Farm Accounting

/ Farm Accounting #1  

zekeman

Silver Member
Joined
Mar 11, 2004
Messages
187
Location
Upstate NY
Have recently attended a workshop for Farm Accounting, two more to go. I left the workshop more confused? and I was not the only one? think the instructor thought every body had some accounting background, "Not I". Question? How many small Farmers/Ranchers do their own accounting? How about with accounting software, What reasonably priced (under $200.00) software do you recommend. Is there accounting software specific to farming in this price range?
P.S. I will also post this on countrybynet.com

Ron
 
/ Farm Accounting #2  
Do you want help with the ledger or schedule F? probably any business ledger software would work but knowing how to apply expenses to your advantage for schedule F purposes may require an accountant with farm experience.

try this question here also
 
/ Farm Accounting #3  
I think that most use an accountant. I know that I do.
 
/ Farm Accounting
  • Thread Starter
#4  
rdln
The apply expenses seems to be it , plus depreciation? (section 179 ? ) Trying now to get instruction publications from IRS.
Was hoping to find software with a chart of accounts already setup for farming ? What do you do with a barn I started building 11/04 but still under construction into 2005 ?????
I will ask the instructor at next class, hit him with this specific question, problem is, if everybody gets to ask specific questions the class slows down to a crawl and he won't get to complete the coarse materials in 3 two hour classes so most of us have been holding back. Last year this class was only 1 session, I did not attend, but it was expanded to 3 sessions this year because of the difficulty & complaints. This class is funded with a grant from a local Foundation with no cost to the farmer, don't want to complain too much?

Ron
 
/ Farm Accounting #5  
do a Google search for "farm accounting software". This one looks like it would be worth downloading to see how it works. It has a pre-loaded chart of accounts, and sells for $249.
 
/ Farm Accounting #6  
Before I could afford an accountant we just used quickbooks to keep track of expenses and income. It's very easy to use. Then we just used one of the tax preparing software kits to do our taxes. Our accountant does it all now but we still use quickbooks to do our daily accounting. Quickbooks also has a quickbooks account filing program too. It's really not as hard as they make it out to be.
 
/ Farm Accounting #7  
The building cannot be depreciated until it is put in service, when it is completed, the start date has no effect upon the return. Section 179 cannot be used to create a loss for the schedule F, in other words it is only available to the net income from the enterprise.
 
/ Farm Accounting
  • Thread Starter
#8  
DUMBDOG
is section 179 a one time deduction for the 2004 tax year, it might not be renewed by congress for the tax year 2005 ? can the money spent on the materials in 11/ 2004 be deducted/claimed in the tax year 2005

Ron
 
/ Farm Accounting #9  
Section 179 is part of the tax code and just like anything else it is at the wim of congress, you can go on the assumption that it will be there the next year until they change the law. It has been around for quite a few years.

If I understood your post correctly, you started to build a barn in November of 2004 and it will not be completed until this year. The materials and any other costs associated with the barn would be capitalized and depreciated over its usefull life. A barn would be considered real property and not subject to a Section 179 deduction.
 
/ Farm Accounting
  • Thread Starter
#10  
DUMBDOG
Thanks, with your two replies about section 179 its starting to become clearer as to the use of this section.
Have searched the net and found the link below for converting
QUICKEN personnel financial software to Farming, I have quicken 2003 software which was given to me but never opened. Weather is nasty in NY which means I have time to spend inside for the paperwork that I have neglected for months.
Ohio state cooperative
Cowboydoc
I will try QuickBooks, if converting Quicken gets too complicated. I have talked to a friend who operates a small printing business and he uses it for his accounting books( plus a real good tax accountant), he has an older version that I can "borrow" to see if it helps
OkeeDon
Thanks for the link, If the above two programs don't work I will do a overnite download of their demo, judging
from their website it might be worth a try

Ron
 
/ Farm Accounting
  • Thread Starter
#12  
kensfarm
Just got off the phone with the IRS, ordered that publication
and a couple others that looked like it might help. Could have downloaded the "BOOK" but I don't like reading instructions on a TV/computer screen - I like reading the old fashion way. Thanks for the link

Ron
 
/ Farm Accounting #13  
Your welcome!

" I like reading the old fashion way. " Me Too!!! /forums/images/graemlins/grin.gif

I'm picturing.. sound asleep snorring on the lazy boy.. w/ glasses on.. tax publication sliding off your lap! /forums/images/graemlins/grin.gif
 
/ Farm Accounting #14  
Ron:

It depends on what you mean by "accounting". If you just want to account for your income and expenses any accounting program will work fine. Even Quicken for just receipts and disbursements.

Unless you really understand accounting, which you won't completely in a short course, I highly recommend you concentrate on receipts and disbursements and your bank balance. This means you don't try to track fixed assets and such in the balance sheet accounts, but rather run every thing (including purchases of assets and cost of building barns) through expense accounts, and let your accountant deal with the depreciation and such. Believe me, he can do it faster than he can straighten out your mess.

For your chart of accounts, just use schedule F categories, and add any other kinds of expenses not listed.

I am assuming you are a cash basis farmer.

If you raise livestock, and want the accounting software to keep up with that in detail, you might want to consider a dedicated farm package. Most small farmers will find such a vertical package too difficult.

For livestock you need to keep up with which were bought to feed out and sell, which ones were bought for breeding, and which ones were raised. You keep an inventory of the ones you buy and feed out and reduce your gain on sale by the amount you paid, and deduct the feed and other expenses as you go. The ones you buy for breeding are like equipment - you depreciate those. The ones you raise don't have a tax basis (cost) because you deduct all the related expenses as you pay them (if cash basis). There is no need to separate expenses for one class of animal versus another, unless you have an internal reason (management) for doing so. It would probably be too difficult to track. Give your accountant how many head of each class you sold during the year and for how much, and how many head of inventory or breeding stock you had on hand at yearend. When you sell raised animals the entire amount is income.

Section 179 applies to livestock as well as equipment. Does not apply to real estate. The current year section 179 deduction is limited to net income from trades or businesses. Salary income is considered trade or business income, so you could conceivably have a farm loss and still have a 179 deduction, if you have a salary or another busines that is profitable.

I am not a Quickbooks fan, but am certified for it and it is sufficient for most small farmers. Peachtree is better (in most cases), but usually not necessary for a small one-computer operation. Quicken is not accounting software - it is checkbook software. It is probably sufficient although quirky for the accountant to deal with.
Whichever software product you use just don't try to set up and operate a full general ledger unless you know what you're doing. Keep your bank account reconciled and properly identify your bank account transactions, then send the backup to the accountant. He will thank you for not biting off more than you can chew.
 
/ Farm Accounting #15  
AlanL:

Good explanation. Also, RonNY needs to understand that accounting for tax purposes, and, accounting for profitability are not necessarily related, i.e. what is going on for tax purposes and what is going on for profitability within various operations often differ. By far the best explanation (easy to understand for the beginner that gets the principles across) I ever found was in a book Farm Management publ by McMillan in 1921 by F.F.Warren ed by L.H.Bailey. It was part of the rural text book series published in that era. The principles haven't changed.

<font color="blue">Peachtree is better . . . </font>

Indeed. This program is derived from the old TCS program written in the late 70s-early 80s - one of the first accounting programs for micro computers. It was sold under various names including Rocky Mountain until it became Peachtree. Once they switched to 32 bit code in the early-mid 90s it became able to handle almost any size business even though still coded in basic (the older 16 bit only allowed access to 100 open invoices for clearing for example). Unfortunately, some outfit named Best software bought them out not too long ago and has crippled some parts of the program in recent years. However, even so, you are correct, it is by far more of a serious accounting package than the other "popular" programs mentioned in this thread and still easy enough to use.

JEH
 
/ Farm Accounting
  • Thread Starter
#16  
AlanL , JEH
I have given up on doing accounting and taxes myself - at least for this year, have an appointment with a local accountant who handles 3 of the 5 horse operations in this area. will discuss setting up software for my operation. Maybe in the future I can handle it but not now. I should have started much earlier thinking about this (Like Sept) but with tax season already here don't have enough time to learn.
Speaking of "PEACHTREE" in my Sunday paper "Staples" is running a sale on Peachtree Accounting 2005 software:
$189.99 - $25 instant rebate - $165 mail in rebate = FREE
maybe I'll save money if the accountant will work with Peachtree.
Thanks to all for your replies
Ron
 
/ Farm Accounting #17  
Most accountants will work with Peachtree. Sounds like a deal, as long as you don't need the added features of "Peachtree Complete Accounting" or "Premium Edition". You probably don't, for a farm.

PT has its quirks too, but I have been installing and supporting it since version 1.0. There was an old DOS version of Peachtree before that, but it has no similarity or relationship to that old dog at all. The existing Windows program was from an outfit called "Accounting by Design", but JEH says it came from another outfit before that , so I assume thats correct.

Your accountant should set it up for you, effective 1/1/05, and give you a primer. Peachtree seems to be a little intimidating right out of the box, hence QB outsells it a mile. However, just a little help from someone who is familiar with it will unlock the key to a very easy to use program.

One of my favorite features of PT is the ability to go back to a prior month and check the bank reconciliation a client did. This really helps with troubleshooting in which month a problem occurred. With QB, the bank reconcilation is good the day you do it. Once you finalize it, its gone forever.....

Peachtree also is less likely to sweep mistakes under the rug. I have had clients come in with their QB data and boast that everything came out perfect, the bank reconciled, and that I should have no problem (which means don't charge much). Then I find $20,000 or so in an account called "opening balance equity". This is the account that QB dumps errors into, while it congratulates you for successfully completing your reconciliation.
 
/ Farm Accounting
  • Thread Starter
#18  
Alan L
He will work with Peachtree

Once again, Thanks to all for your replies

Ron
 

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