Sign Alabama Profit Sharing Agreement Template Simple

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- [Instructor] Welcome to this Farm Accounting 101 presentation on sample accounting entry number 9, recording contract poultry sales bank deposit. I'm Robert Page, Regional Extension Agent and member of the Farm & Agribusiness Management Team with the Alabama Cooperative Extension System at Auburn University. As we have said in earlier presentations, the Farm Accounting 101 series is intended to help Alabama producers to improve their farm financial literacy. Farmers, like any other small business, have the same basic financial transactions every year. So we study typical checks and deposits. We also learn the accounting principles behind these checks and deposits. In today's sample entry, a poultry farm is depositing their check from their poultry company for chicken flock sales into their farm checking account. Let's review Sample Accounting Entry number 9, depositing a contract poultry sales check into farm accounting. This is a very typical check for thousands of Alabama contract poultry growers. The poultry farmer has a contract with a poultry company to raise chickens on their behalf as an independent contractor. Typically, each time a chicken flock is picked up by the poultry company from their farmer, the farmer will receive either a check or an electronic funds transfer for their contract poultry sales. This deposit is different than a typical farm deposit because the poultry company usually transfers part of the flock sales proceeds to the farmer or producer's ag lenders as a payment on the farmer's poultry loan for buildings and equipment. The rest of the sale proceeds goes directly to the farmer. Therefore, the farmer does not get the entire flock sales proceeds for deposit, but rather must record the total sales amount for correct financial records. In this example, total flock sales were $34,884.65. However, the farmer producer receives an EFT deposit of only $17,442. How do you account for the difference in these two amounts? We'll review that shortly, but now let's change over to the Excel view. Here we are in our Excel spreadsheet for this transaction. The date of the transaction is October 17, 2019, and we've recorded it in a memo as Contract poultry sales deposit for the flock. The bank deposit was $17,442. Now, to account for this, we come over to column L, Line 7, in the Schedule F under Custom hire for the gross sales amount of this flock, which was $34,885.65. The balance goes to Other Cash Adjustments in order to get this line item in balance. So that is an income item. It's recorded in Sheet one. In sheet three, we can go to the profit and loss summary, and see that this $34,000 is indeed included in the profit and loss summary for this Excel spreadsheet. Now let's switch back to our PowerPoint presentation. If you have not used this Excel spreadsheet before, it is available for download. To find the spreadsheet, visit the ACES website at www.aces.edu and select the Topic tab entitled Farming and then Farm Management to find the article entitled Using an Excel Spreadsheet for Farm Financial Records. There is a link to this spreadsheet embedded in the article. Now let's take a look at the compound accounting entry for this contract poultry sales deposit. And this is a complicated entry, so you should be aware that this one does require some calculations. Line one, Cash - Farm checking, is a current asset and does increase by the bank deposit amount of $17,442.00, and that is a debit. Line two is Contract Poultry Sales which is an income account, and that is credited for $34,084.65. Then we have the next two line items that account for the difference. The first line item is the Poultry Loan, which is a long-term liability of the farm to the ag lender. In this example, we are using principal payment to make a principal note payment of $11,337.84. Additionally, we have interest on this poultry loan, which is an expense account for $6,104.81. You should be aware that payments or reductions on long-term liabilities are recorded as debit entries, and the expense is also recorded as a debit entry. The big question is how would the farmer know how much of this payment is interest and how much is principal? The answer depends on the type of poultry loan, and whether or not the farmer has a loan amortization document from the bank with a breakdown of the two amounts for each payment. Some farmers may have a fixed number of poultry loan payments per year that are due at a fixed time. In those instances, principal and interest amounts can be exact or closely estimated. In other poultry loans, the interest portion of the payment may be unknown because the payments to the ag lender are calculated by the poultry company as a set percentage of the poultry payment, such as a 60-40 farm-ag lender split. For those type of loans, the farmer can either post an estimated interest payment for each flock, or wait until the end of the year and post the total interest expense for the year from the ag lender, using Form 1099-INT, and then post the offsetting entry to the loan principal amount. For many farmers, recording principal versus interest portions of poultry loan payments may be delegated to their accountant or tax preparer at the end of the year. Like all accounting entries, debit and credit entries must be in balance. In this example, total debits and credits for this poultry deposit are $34,884.65. We close by saying, thank you for watching today's Farm Accounting 101 presentation on Sample Accounting Entry number 9, recording a contract poultry sale bank deposit. This segment of the Farm Accounting 101 series has been produced by the Alabama Cooperative Extension System Farm & Agribusiness Management Team at Auburn University in Auburn, Alabama. For additional information on the Farm & Agribusiness Management Team and other ACES programs, please visit our website at www.aces.edu.