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RELATIONSHIP BETWEEN FINANCIAL STATEMENTS

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relationship between financial statements financial statements as a system overview of financial statements what to prepare who prepares them what data is needed what ... – PowerPoint PPT presentation

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Title: RELATIONSHIP BETWEEN FINANCIAL STATEMENTS


1
RELATIONSHIP BETWEEN FINANCIAL STATEMENTS
  • FINANCIAL STATEMENTS AS A SYSTEM

2
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

3
System of Financial Statements
  • Balance sheets
  • Beginning balanced sheet
  • Ending balance sheet
  • Income statement
  • Statement of cash flows
  • Statement of owners equity

4
Balance Sheets are for specific points in time
  • 1/1/12 1/1/13
  • BBS--------------------------------------------EBS
  • Income Statement
  • Statement of Cash Flows

Flow Statements
5
WHY PREPARE FINANCIAL STATEMENTS
  • COMMUNICATION
  • MEASURE PERFORMANCE
  • CONTROL OF EXPENDITURES AND INVESTMENTS
  • ESTABLISHING AND EVALUATING GOALS

6
  • PLANNING AND BUDGETING
  • ASSESSMENT OF RISK
  • A BASIS TO CALCULATE PRODUCTION COSTS

7
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.

8
  • 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.

9
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.

10
  • SAVES TIME IN WORKING A LOAN APPLICATION.
  • PROVIDES BETTER DOCUMENTATION FOR THE LOAN TO
    PROVIDE TO MANAGEMENT AND REGULATORS.

11
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.

12
  • 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.

13
(No Transcript)
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