Investment in Growing Crops is a prepaid expense reported on the balance sheet. These are prepaid expenses to produce a crop which is not yet harvested. Each month during the growing season, these costs are accumulated on the balance sheet. When the crop is sold these costs are removed from the balance sheet and reported as cost of goods sold on the profit and loss statement. Example of costs to include in growing crop investment would be: farm labor, repairs & maintenance, seed, fertilizer, fuel, insurance, utilities and any other direct cost associated with the growing crop.
One of the biggest mistakes business and farm owners make is mixing business cash with personal cash. This is a NO NO!
You own a business and you have free access to the business funds, but those funds are not for your personal use. The business earned the revenue and paid the expenses the remaining profits are the businesses. As an employee of the business your are paid a wage for your work and should be compensated. The other money should remain in the business.
Keep two separate checking accounts. One for the company and another for your personal use. Do not mix the funds. Pay your personal expenses out of your personal account and the business expenses out of the business account.
This is the first step in getting a handle on your finances.
Build your wall!
Working Capital my hold the key to your farm's success. It is the money available to meet your current expenses.
How to calculate working capital:
Total current farm assets - Total current farm liabilities = Working Capital
The higher the number, the better able the farm will be to cover their short-term obligations.
Cash keeps the wheels turning.
Transportation cost to market - this is the cost of moving finished farm products from the farm to the market. This cost does not increase the value of the product, merely moves it to the market. Transportation cost to market is not included in the production cost, but is a variable operating expense.
This is a short 5 step, how to register a business in Idaho:
"Farming is a business. Ills of many industrial and commercial businesses in our large cities are corrected by the inauguration of better financial, accounting and marketing policies...Many of the ills of the farming business likewise can be cured by good management from within rather than legislation from without the farm boundaries. Accounting is one of the best tools of the successful manager anywhere. If the farmer can keep accounts even on a simple basis and learn to use them properly he will be in a better position to detect his weaknesses in producing and marketing the products of the farm." -Hiram T. Scovill, (The Accounting Review, 1926)
Barbara M. Wheeling opens her book, Introduction to Agricultural Accounting, with this quote from Hiram T. Scovill written in 1926.
The spreading of costs over time, location, department or expense accounts. For example, an electricity bill of a $1,000 may be spread or allocated over several locations on the farm. The goal is to match the expense with the products being produced.
The cost to use a piece of equipment during a season, which reflects the decline in value of the equipment. As equipment is used to produce income the value of the equipment is reduced because of wear and tear. Over time the equipment will "wear out" completely and be of no value. The idea is to record those usage costs to match the productive period of the equipment.
For example, you purchase a new tractor for $100,000 and estimate the tractor will be used for 5 years before it is worn out. The depreciation expense of that tractor for one year is $100,000 divided by 5 which equals $20,000 per year.
IRS Virtual Currency Guidance: Virtual Currency Is Treated as Property for U.S. Federal Tax Purposes; General Rules for Property Transactions Apply
IR-2014-36, March. 25, 2014
WASHINGTON — The Internal Revenue Service today issued a notice providing answers to frequently asked questions (FAQs) on virtual currency, such as bitcoin. These FAQs provide basic information on the U.S. federal tax implications of transactions in, or transactions that use, virtual currency.
In some environments, virtual currency operates like “real” currency -- i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance -- but it does not have legal tender status in any jurisdiction.
The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that:
Bookkeeping seems to be a never ending task. There is always another invoice to generate, bill to pay and receipt to track. On one hand this is a good thing because it means your are still in business. On the other hand it means far more office work for you. You may dread this back office work but let us consider the Why, What, When and How of bookkeeping. With a little patience and thought you can make your bookkeeping task much less daunting.
What is bookkeeping?
When to do bookkeeping?
How to keep up the books?