| tc806, first question I would have is: do you do your own taxes, or do you have a professional do them? (NO, you don't need to answer. It is a rhetorical question.) second, do you/ does your accountant use the acrual method of accounting, or a cash-basis when doing your taxes? (Again, it's a rhetorical question.) If you are using the accrual method, you can ignore the rest of what I say next, because I don't know if it applies or not. In my opinion, you need (2) sets of financial records: (1) set is for your tax needs; and the other set is for your business decisions. In the 1st set - for your tax needs - you would be working on a cash basis. You figure your costs strictly on what you spent out of pocket. Your expenses would be seed, fertilizer, herbicides, any land rent, machinery parts, etc, etc, etc. If you paid for it, it is an expense. And your income would be anything you sold. I hope you get the picture from here. It should be simple to understand. Your 2nd set of records would be to break things out by enterprise, as I suggested above. This is not for tax information. This is for business decision-making. To know whether you are making money on any or all parts of your farm enterprise(s). In this set of records, you would "sell" your corn from your grain enterprise to the cattle enterprise. It would show up as income on the grain side, and show up as an expense on the cattle side. It evens out. It is possible that it costs you $4.50/bushel to raise your corn, and you could sell it for $7.50/bu. But you feed it to your cattle, and you only get $6.50/bu in value from feeding it thru the cattle. So, sure your farm made money - you made $2.00/bu by feeding it, and your taxes would show a profit based on that $2.00/bu But if you didn't have the cattle, you could have sold it for $3.00/bu. Now, which would you rather do - work your butt off all winter long feeding cattle for $2.00/bu corn? or sit on your butt in front of the warm fireplace all winter long, and live on your $3.00/bu corn??? |
If you raise
