RELATIONSHIP BETWEEN FINANCIAL STATEMENTS

FINANCIAL STATEMENTS AS A SYSTEM

OVERVIEW OF FINANCIAL STATEMENTS

WHAT TO PREPARE WHO PREPARES THEM WHAT DATA IS NEEDED WHAT KIND OF ANALYSIS

WHY PREPARE FINANCIAL STATEMENTS

HOW THEY RELATE TO COST OF PRODUCTION

System of Financial Statements

Balance sheets: Beginning balanced sheet Ending balance sheet

Income statement Statement of cash flows Statement of owners equity

Balance Sheets are for specific points in time

1/1/13 1/1/14

BBS--------------------------------------------EBS

Income Statement

Statement of Cash Flows

Flow Statements

WHY PREPARE FINANCIAL STATEMENTS

COMMUNICATION

MEASURE PERFORMANCE

CONTROL OF EXPENDITURES AND INVESTMENTS

ESTABLISHING AND EVALUATING GOALS

PLANNING AND BUDGETING

ASSESSMENT OF RISK

A BASIS TO CALCULATE PRODUCTION COSTS

ADVANTAGES FOR FARMERS AND RANCHERS

UNDERSTAND THE FARM BUSINESS FROM A FINANCIAL VIEWPOINT.

WHEN USED TOGETHER WITH IRS TAX RETURNS HELPS GENERATE ORGANIZED INFORMATION FOR EFFICIENT USE IN MAKING FINANCIAL DECISIONS.

AFRA CAN BE PREPARED FROM

EXISTING ACCOUNTING SYSTEMS BEING USED FOR INCOME TAX RECORDS.

PERMITS IN-DEPTH FINANCIAL ANALYSIS OF LIQUIDITY, SOLVENCY, PROFITABILITY, REPAYMENT CAPACITY, AND FINANCIAL EFFICIENCY.

ADVANTAGES FOR LENDERS

CUSTOMERS PROVIDE COMPLETE STATEMENTS.

GIVES LENDERS COMPLETE INFORMATION ON WHICH TO BASE LENDING DECISIONS.

PROVIDES INFORMATION TO ASSESS TRENDS IN FINANCIAL PERFORMANCE.

SAVES TIME IN WORKING A LOAN

APPLICATION.

PROVIDES BETTER DOCUMENTATION FOR THE LOAN TO PROVIDE TO MANAGEMENT AND REGULATORS.

ASSUMPTIONS AND PHILOSOPHY

BASED ON FARM FINANCIAL STANDARDS TASK FORCE RECOMMENDATIONS.

CASH-BASIS CALENDAR TAX YEAR IS ASSUMED.

BALANCE SHEET IS COMPLETED AS OF DECEMBER 31, AND BASED ON A COST AND MARKET VALUATION OF ASSETS.

ONLY SIMPLE CASH RECORDS SYSTEMS

ARE REQUIRED TO PROVIDE SUFFICIENT DATA.

PERSONAL AND BUSINESS ASSETS AND LIABILITIES CAN BE CONSOLIDATED INTO A SINGLE BALANCE SHEET OR TREATED SEPARATELY.

CASH BASIS INCOME REPORTED TO IRS IS CONVERTED TO AN ACCRUAL-BASIS NET INCOME.