Bookkeeping and Farm Economics

Transcription

1 Bookkeeping and Farm Economics Chapter 1: Chapter 2; Chapter 3: Chapter 4: Chapter 5: Chapter 6: Chapter 7: Daily Recording The Consultancy Centre's basic accountancy work Making out the Balance Sheet The Managerial Accounts The Concept of Gross Margin Production and Financial Planning The Russian Tax Account Chapter 1: Daily recording The daily recording is entering all amounts as you receive or pay them It is a receipt, when you put money into the purse or deposit money on your bank account, and it is an expenditure, when you use the money Translation MÆLK, SVIN, ÆG MM KRAFTFODER, GØDNING, MM Milk, Pigs, Eggs, etc Protein, Fertilizer, etc 1

2 The Cash Book The purpose of systematically entering all receipts and expenditures is to create a basis for working out the economic result in a certain period -- it is not a goal in itself to work with the farm's bookkeeping There are two main reasons for farmers to make bookkeeping and accounts: Public authorities' demands for bookkeeping and accounts: Documentation to be used as a basis for taxation The authorities can require some certain ways of how bookkeeping should be made Farmer's own demands for bookkeeping and accounts Every independent farmer needs to have a general view of the economic state of his business It is the basis for decisions on the future management of the farm The bookkeeping is the basis for all kinds of accounts Not to hide the incomes, Danish bookkeeping law provides these rules for recording in the cash book: With ink or ball-point pen In date order and with voucher numbers Without empty spaces between entries Mistakes corrected in a way, so that they can still be read On numbered pages With frequent cash statements The cash book, accounts, vouchers, etc, must be kept for five years, according to Danish rules 2

3 How to record in the Cash Book The cash book shown is made for Danish farmers' common computer accounting system The farmer records in the cash book page and at the end of the month he sends it with enclosed vouchers to the farmers' consultancy centre (see Chapter Two) You begin recording at a new page by entering name, address, month and year Bring forward the last month's cash balance ( kroner) and last month's bank balance (debt 41,63233 kroner) 3

4 Translation Navn Adresse Kasseregnskab Indbetalinger/indtægter Dato Tekst Bilag nr Stk el kg Kasse Check/KK Konto nr Beholdning ved begyndelse tilgode I alt Skyld ved slutning Kassedifference Balance Name Address Cash Book Receipts Date Text Voucher No Quantity Cash Cheque Account Account no Balance by beginning (positive amount) Total Debt by end Cash Deficiency Balance 4

5 Translation Udbetalinger/Udgifter Beholdning ved slutning tilgode Kassedifference Balance Expenditure Balance by End (positive amount) Cash Deficiency Balance 5

6 Items An item is consisting of the following pieces of information: a Date for payment of the amount Note, that you should not mistake it for the date of invoice b Text describing the item, so that others, that continue the bookkeeping work know how to treat it From whom did you receive the money, and why? If the voucher contains of more than one sort of receipt or expenditure, you should use a new line for each sort c Number of voucher is a very useful information, which helps the bookkeeping work later d Quantity is information of number of animals purchased or sold, or kilograms of grain sold In the example it is one sow sold e The amount received or paid Concerning amounts paid by cheque, it is useful to show the cheque's number It lightens the work of controlling the bank account Translation Slagteriafregning At indsætte på konto Deres Slaughterhouse statement To be deposited on your account 6 bank

7 Translation Dato Tekst Bilag nr Kvantum (stk el kg) Beløb Date Text Voucher No Quantity Amount Amounts The amount shall be entered in the cash column, if it is a payment in cash You should use the bank column, if it is a movement on the business bank account You can make corrections by striking out, like shown in the example Which level of specification you should use in entering the items and amounts depends on the level of specification, you wish in the final accounts If you want to know the results of individual crops, you must show sales of say barley and oats separately Too, it depends on your agreement with the consultancy centre It is important to be consistent in one's bookkeeping and use one principle, when entering specifications in the cash book If you are in doubt, it can be useful to look in the pages of earlier months 7

8 Some items contain both buying and selling and are received every month or every week An example is the dairy statement in the example below It may be practically to enter only one amount, and letting the consultancy centre split the amount later This makes the control of the bank account easier Translation Mejeriafregningskopi At udbetale Dairy Statement To be paid 8

9 Current Account Externally: When payment is not following delivery of goods, it may be an advantage to use the current accounting method Using this method is making the work easier for the farmer, because he lets the consultancy centre distribute the items later Internally: When you draw money from the business bank account into cash, and vice versa, you must show the amount in two places You can see this in the example at the 9th day: The amount 207,45 kroner is shown both as a cash income and as a bank cost Note, that if you draw money from another bank account, you should only enter the amount in the column, that "receives" the amount You can see this in the example at the 5th day: The amount 1500 kroner is shown only in the bank column 9

10 Private Consumption Costs for private consumption are not tax deductible, but you should all the same enter these costs in the cash book The easiest way is at intervals to draw larger amounts for your private wallet, and then to use this money for all private costs Cash Balancing Cash Balancing is an important part of all bookkeeping By balancing cash, you ensure, that all items are correctly entered the cash book This is the principle: Cash Balancing Cash Balance at beginning Receipts minus Expenditures of the Period = calculated Cash Balance minus counted Cash Balance = Cash Deficiency 730 When you compare the calculated and the counted balances it is possible to find errors: wrong amounts, wrong additions, amounts in wrong columns, etc 10

11 Bank Account Balancing Balancing the bank account is in principle as cash balancing In this example, the farmer has a cheque account with overdraft (negative balance) and for this reason some of the calculations are altered You start with your debt to the bank, add all expenditures of the period, and subtract all receipts of the period: Bank Account Balancing Bank Account Balance at beginning (negative) plus 18 amounts drawn = minus 5 amounts deposited (not slaughterhouse payment of September) =Bank Account Balance at August (negative) 11

12 Translatio n Dato Tekst Hævet Indsat Saldo Overført Mejeri Slagteri Date Text Drawn Deposited Balance Amount carried forward Dairy Slaughterhouse 12

13 Your own cheque accounts and the bank's statement will not always coincide, because of postponement Usually, you need to make corrections like this to make them correlate: Correction to the Bank's Statement of Account Bank's Statement of account August 30 plus 7 cheques of August, entered in September (not cheque no 745 of September) = minus receipts of August, entered in September (none) ((no slaughterhouse payments of September) = Value Added Tax and Turnover Tax You can use different methods in calculating Value Added Tax and Turnover Tax (NDS and special tax) in bookkeeping With the use of computers the consultancy centre only needs to use certain account numbers or certain codes mary Here are some good rules for a correct bookkeeping: Enter items in the cash book every day you buy or sell You may do it at a certain hour every day Do choose the text with care, so that others will understand it Add voucher numbers on all vouchers, and use these numbers in the cash book Collect expenditures in few payments Enter amounts in net figures -- the consultancy centre can correct it later Do make frequent cash statements 13

14 Chapter 2: The Consultancy Centre's basic accountancy work In principle, the farmer can himself make all of the accountancy work Under most circumstances, however, he will have advantage of using the farmers' consultancy centre to the work between the balanced cash book and the finished accounts Translation Kasselister Regnskabsmateriale r Regnskabskontor Cash Book Accounts Consultancy Center 14

15 The Purposes of Farmers' Accounts There are two main reasons for farmers to make bookkeeping and accounts: Public authorities' demands for bookkeeping and accounts: Value-Added-Tax Accounts Income Tax Accounts Wage Accounts Farmer's own demands for bookkeeping and accounts: Managerial Accounts Use of the results for planning production and economy All of these tasks can be taken care of at the Consultancy Centre Basic bookkeeping When the farmer's Cash Book and the matching vouchers arrive to the Consultancy Centre, it is treated in this way to be turned into accounts: Checking and auditing: All additions and balances are controlled, and every item in the Cash Book is compared with the vouchers Needed transfers of ie interest and repayment should be made at this moment Choosing an account number for every item: In the Cash Book the items are entered chronologically It means, that repair bills, sale of grain and private costs are all mixed up, according to the day of payment In the account materials we wish to show these items in another order, with all kinds of fodder in one group, all private costs in another group, etc This is done by giving an account number to every item, and afterwards sorting all items by the account numbers 15

16 The total number of single accounts is decided according to these considerations: Many single accounts, if Farmers need detailed specification in the final accounts Few single accounts, if: Farmers are satisfied with a general overview, You wish less work controlling the bookkeeping, or There are technical limits in the bookkeeping system In the example below, you should note, how the code "1" in column "M" divides the amount 10614,63 from sale of kg wheat into two: The item in the Cash Book: Sold wheat kg kroner is divided into two items in the Item List: Sold wheat kg kroner VAT of sale kroner Translatio n Solgt hvede do moms account account 3131 account 9700 Sold wheat Sold wheat, VAT Item List In the Cash Book the single items are shown in the order they are entered When the Consultancy Centre employees have added an account number for every item, it is possible to make a sum per account The result is called an Item List The users of the accounts (the farmer, his bank, or the tax officials) can follow every single item from the Cash Book through the Item List to the final Tax Account and Managerial Account 16

17 If the farmer sends in his Cash Book and vouchers and informs the Consultancy Centre of debts and amounts due to him, then he can use the Item List and other materials to make the right decisions in managing his farm Translation Horizontally KONTO MD BILAG TYPE MOMS Account No Month Voucher No Type of item Amount of VAT 17

18 NETTOBELØB Vertically 2910 PRIVATLÅN 2921 MEJETÆRSKERLÅN 3131 HVEDE SALG 3550 RAPS 7437 VEJMATERIALER 7452 MURER 7532 REPARATION AF DRÆN Amount without VAT Private credit Combiner credit Sale of wheat Rape Materials for road Bricklayer Repair of drain 18

19 Chapter 3: Making out the Balance Sheet In the balance sheet you enter all what you own, and all what you owe The difference is called Net Capital The Balance Sheet is an important part of the accounts, because errors influence directly on the period's result The Balance Sheet in the Accounts To make regular accounts for a period is needed Balance Sheets at beginning and at end In the Balance Sheets you enter all what you own, and all, what you owe The difference is called net capital (or net debt, if negative) The Balance Sheet is an important part of any accounts: you can make accounts containing only of two Balance Sheets plus information of how much money paid to the owner Then you can calculate the profit in this way: The most simple sort of account Net Capital at end - Net Capital at beginning

20 + Private consumption of the year = Surplus of the year = In making out the Balance Sheet, you have several problems What is the value of land, buildings, livestock, fertilizer in the fields, etc? Be careful in making up the physical assets, the supposed value is directly influencing the surplus of the period Do use the identical principles at beginning and at end Examples of errors in balance at end: The livestock is kroner too low, and stocks are 5000 kroner too low The surplus from above will then be altered in this way: Example 1 With error Without error Net Capital at end Net Capital at beginning Private consumption of the year = Surplus of the year = = The surplus is lowered, because the assets are valued too low Another example: Error in both balance at beginning and balance at end Value of livestock is kroner too low, and stocks are 5000 kroner too low Example 2 With error Without error Net Capital at end Net Capital at beginning Private consumption of the year Surplus of the year = = When you make the same error at beginning and at end, the surplus will be unchanged -but the balances are still wrong Take care when you make up the values in the balances They influence the surplus directly Do use the same principles both at beginning and at end If you make up the values in an inaccurate way, it may influence the single year's result essentially Balance at end of year 1 Assets Real Estate Machines Livestock Liabilities Mortgage debt Bank debt

21 Stock Securities Car Outstanding accounts Cash Other debt Net Capital The figures in the balances at the end of one year and at beginning of the next year are identical That gives coherence between the different years Balance at beginning of year 2 Assets Real Estate Machines Livestock Stock Securities Car Outstanding accounts Cash Liabilities Mortgage debt Bank debt Other debt Net Capital

22 Chapter 4: The Managerial Accounts The managerial account is meant for the use of the farmer It helps him manage the farm You calculate the Managerial Accounts by combining the cash turnover, balance at beginning, and balance at end An Example with one Account Profit and Loss Account Debit Credit Net Capital at beginning Every entry, that is diminishing the Net Capital throughout the year Every entry, that is increasing the Net Capital throughout the year Private Consumption, etc Income <= <= Balance at beginning Assets Liabilities Net Capital at beginning Cash Book Account Receipts Expenditures (many entries) (many entries) Balance at end Assets 22 Liabilities

23 Net Capital at end => Net Capital at end This Profit and Loss Account includes all kinds of results In the following example we will divide the account An Example with Four Accounts Business Account Debit Bought Animals Repair Machines Wage Paid Energy Other Costs Credit Sold Grain Sold Milk Sold Cattle Sold pigs Increase in livestock Depreciation Business Surplus Income Account Debit Credit Paid interest Received Interest 1799 Paid Land Rent Business Surplus Surplus from Business no 0 2 Wages earned 0 Income Private Account Debit Credit Cash Private Expenditure Cash Differences 125 Cost for car 6274 Private Consumption Profit and Loss Account Debit Credit Paid Income Tax 8916 Net Capital at beginning Investment in Buildings Depreciation Buildings 5497 Private Consumption Public Money received Net Capital at end Dotation to family Gift received 8000 Income

24 By dividing the profit and loss account in four accounts as shown, you achieve a more usable approach To show how the amounts are moved, we use three sums: The of Business Surplus The of Income The of Private Consumption The Business Account The Business Account shows, what the farmer earns in his primary business The Business Account contains all business receipts and expenditures, in cash as well as non-cash Business Account Debit Bought Animals Repair Machines Wage Paid Energy Other Costs Credit Sold Grain Sold Milk Sold Cattle Sold pigs Increase in livestock Depreciation Business Surplus The Credit Column: Cash receipts like sold grain This information comes from the Cash Book Account Increase in livestock value This is calculated using the information from the balances at beginning and at end If the result is a decrease, the figure should be shown in the Debit Column Changes in business stocks are treated in the same way Livestock at end Livestock at beginning = Increase in livestock The Debit Column: Cash expenditures like cost for bought animals, from the Cash Book Account Depreciation is calculated as the difference between estimated value of assets at beginning and at end, eg using information from the balances at beginning and at end Business Surplus: This is the result of the Business Account calculations 24

25 The Income Account The Income Account calculates the farmer's total income from different businesses, paid interest, etc Income Account Debit Paid interest Paid Land Rent Income Credit Received Interest Business Surplus Surplus from Business no 2 Wages earned The Credit Column Received interest from the Cash Book The Business Surplus is moved from the Business Account Debit Column to the Income Account Credit Column Surplus from other businesses from the Cash Book, etc Wages earned The Debit Column: Paid Interest on credits, paid land rent, etc Loss on business, if any Income: This is the result of the Income Account Calculations The Private Account The Private Account calculates the private consumption Private Account Debit Credit 25

26 Cash Private Expenditure Cash Differences 125 Cost for car Private Consumption The Credit Column contains Private Consumption, which is the result of the private account calculation The Debit Column contains different private costs The Profit and Loss Account The Profit and Loss Account collects all of the formerly mentioned movements It offers a calculation of the Net Capital at end If the figure calculated this way is identical with the former, the accounts are connected correctly Profit and Loss Account Debit Paid Income Tax 8916 Investment in Buildings Credit Net Capital at beginning Depreciation Buildings

27 Private Consumption Net Capital at end Public Money received Dotation to family Gift received Income The Credit side contains all entries, that will increase Net Capital at end: Net Capital at beginning from the Balance at beginning Depreciation of Buildings is added here, if the entered values of buildings are lowered with this amount Otherwise the Profit and Loss account will not balance Money received from state, dotations, gifts from family -- all costs, that are not part of ordinary income Income from the Income Account The Debit side contains all entries, that will diminish Net Capital at end: Paid Income Tax, from Cash Book Investments in Buildings are supposed not to be added in the Net Capital at end That is why it is subtracted here Private Consumption comes from the Private Account Net Capital at end: This is the end result of the Profit and Loss Account Calculations Improving the Quality of the Accounts Reliability: When you at making up the accounts, you should do it as precisely as it is practically possible When you know precisely how the result was in each period, you have better possibilities of correcting errors and make changes in composition of the production Correct Stocks: If you buy seed in autumn for next year's harvest, this year's result will show a too bad result, and next year's result will show a too good result Such a cost ought to be corrected by entering it in the balance of end of this year Equally, harvested grain ought to be entered in the accounts of the harvest year, regardless of whether sold, used for fodder, or in stock at end of the year Only if the harvested grain somehow later is lost, you should not enter it into the accounts Continuous production: In animal production the production is mostly continuous What is the value of that part of the year's production, that is not finished yet? The production value of the half-feedened calf or pig should be shown in the accounts as well as of calves and pigs sold 27

28 Changes in price level: What if price level changes throughout the year? There will be a difference between balance at beginning and balance at end, not because you have more pigs in the stable, but only because price level went up In reality, you did not earn the money, so there is a reason for correction One way of doing this is to use an average-ofthe-year price per pig for calculations both at beginning and at end Without correction of price level Number of pigs at end Price per pig at end Value of livestock Change in livestock value With correction of price level Number of pigs at end 100 Year's average price per pig 250 Value of livestock Number of pigs at beginning Price per pig at beginning Value of livestock Number of pigs at beginning Year's average price per pig Value of livestock Change in livestock value In this example, the correct change in livestock value is 0 When price level goes up, the farmer is not earning as much as the uncorrected calculation shows! The problem in using this method is, that you must decide what is the appropriate price, and to decide the degree of details 28

29 Chapter 5: The Concept of Gross Margin You can make the Accounts show, how earnings were in the different productions Which branches were good, and which were not? The results shown in the accounts are historical You cannot correct earlier errors and make last year's result nicer, but you can learn from your errors, so that you are not repeating them (without knowing it) For the farmer as a manager, it is important to use the accounts to unveil errors and defects and to get an impression of which results, you can expect later The farmer's first task is to make a systematically evaluation of improvement in all kinds of existing production If a result is not satisfying, then how can it be improved? Often, you can improve the result considerably without larger investments If for example you find, that the pigs' fodder consumption is too large compared to their growth, you should start solving this problem This is a good reason for making notes on fodder consumption and the animals' pregnancy If you want to know the efficiency in the single productions, you must make an analysis, especially of costs The costs are divided into two main groups Variable Costs: Costs, that are directly connected with the size of production and will disappear, if you stop the production Foodstuff and fertilizers are typical examples of variable costs Fixed Costs: Other costs are partly variable or fixed costs, and will only to a certain degree depend on production and management 29

30 By distribution the Variable Costs, you can calculate how much every kind of production yielded to cover the common, fixed costs This yield is called Gross Margin In its simplest form a gross margin is a measure of gross output less variable costs and could be made up of two figures, ie: 1 hectare of potatoes Output - Variable Costs = Gross Margin A gross margin derived from such figures is rather limited for planning and budgeting You can add details like in this example: 1 hectare of potatoes Output: Sales 33 t/ha Variable Costs: seed fertilizer pesticides contract labour other costs Total variable costs = Gross Margin With the Gross Margin calculation, you would like to know: Is the level of fertilizer correct? Is the price of seed per tonne too low? Why is this farmer's cost for fungicides higher than other farmers? - then you must divide the income and costs in a more thorough way and show physical units: 1 hectare of potatoes Output 16 t/ha for processing, Rb/t 10 t/ha for stock feed, 5000 Rb/t 3 t/ha for wages, Rb/t 4 t/ha reserved for seed, Rb/t Total Output Variable Costs: seed 2,8 tonnes/ha Fertilizer 5 tonnes manure 200 kg N

31 250 kg P kg K Pesticides herbicide 2,5 I/ha x fungicide 3 I/ha desiccant 4 I/ha Contract labour, 100 hours Other costs bags l levy Total variable costs = Gross Margin The example is based on Mogens Abildgaard: Accounting for Individual Farms, TA-CIS project, Agroconsult, Moscow, 1995, Page Variable costs Fixed costs 31

32 Chapter Six: Production and Financial Planning What will happen in future? You do not know which changes in production will be the most profitable, if you do not make calculations If is important to make realistically economic calculations before you decide investments It can be a difficult task to make the calculation, but still it will give a good idea of the economic conditions Profitability: If you need to borrow money, the bank will ask to see a financial and production plan The bank wants to see, whether the investment will be profitable The increase in income must be larger than the increase in costs Liquidity: Will you have cash enough to pay the credit back? You must be able to provide money to pay interest and instalment of the credit meant for investment When your conditions change, there may be need for a production and financial plan The limiting conditions may be: Changes in production efficiency Enlarging or changing the production Lack of cash Lower prices Changes in market situation To make it possible for you to judge, both when you want to know Whether you will make profit on the existing production under changed conditions or You will make profit on a changed production 32

33 You will not run out of cash in the coming period When showing alternatives in a plan, it is most convenient to show only one change at a time, for example not in two columns: (Text Existing Higher production and higher ) production prices It will be better with three columns: (Text Existing Higher Higher production and higher ) production production prices It is most common to make a plan for one year On the other hand, it cannot tell you how income and costs will be distributed throughout the year Maybe there is a need for dividing the year in quarters or months The production and financial plan can show Profitability: The expected economical result for the coming period Liquidity: The cash flow in the period You can show the expected result based on the expected Gross Margins of the single productions: Gross Margins - Fixed Costs = Surplus Plan year Account year l Surplus Plan 2 Gross Margin Per Total Total unit 275 ha rain and rape cows calves for slaughter sows pigs for slaughter Other Total Gross Margin Fixed Costs Surplus

34 In this example, the farmer and his consultant expect a considerable improvement of the Gross Margin per sow Nearly all of the improvement in the Total Gross Margin is originating from this improvement Using the plan, you can calculate how long the farmer's money will last When you use your income to invest in new machines, buildings, larger livestock, etc, you may run out of money even if you are improving your surplus The expected cash incomes in year 2 will be kroner, which is more than the expected surplus of kroner That is because parts of the fixed costs shown are not in cash Depreciation is not a cash cost like costs for fertilizer, seed, etc Costs for buying machines and buildings are not deducted directly in the accounts in the year of the purchase They are not used up at end of the year of purchase, and the cosa of using these goods are instead distributed over the expected years of use Every year the machines and buildings are worn, and they loose value The expected cash incomes is the amount, that is at disposal to pay interest and instalment, land rent, investments, and private costs like consumption and income taxes Plan year 2 Account year l One-year Liquidity Plan Surplus + depreciation correction + incomes not from agriculture Total Cash Income Costs: Interest and land rent aid Instalment on credits Private consumption and taxes Gross investment in buildings and livestock Interest and instalment on new credit Total Costs: Total Cash Need: New credit for sow stable Difference As you see, neither in year 1 nor year 2 the new credit was sufficient for covering all of the farmer's need for cash The One-year Liquidity Plan shows, that all of the planned investment in the sow stable must be financed by credits kroner are covered by a new credit, and the farmer will hopefully find rest of the money on his bank account Short-term Liquidity Plan: Newly established farmers and farmers, that make larger changes in their production, may use a Liquidity Plan for shorter periods than one year As a basis you use cash results from corresponding periods one year earlier 34

35 35

36 Chapter 7: The Russian Tax Account Russian Taxation Rules Every farmer must report for the tax authority his quarterly sales and income for purchase tax and income tax purposes The principles are rather simple, nearly only covering cash sales and cash costs Russian farmers pay two or three kinds of taxes: 3% Sales Tax on total sales, since January 1994 There is no refund, if the farmer has more cost than sales in one quarter The Russian name is "Special tax" 20% Value Added Tax on sales minus purchases If the farmer had more cost than sales in one quarter, he will have the paid Value Added Tax refunded from the state The English abbreviation: VAT, Russian abbreviation: NDS VAT on purchased machines is legally deducted, and VAT on sold machines is compulsory There exist special favourable terms of refunding 50% of farm building costs 35% Income Tax on Taxable Farm Profit Farmers are excepted from this tax in the first five years after their establishment, or 70% Income Tax on Taxable Business Profit There is no five-year exception from this tax on non-agricultural activity The Taxable Farm Profit is defined in the following way Allowance for paid Sales Tax and Value Added Tax No taxation of change in stock or livestock Allowance for depreciation of assets according to special rules, with inflation taken into consideration The farmer is obliged to inform the tax authorities of his sales and income quarterly on a certain one-page form at the latest 19 days after the end of the quarter The matching tax 36

37 should be paid at the same time As mentioned above, the principles of the tax accounts are rather simple The period is short, only three months There is no interdependence between periods The basis for taxation includes cash sales, cash costs, and assets allowance by end According to these principles, it is rather easy to show the taxable income and to calculate the different taxes in the farmer's tax account Entrepreneurs in other sectors than agriculture pay 70 per cent income tax on business profit It is quite common, that farmers make other business beside their agricultural business The income taxation rule of other sectors is put into force, when a farmer has more than 30% of non-agricultural sales Wage earners pay approximately 12% income tax This tax is to be withheld by the employer Besides the wage cost, the employer has other costs of hired staff such as contribution to pension funds Tax of wage earners' interest income is withheld by the bank Tax of entrepreneurs' interest income is not withheld Instead, the farmer must show this income in his tax form Principles for the Tax Accounts Which figures should be shown in the Tax Account? That is a question of which information is needed to fill the Tax Form, and what is expected by the tax authorities The bookkeeping practice should follow the demands of the tax authorities The vouchers need to be controlled by Consultancy Centre staff, cash balance controlled, etc It is important, that the tax authorities believe in the Consultancy Centre's work, so it must be properly done When should an income or a cost be entered the books? When the buyer and seller agree on the amount If the amount is paid, then at the month of payment A Proposal for Plan of Accounts Tax Form 1 1A 1B 1C Accoun t Text Sales 1 (crops) Sales 2 Sales 3 Sales 4 Sales 5 Sales 6 (milk) Sales 7 (animals) Sales 8 Sales 9 Sales 10 Total Sales, Taxes Excluded non-processed agricultural sales Processed agricultural sales Work and service for other firm 37 Cas h NonCash

38 A 4A Income form realisation Interest from bank Yields from value papers Other income 1 Other income 2 Interest, yields, realization income, etc Total taxable incomes, row 1+2 Non-agricultural part Credits obtained Dotations from budget funds Assurance received Other donors, non-budget funds Credits obtained, dotations, etc Depreciation by end of use Repair 1 Repair 2 Cost of repair Production costs 1 (crops) Production costs 2 Production costs 3 Production costs 4 Production costs 5 Production costs Production costs 7 Production costs 8 Production costs 9 Production costs 10 Production costs 11 (animals) Production costs 12 Production costs 13 Production costs 14 Production costs 15 Costs for production work and service 60 Salaries 61 Payments to farm members 62 Social and medical insurance 63 Depreciation 64 Leasing paid 65 Obligatory insurance payment 66 Interest 1 67 Interest 2 68P Reserved 69P Reserved Interest paid 70 Sales commision paid 71 Specialists paid 72 Telephone etc 73 Bank costs 74 Other expenses 38

39 75P Reserved 76P Reserved 15 Other expenses 16 Total deductible costs 16А Costs for agricultural sales 16В 77 Costs for processed agr sales 16С 78 Costs for work and service for other firms 16D 79 Costs for non-agricultural sales 17 Investments and repayments Р 84Р 85Р 86Р 87Р 17А 17В 88 17С А 18В 18С 18D 19 19A Р 99 (110 ) (111 ) (112 ) (113 ) (114 ) Buildings Machines 1 Machines 2 Reserved Reserved Reserved Reserved Reserved Buildings and machines Production livestock, etc Repayments Taxable profit (row 3 minus row 16) Non-processed agricultural sales Processed agricultural sales Work and service for other firms Income from non-agricultural activity Turnover (row 3 + row 4 - row 16 - row 17) Profit of the farm members Cash by beginning Cash by end (negative) Bank by beginning Bank by end (negative) From private means To private consumption Paid VAT and special tax Reserved Regulation of non-cash figures Calculated VAT (to Cash Balance control) * Calculated Special tax (to Cash Balance control) Cash Balance control (should be zero) * Non-cash Balance control (should be zero) Calculated agricultural income tax * 39

40 Notes This material is adapted from the booklet "Regnskabsføring i landbrugsvirksomheder", published by Danish Radio 1975 It is intended to instructing in farmers' accounts in Russia The purpose is to give inspiration and understanding of Danish farmers' accounts - it is not a final precept for Russian accounts Chapter seven on the Russian Tax Account is entirely a proposal at my own expense Illustrations by J Skjødsholm, translation to Russian by Natacha Grigoriyeva Smolensk, June 1995 Ebbe Munk 40