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Lecture Notes on Agri-Business Management | AGSC 3020, Study notes of Agricultural economics

section 1 notes Material Type: Notes; Professor: Gasser; Class: Agribusiness Management; Subject: Agricultural Science; University: Southern Utah University; Term: Spring Semester 2011;

Typology: Study notes

2010/2011

Uploaded on 02/20/2011

jkingster88
jkingster88 🇺🇸

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Agra business mgnt
Structure of farms and ranches
Number of operations decreasing
Total land use relatively constant
Average production per farm is
increasing
Why are operations larger?
Economies of scale
Expensive new technology
and training time
Expensive labor due to non-farm
employment opportunities
Labor-saving technology
increases production potential
per person
Desire for greater income and
standards
Alternative to expanding
Strategic alliances and
partnerships
High volume low margin producers
Expand production of familiar
products
Generic commodities
Thin profit margin
Low volume, high value producers
Alternative products
Promotion and marketing are
critical
Speciality product and service
providers
Specialize in specific skills
Maximize use of technology
Marketing of services and
interaction with customers are
important
Part-time operators
“lifestyle” operations
Supplement to non-farm income
pf3
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Agra business mgnt  Structure of farms and ranches  Number of operations decreasing  Total land use relatively constant  Average production per farm is increasing  Why are operations larger?  Economies of scale  Expensive new technology and training time  Expensive labor due to non-farm employment opportunities  Labor-saving technology increases production potential per person  Desire for greater income and standards  Alternative to expanding  Strategic alliances and partnerships  High volume low margin producers  Expand production of familiar products  Generic commodities  Thin profit margin  Low volume, high value producers  Alternative products  Promotion and marketing are critical  Speciality product and service providers  Specialize in specific skills  Maximize use of technology  Marketing of services and interaction with customers are important  Part-time operators  “lifestyle” operations  Supplement to non-farm income

 New technology  Precision equipment  Herbicide resistant crops  Information  Better collection tools  Easier  Controlling assets  Human resources  Dealing with people  Communication  Consumer demands  Integration and coordination  Environmental health  Globalization  1/19/Management VS Labor  Management  making decisions  Strategic  Overall long-term strategy  Strategic mgnt

  1. Define mission  Why does the business exist?
  2. Formulate goals  Written  Specific  Measurable  Have a timetable
  3. Assess Resources (Internet scanning)  Physical  Human  Financial
  4. Assess business environment (external Scanning)  Demand
  1. prepaid expense (insurance, feed, tools, fertilizer)  payment made in accounting period before use of the product or service to generate revenue
  2. accured expense  expense that accommodates daily but has not yet been paid
  3. asset  any item of value
  4. liability  debt (obligation to be paid) in future
  5. owner equity (net worth/ contributed capitol)  assets minus liabuility
  6. inventory  quantity and value of products produced for sale
  7. debt (left)  decrease in liabuility and owner equity  account entry in left column  increase in asset value or expense account
  8. credit  account entered in right column  decrease in assets value  increase in liability, owner equity or revenue account
  9. accounting period  calendar year (starts jan ends December)  fiscal year (other start dates of 12 months  farmer production cycle, end when activities are slow  1/24/  Single entry
  10. One entry in books for each receipt and expenditure  Double entry
  11. Record changes in assets and liabilities as well as revenue and expenses
  12. Equal and offsetting entries for each transaction (debits= credits)
  13. More accurate to balance accounts and produce statements  Expenses + assets= Liabuilities + Equity + Revenue A=L+I+C-E  Cash accounting
  14. Transactions recourded when cash is spent or received
  15. Includes recording depreciation expense  Advantages  Simple

 Calculating taxable income flexibility  Accruel accounting  Transactions recorded when produced or services provided  Inventories and accounts receivable are recorded as revenue  Accounts payable are recorded as expenses  Advantages  More accurate  Disadvantages  More time and knowledge required to track it  1/26/  Cash  Seed, chemical, fuel, expense  $  Accrual  Fertilizer expense $  Seed chemical fuel expense  $  Fuel expense $  Grain revenue $    1/28/  Value of assets  Be conservative and consistent  Market Value  Current net market price  Cost  Original purchase cost  Not for items produced  Lower of market or cost  Avaoids overly high value  Farm production cost  Accumulated costs of production  Requires good cost of production records  Cost less accumulated depreciation  Only for depreciable assets  Current “book Value”  Depreciation  Decreases in value of asset  Business expense  Distributes cost over life of asset  Depreciable assets  Greater than 1 year of useful life  Determinable useful life  Used in a business  Cost  Total price paid for asset  Useful life  Years of use in the business  Salvage value  Expected market value at end of useful life  Can be zero if used until worn out  Book value

 Income tax Depreciation

  1. Tax basis= “book Value”  MACRS- GDS- modified accelerated cost recovery system general depr. System  Salvage Value= $  Fixed used life  1/2 year depreciation first year  Begins as 150% DB Method  Changes to SL when greater than the DB