit
Generally reported on a calendared or fiscal year reporting period
Used in capacity analysis

12. Income Statement Components
Sales of Gross Revenues
Cost of Sales
Direct costs associated with production of goods and services company sells
Beginning Inventory
Cost of good (direct purchases, direct labor, overhead costs) – Ending inventory

13. Income Statement Components cont.
Selling, general, and administration expenses
Operating Income
Other Income (expense)
Income and dividend income
Miscellaneous income
Gain (loss) on disposal of property and equipment
Gain (loss) on disposal of investments and business units
Interest expense
Provision for income taxes (not actual taxes paid)
Income interest in earnings (losses) of subsidiaries
Net income

14. Preparing an Income Statement

15. Statement of the nature and type of resources available to a business
Balance Sheet
Financial statement showing assets, liabilities, and net worth as of a specific date
Statement of the nature and type of resources available to a business
Shows what a business owes its creditors
Reveals the net worth of the business

16. Balance Sheet Components
Assets
All resources and properties owned by a business
Tangible assets can be touched such as supplies, machinery, buildings
Intangible assets have no physical presence, but do have value such as a franchise to operate a business under a certain name
Current Assets
Can or will be used or sold within one year
Savings and checking accounts, accounts receivable, short-term bonds, supplies to be used within a year, equipment that will be used within a year and then sold or disposed of, inventory that will be sold and converted to cash within a year
Noncurrent Assets
Also known as fixed assets
Will not be used or sold and converted into cash within one year
Certificates of deposits and bonds that take over a year to mature, supplies that will not be used within one year, inventory that will not be sold and converted into cash within one year, vehicles, equipment, buildings, land, and breeding livestock that will not be sold within a year

17. Balance Sheet Components cont.
Liabilities
All debts owed by a business
Money, goods, or services that a business owes to a creditor
Current Liabilities
Payable within one year
Interest and principal payments due within one year on loans, interest and principal payments on charge accounts, accounts payable, payments on insurance
Noncurrent Liabilities
Also known as long-term liabilities
Not payable within one year
Interest and principal payments for loans not due within one year

18. Balance Sheet Components cont.
Partially current and partially noncurrent
A business takes out a loan to renovate a building and repay the loan over six years
Loan is for $25,000 with $5,000 in interest and principal due in one year
Business’s current liability with remaining $20,000 being a noncurrent liability
Net Worth
Owner’s equity
Net ownership a sole proprietor, partnership, corporation, or cooperative has in a business
Net worth = Assets – Liabilities

20. The way money flows into and out of a business
Cash Flow Statement
The way money flows into and out of a business
Shows liquidity of business
Helps business establish and maintain line of credit
Helps determine when cash will be available for such things as purchasing capital assets and expanding the business

22. Statement of Cash Flows
Same information needed as for cash flow statement
Illustrates changes in cash or cash equivalents for a period
Summarizes information from cash flow statement, showing in what areas cash inflows and outflows occur
Determines where cash was generated and how it was used by business

24. Conclusion
An income statement is a summary of a business’s income and expenses for a specific period of time. It allows a business to figure net income or net loss by finding total revenues, subtracting total cash and noncash expenses, and then adding or subtracting capital gains or losses.
A balance sheet is a summary of assets, liabilities, and net worth of a business at a specific point in time. It is useful in making business decisions since it indicates the business’s current financial position. A balance sheet can also be used to measure the solvency and liquidity of a business.
Cash flow is the way money flows into and out of a business. A cash flow statement summarizes the projected payments by and receipts for a business. Information from the cash flow statement is transferred to the statement of cash flows and summarized by activity to show exactly where cash inflows and outflows occur. Cash flow statements can be used to help a business determine its liquidity, gain and maintain a line of credit, and evaluate past financial practices to inform current decisions.

25. Exit Card What did you learn today about agribusiness records?
What questions do you still have about agribusiness records?