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RELATIONSHIP BETWEEN FINANCIAL STATEMENTS

RELATIONSHIP BETWEEN FINANCIAL STATEMENTS. FINANCIAL STATEMENTS AS A SYSTEM. OVERVIEW OF FINANCIAL STATEMENTS. WHAT TO PREPARE WHO PERPARES THEM WHAT DATA IS NEEDED WHAT KIND OF ANALYSIS WHY PREPARE FINANCIAL STATEMENTS HOW THEY RELATE TO COST OF PRODUCTION.

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RELATIONSHIP BETWEEN FINANCIAL STATEMENTS

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  1. RELATIONSHIP BETWEEN FINANCIAL STATEMENTS FINANCIAL STATEMENTS AS A SYSTEM

  2. OVERVIEW OF FINANCIAL STATEMENTS • WHAT TO PREPARE • WHO PERPARES THEM • WHAT DATA IS NEEDED • WHAT KIND OF ANALYSIS • WHY PREPARE FINANCIAL STATEMENTS • HOW THEY RELATE TO COST OF PRODUCTION

  3. WHY PREPARE FINANCIAL STATEMENTS • COMMUNICATION • MEASURE PREFORMANCE • CONTROL OF EXPENDITURES AND INVESTMENTS • ESTABLISHING AND EVALUATING GOALS

  4. PLANNING AND BUDGETING • ASSESSMENT OF RISK • A BASIS TO CALCULATE PRODUCTION COSTS

  5. 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.

  6. AFRA CAN BE PREPARED FROM EXISTING ACCOUNTING SYSTEMS BEING USED FOR INCOME TAX RECORDS. • PREMITS IN-DEPTH FINANCIAL ANALYSIS OF LIQUIDITY, SOLVENCY, PROFITABILITY, REPAYMENT CAPACITY, AND FINANCIAL EFFICIENCY.

  7. ADVANTAGES FOR LENDERS • CUSTOMERS PROVIDE COMPLETE STATEMENTS. • GIVES LENDERS COMPLETE INFORMATION ON WHICH TO BASE LENDING DECISIONS. • PROVIDES INFORMATION TO ASSESS TRENDS IN FINANCIAL PREFORMANCE.

  8. SAVES TIME IN WORKING A LOAN APPLICATION. • PROVIDES BETTER DOCUMENTATION FOR THE LOAN TO PROVIDE TO MANAGEMENT AND REGULATORS.

  9. ASSUMPTIONS AND PHILOSOPHY • BASED ON FARM FINANCIAL STANDARDS TASK FORCE RECOMMENDATIONS. • CASH-BASIS CALENDER TAX YEAR IS ASSUMED. • BALANCE SHEET IS COMPLETED AS OF DECEMBER 31, AND BASED ON A COST AND MARKET VALUATION OF ASSETS.

  10. 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 TREARTED SEPARATELY. • CASH BASIS INCOME REPORTED TO IRS IS CONVERTED TO AN ACCURAL-BASIS NET INCOME.

  11. FINANCIAL STATEMENTS AS A SYSTEM • BALANCE SHEET – BEGINNING OF ACCOUNTING PERIOD • BALANCE SHEET – END OF ACCOUNTING PERIOD • INCOME STATEMENT • STATEMENT OF CASH FLOWS • STATEMENT OF OWNERS EQUITY

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