1. The Ostrich Farm
Financial Accounting

2. Basic Information
commercial ostrich industry began about 150 years ago in South Africa
especially good for their meat
eggs are edible but they are mainly used for breeding and art purposes
one pair of mature ostrich is worth about 8 ostrich eggs
one adult ostrich yields around 100 kg of meat
100 kg meat is worth about 9 eggs
One adult ostrich consumes about 35 kg of feed per day
Financial Accounting

3. Beginning-1
father divided his ostrich farm of 30 squared kilometers that is worth ninety ostrich eggs between his two daughters
total of thirty ostriches
the daughters did not own the land or the ostriches but were responsible from running the operations
older daughter received a land of 20 squared kilometers with 20 ostriches, and the younger the remaining land with its ostriches
Financial Accounting

4. Beginning-2
In each piece of land there is one egg incubator that is expected to last eight years with good use, and a portable shelter for the animals which can usually be used for two years.
Each egg incubator is worth two pairs of ostriches and the shelter about two eggs.
The father also gave each daughter bird feed that would be enough for the first half of the year kg of feed is worth one egg.
Financial Accounting

5. Decision Which daughter is doing better? Criteria?
Financial Accounting

6. What do we need to answer?
“performance”
ownership
common denominator or measurement unit
Financial Accounting

7. Solution Common denominator – eggs or birds? Father or daughters?
Wealth increase? How to measure?
Financial Accounting

8. Measurement Unit -Eggs
Financial Accounting

9. Older Sister
Capital –whose?
Financial Accounting

10. During the year- Older
slaughtered 9 ostriches at midyear (assume one year is 360 days) and exchanged the meat for another portable shelter and bird feed
The hens laid a total of 300 eggs of which 2 were broken
She gave 45 eggs to her helpers and 3 eggs to the veterinarian
the egg incubator broke down and she promised to give the fixer 2 eggs during the next season
Her father took 25 eggs
Financial Accounting

11. End of the year- Older
At the end of the year, she received 25 pairs of ostriches of a different breed in exchange for 9 eggs a pair. These ostriches are expected to be ready for processing when they are 18 months old, at almost half the age of the other breed.
Financial Accounting

12. During the year: Older
*126 eggs plus 69.3 eggs
Financial Accounting

13. Financial Accounting

14. During the year – Older –2
Financial Accounting

15. End of the year Older
Financial Accounting

16. Younger sister
Capital –whose?
Financial Accounting

17. During the year- Younger
hatched 10 eggs and exchanged the chicks for 20,000 kg of feed and one small used incubator that is worth 5 eggs and that could be used for 5 more years at the beginning of the year
slaughtered 1ostrich mid-year and exchanged for bird feed
hens laid 277 eggs during the year. She used 45 eggs to purchase more bird feed, gave 25 eggs to the helpers, 2 eggs to the veterinarian, and 50 eggs to her father
Her portable shelter became unusable due to a very active animal. She got a new shelter, and gave one egg and promised to give one more egg next season
Her portable shelter became unusable due to a very active animal. She got a new shelter, and gave one egg and promised to give one more egg next season.
Financial Accounting

18. End of the year-Younger
At the end of the year, she exchanged her remaining eggs for 18 pairs of ostriches of the same breed as hers
Financial Accounting

19. During the year: Younger
*63 eggs eggs
Financial Accounting

20. Financial Accounting

21. During the year: Younger-2
Financial Accounting

22. End of the year- Younger
Financial Accounting

23. Comparison- Beginning of the year:
total egs Older Younger
ostrich
land
incubator
feed
shelter
Financial Accounting

24. Comparison – End of the year
total eggs older younger
ostrich
feed
land
Incubator
Shelter
Owes: 2 eggs egg
Financial Accounting

25. Which one is doing better?
What about the eggs given to the father?
Which daughter is using the resources more efficiently?
Who has increased the wealth more?
Financial Accounting

26. Wealth Older Beginning 284 eggs End 356.7 eggs (owe 2 eggs)
Younger Beginning 151 eggs End eggs (owe 1 egg)
How much is the net worth or capital or owners’ equity?
Financial Accounting

27. Increase in wealth
Difference between the beginning and the ending capital
Older: 72.7
Younger 98.3
Now let’s see what caused the capital increase….
Financial Accounting

28. Older –Annual Performance
meat produced
eggs
total revenue eggs
cost
ostrich x
feed
Cost
gross margin
help 45
vet 3
broke 2
fix 2
total expenses
income
gave to father
Increase eggs
Financial Accounting

29. Younger-Annual Performance
shelter eggs
hatched eggs
meat
eggs
total revenue 311
ostrich
feed
hatched eggs
Cost
gross margin
help 25
vet 2
shelter unusable 2
total expenses
income
gave to father 50
Increase
Financial Accounting

30. Moral of the Story We need a common measurement – money
Period is important – a year from now older might be better
Entity is different than the owner
Each financial statement answer a different question
Balance sheet: how resources are allocated
Income Statement : how efficiently the resources are used.
Financial Accounting