How do you measure How do you measure performance?performance?

Your school workYour school work

Basketball teamBasketball team

RestaurantRestaurant

GreenhouseGreenhouse

INCOME STATEMENTSINCOME STATEMENTS

Ag Business ManagementAg Business Management

Spring 1999Spring 1999

ObjectivesObjectives

Describe the importance of income Describe the importance of income statements.statements.

Identify sources of revenue and Identify sources of revenue and expenses.expenses.

Given a list of transactions, Given a list of transactions, categorize revenues and expenses.categorize revenues and expenses.

Importance of an Income Importance of an Income StatementStatement

Did the business end the year with Did the business end the year with a profit or loss?a profit or loss?

How much was the profit/loss?How much was the profit/loss?

Uses of Income StatementUses of Income Statement

Summarize revenues & expenses

Determine profit/loss

Explain changes in owner equity

Calculate financial measures

Support loan application

Summary of Revenue & Summary of Revenue & ExpensesExpenses

Revenue = cash receipts from product sales or dividends on interest income.

• Short or long term asset sales

• Inventory adjustments

Examples of Revenues

Cash RevenuesCash Revenues• Cash salesCash sales• Government paymentsGovernment payments• Custom work receiptsCustom work receipts

Non-cash RevenuesNon-cash Revenues• Acct. ReceivableAcct. Receivable• Changes in inventoryChanges in inventory

Summary of Revenue & Summary of Revenue & ExpensesExpenses

Expenses

• operating

• interest

• non-cash expense adjustment

Examples of Expenses

Cash operating• seed• fertilizer• chemicals

Non-cash expenses• depreciation• changes in unused supp., acct. pay.,

accrued int., accrued taxes

Net IncomeNet Income

Net income = revenue - expenses

•Net income calculated annually

•Corresponds with income tax reporting dates

Cash Accounting - Income Cash Accounting - Income St.St.

Cash revenue - cash expenses = net Cash revenue - cash expenses = net cash incomecash income

Net cash income - depreciation = net Net cash income - depreciation = net income from operationsincome from operations

Net income from operation Net income from operation gain/loss gain/loss on sale of capital assets = net incomeon sale of capital assets = net income

Accrual Accounting Income Statement

Gross revenue - cash expenses - depreciation non-cash expense adjustment = net income from operation

Net income from operations gain/loss on sale of capital assets = net income