Farm Balance Sheet

A balance sheet is a statement of records showing the financial position of a farm business at a particular point in time. The balance sheet shows what is owned in a business, what is owed, and the owner’s share or net worth of the business.

Uses of the Balance Sheet

  • Lending agencies use balance sheets to evaluate the financial position of most loan applicants.
  • Comparison of balance sheets over time will show how much the business net worth is increasing or decreasing.
  • A balance sheet also can be used by the owner of a business to support a request for borrowed funds.
  • A balance sheet gives information on how best to meet liabilities. If liabilities are due in a short time, cash will be needed to pay them. If the sale of current assets will not raise sufficient funds and the loan cannot be renewed, then a long-term loan may need to be negotiated on the basis of long-term asset values.
  • Comparison of total current assets to total noncurrent assets helps determine if too much or too little capital is tied up in permanent investments. A farm business, consisting primarily of noncurrent assets, has less flexibility than one that has sufficient current assets. Some flexibility in the business should be maintained. A balance sheet provides the information for making these comparisons

Some of the terms may be confusing but don’t worry they will be explained in the table below.

Explanation of some terms

category Items Description Examples
Assets

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Intermediated assets

 

 

 

 

Fixed assets

 

 

Cash/savings

 

Accounts receivable

(debtors)

 

Stocks and Bonds

Feed,supplies

 

Market Livestock

 

Trucks/cars

 

Materials and Equipment

 

Beef/sows/doers etc

 

Contracts/notes receivable

 

Farm land

 

 

 

Lease hold improvements

 

 

Other real estate

 

 

 

Include money owed to you from the sale of livestock/livestock feed.do not include any loan made by the farmer to anyone

 

 

All inventory items including value per unit, total value

Include livestock you plan to sell in the next 12-18 months and exclude breeding livestock.

 

Use the market value of cars/trucks you own.

 

Use market value of materials and equipment you own. Don’t include leased materials.

 

Livestock that has been held over a year/ used for breeding

 

Money owed to the farm as a loan

 

List number of hectares and the market value including buildings and fixtures for each land you own. Include your residence with the farm value, if located on the same deed.

 

List the market value of any asset owned by you and attached to real estate owned by another party that you have control over

 

Include the market value of real estate you own that has not been included in the other real estate line items.

 

cash on hand, checking/savings account bank statements as of yearend, personal and business accounts.

When the farmer sells his/her goats and the payment done at a later time.

 

 

corn silage, haylage, dry hay, grain, minerals, supplies, fuels, chemicals, seed, fertilizer, etc.

 

 

 

 

 

trucks 1,trucks 2…

 

 

Breeding livestock

 

 

 

hunting camps, recreational property, non-agricultural real estate, vacation homes, rental units,

 

 

grain bin, shed, barn, or other improvements you made on someone else’s property

Liabilities

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intermediate liabilities

 

 

Long term liabilities

 

Contingent liabilities

 

Income taxes

Taxes

 

Accounts payable

(creditors)

 

Notes Payable

 

 

 

Cash Rent

 

Loans on Life Insurance

 

 

Accrued Interest

 

 

Notes payable

 

 

Farm Mortgages

 

 

List any other taxes that are due and payable

 

List all debts owed to vendors, suppliers, creditors for items purchased or services rendered but not yet paid for

 

Current principal balance of any loans typically taken out to fund operating needs (feed, livestock inventory, supplies, etc) and are expected to be repaid within 12 months.

 

Account for any accrued rent payments that are due and not yet paid in this section.

 

Include any loans taken out against a life insurance policy

 

 

Include any interest that has accrued on a loan(s) and is due, but not yet paid

 

These are loans typically taken out to fund capital items including but not limited

 

Include loans taken out to fund real estate purchases

 

Include any loans that you co-signed or guaranteed for another party and footnote the details of this contingent liability (to whom, amount, payment, who is making the payments)

 

 

Real estate taxes, sales taxes, farm taxes etc.

 

Feed/livestock suppliers, inventory, vet services, custom hire work

 

 

 

 

 

Borehole rentals,

 

vehicles, equipment, machinery, breeding livestock, fixtures, building improvements, education loans, loans taken out to refinance other debts, personal loans to an individual or family member, capital lines of credit.

residence, farm land, agricultural buildings, commercial property, and bare land

 

Capital items are livestock for breeding, bulls, bucks,rams etc

 

Equity/net worth Owner`s equity capital

 

 

Retained Earnings

 

Net profit

The amount of funds contributed by the farmer in a partnership.

 

Prior years’ Net Profits/(Net Losses) “retained” in the business

 

Current year’s Net Profits (or Net Loss)

Livestock Inventories

  • Livestock ready for market: use market prices, except for livestock that has gone up in value, you price it using cost basis (what you incurred when raising the animal).
  • Raised breeding livestock: accumulate all costs to get the animal from birth to reproductive age.
  • Depreciation: taxes, asset value, insurance
    • Cost-all cost paid for the asset; price, taxes, delivery and installation fees
    • Useful life: number of years you expect to use the asset in your business
    • Salvage value: expected market value at the end of useful life you assigned

Calculations:

  • Total Assets = Current assets + Fixed assets + Intermediated assets
  • Total Liabilities = current liabilities + long term liabilities + Intermediate liabilities
  • Net worth = owner`s equity investment ± Retained earnings ± net Profit/loss
  • Balance sheet equation: Total assets = total liabilities + net worth

Example of a Balance Sheet:

Assets
Current Assets: P P P
Cash/savings ………………
accounts receivable ………………
Market livestock ………………
inventory ………………
stocks and Bonds ………………
              Total current assets ……………..
Intermediate Assets:
Trucks ………………
materials and equipment ………………
Breeding animals ………………
notes receivable ………………
              Total intermediate assets
Fixed Assets
Farm land ………………
leasehold improvements ………………
              total fixed assets ………….
total Assets ……………….
Liabilities
current Liabilities
taxes ………………
accounts payable ………………
Notes Payable ………………
Rent ………………
Short term loans ………………
              total current liabilities …………..
Long term Liabilities
Mortgage ……………..
long term loans ……………..
              total long term liabilities ……………
Total Liabilities …………..
Net worth
Owner`s equity investment ………………
Retained earnings ………………
Net Profit/loss ………………
Total Net Worth …………..
Total Liabilities and net worth ………………..

 

REFERENCES