Financial Statements

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Financial Statements
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INVENTORY
an itemized list of things owned by a business
with the beginning value
and depreciated value
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Inventory

• a. non-depreciable items that will be used up
  or sold within a year example
  
• feed, supplies, etc.

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Inventory

• b. depreciable items that have a useful life of
  more than one year and lose value
  
• because of age, wear or becoming out-of-date
  because of technology advancements.
  

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• Land is NOT depreciable property.

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What is an Asset?
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Asset

• Something tangible of value that a person owns

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Asset

• 1. Current Asset- items quickly converted into
  cash or that will be sold within 12 months
  
• Examples cash, checking, savings, stocks, etc

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Asset

• 2. Non-current- items that have a useful life of
  more than one year
  
• Examples land, machinery, breeding livestock,
  stud dog, etc

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Liabilities

• Money owed by the business or individual
• DEBTS
• Ex. Car payment, seed
  order, soil shipment
  

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Liability- debts

• 1. Current- debts that are due to be paid this
  year
  
• Examples fertilizer and feed bills, tractor and
  building payments, and part of mortgage due this
  year

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Liability- debts

• 2. Non-current Liability- debts not due this
  year
  
• Example mortgages not including this years
  payment

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Net worth
Total assets - Total liabilities Net Worth
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Where do they belong?
Current Asset? Non-current Assets?
Current Liability? Non-current Liability

• Angus steer
• Lawn mower
• Credit card bill
• Car payment
• 2 acres of land
• Angus bull
• 6-month CD
• Home mortgage
• Power bill

• Cell Phone Bill
• Purchasing a car 0 down no payments til next
  year.
  
• Fertilizer bought for your home lawn
• Checking account
• 2004 Ford Mustang
• Weed eater
• Inheritance from your rich uncle

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Determine Net Worth

• Checking account (1,750)
• Jet Ski (850)
• Cattle Feed (350)
• Hay (1,200)
• Lawn Mower (560)
• Credit card (3,200)

• Used Dodge Dakota Pickup (12,500)
• Home Mortgage (750)
• Fertilizer for lawn (30)
• Beef Cattle Herd, (15 cattle _at_200 each)

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Depreciation

• If you buy agricultural property such as
  machinery, computers, breeding livestock,
  equipment, etc that has a useful life of more
  than one year, you spread the cost of it over
  several years for record keeping and tax
  purposes. This is called depreciation. Property
  is depreciable if it meets these tests

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Depreciation

• 1. It must be used in business or held for the
  production of income.
  
• 2. It must have a determinable useful life longer
  than one year
  
• 3. It must be something that wears out, decays,
  gets used up, becomes obsolete or loses value
  from natural causes.
  

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Depreciation

• The most common method of depreciation is
  straight line depreciation.
  
• Selling your car..

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Debt to Equity

• How much Debt compared to owned items you have!
• Ratio
• Total liabilities divided by net worth
• Liabilities/ net worth