Understanding Net Worth, Cash Flow, Income Statements and Computerized Record Keeping

Next Generation Science / Common Core Standards Addressed!

CCSS. Math .Content. HSSID.A.2 Use statistics appropriate to the shape of the data distribution to compare center (median, mean) and spread (interquartile range, standard deviation) of two or more different data sets.

CCSS. ELA Literacy. WHST.11‐12.9 Draw evidence from informational texts to support analysis, reflection, and research

Student Learning Objectives Develop a net worth statement for an

agricultural business. Develop an income statement for an

agricultural business. Develop a cash flow statement for an

agricultural business. Understand computerized record keeping. Understand the AET Tracker Record

keeping system.

Terms Accrual accounting Assets Cash accounting Cash flow

statement Current assets Current liabilities Expenditures

Income statement Liabilities Net income Net worth

statement Non-current assets Non-current

liabilities Revenue

Interest Approach

Have students total the value of items currently in their possession.

Ask them what happens to their financial position if you owe them $20.

Are they now worth more or less? Net worth looks at situations like this.

Net Worth Statement

Shows the financial health of a business at a given point in time.

Assets

Items that are owned by the business and have value.

Assets Current assets - items owned that

will be used or turned to cash within one year.

Non-current assets - items whose useful life is greater than one year.

Examples of Current Assets Cash Checking

Account Savings Account Feeder Animals Feed Crops growing in

the field

Supplies Prepaid

Expenses Accounts

Receivable Crops in storage

Non Current Assets Equipment Buildings Land Breeding Livestock Improvements Vehicles

Liabilities

Debt obligations. Something owed to someone else.

Liabilities Current liabilities — debts due

within one year

Non-current liabilities — debts due after one year

Current Liabilities

Accounts payable Loans due within one year Accrued Interest Current portion of long term debt

Non-Current Liabilities

Long Term Debt (not due within one year)

Mortgage (house or land loan)

Components of a Net Worth Statement

Total assets = current assets + non-current assets.

Total liabilities = current liabilities + non- current liabilities.

Net worth or equity = total assets – total liabilities.

Assets Liabilities

Current Assets Current Liabilities

Non Current Assets Non Current Liabilities

Total Assets Total Liabilities

Net Worth

Income Statements Income statement

— a financial instrument that shows the profits or losses of a business over a period of time.

Cash vs. Accrual Accounting

Cash accounting — income and expenditures are recorded when they are received or paid.

Cash vs. Accrual Accounting Accrual accounting — income and

expenditures are recorded when the service or product is delivered or received.

Accrual accounting also shows changes in assets and liabilities (inventories).

Income Statement Components

Revenue - cash receipts from services performed, products sold, etc.

Expenditures - cash paid for services, inputs purchased, etc.

Net income = revenue - expenditures

Uses of Computerized Records

Monitor feed rations. Plan changes in enterprises and whole

business. Record tax and accounting

information. Help in marketing of products through

price analysis and market trends.

Uses of Computerized Records

Schedule workloads for employees.

Provide financial statements. Track inventories.

The End!