4.0 Conclusion Farmers have to continually make management decisions, as we have so far identified. These management decisions determine the outcome of a farm operation in relation to investment undertaken, financing of the operation, protection, or custodial and consumption behaviour of the farm household. Thus, to make good decisions, farmers must have relevant information 5.0 Summary In this unit you have learnt that: • Keeping records are essential to the efficient management of a farm business • Accurate records and resulting analyses help farmers make financial and production decisions • Traditional hand record- keeping systems continue to work well for many farmers 28
• Computerized record keeping and analysis program have been accepted and used by a number of farmers also • Developing and using a farm record keeping system will allow the farm manager to make more informed decisions affecting the profitability of the farm 6.0 Tutor - Marked Assignment 1. Differentiate between record keeping and record analysis 2. Compare and contrast hand system and computerized system of record keeping. 7.0 References and Other Sources. Gerloff, D.C and R.W. Holland (2006) Establishing and using a farm financial record- keeping system. The University of Tennessee Agricultural Extension Source UT PB 1540 Jose, P (1994): Financial Record keeping Software Review Texas Agricultural Extension Service Bulletin B-5089, Texas A&M University system, May 1994. 29
Unit 4: Analyzing farm Records 12.0 Introduction 13.0 Objectives 14.0 The Body of the Unit 3.1 Analyzing Farm Records 3.2 Financial statements and list of Required Records 4.0 Conclusion 5.0 Summary 6.0 Tutor Marked Assignment 7.0 References and other sources 30
1.0 Introduction Once a farm record keeping system has been established analyzing the records can begin. Decision making can be greatly enhanced by analyzing both production and financial records and their impact on profitability. In this unit you will learn about a number of financial analysis tools that can be used when accurate and complete farm records are available. 2.0 Objectives It is expected that, at the end of this unit, you should be able to : • Discuss the various methods of analyzing farm records. 3.0 The body of the unit 3.1 Analyzing Farm Records A number of financial analysis tools can be used when accurate and complete farm records are available. These tools include the balance sheet, income statement and projected monthly cash flow statement (including family living expenses). These three financial statements provide information for making short and long term financial decisions. 3.1.1 The Balance Sheet Also known as the financial statement or statement of networth. The balance sheet provides an overall financial snapshot of the farm business on a specific date. It lists all of the assets (property) and liabilities (loans) of the business as of the balance sheet date. Income and expense records are not needed for the balance sheet. A value for each asset and the outstanding balance for each liability is given in the balance sheet.
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