The Agricultural Accounting is a financial information system, which allows to know at any time the economic and financial result through the processing of the operations in terms of debit and credit registered in the accounts during a period.
- 1 Introduction
- 2 Definition
- 3 Other applications
- 4 Objectives of Agricultural Accounting
- 5 Difficulties
- 6 Functions
- 1 Economic Function
- 2 Financial Function
- 7 Historical Function =
- 1 Statistical Function
- 2 Fiscal Function
- 3 Legal Function
- 8 Comparison with other branches of accounting
- 9 Importance
- 10 Sources
Agricultural Accounting Introduction
Agricultural organizations must develop economic activities through productioncompetitive products, increasing better yields and generating economic growth, under adequate coordination of the factors that affect production, as well as the incentive towards agroecological production. The Administration in an agricultural company looks for answers to the following problems: What to produce? How to produce? When to produce? In order to have an overview of these three questions, entrepreneurs need correct and timely information about how internal and external markets are moving to project what will be produced and at what costs. The Administrator obtains this information through the Agricultural Accounting system, which he makes available to the employer so that the most accurate and timely decisions are made.
Agricultural Accounting Definition
Agricultural Accounting is a branch of General Accounting , clearly specialized and its accounting is done in the same way as accountingof industrial costs. It is the registration and ordering of the information of the transactions practiced in economic units within the agricultural companies in order to quantify them to make administrative decisions. It is the starting point to obtain reliable information about the environment that involves the production process, establishing adequate controls and gathering adequate information that serves it for decision-making. Agricultural Accounting, is a financial information system, which allows at any time to know the economic and financial result, through the processing of operations in terms of debit and credit recorded in the accounts during a period.
Agricultural Accounting also applies to other purposes such as:
- Obtain necessary and correct information to comply with the income taxpayment requirements .
- Help the farmer to plan the improvement of the infrastructure of his farm, so that he will have greater knowledge about business management and the profitabilityof the business, according to the benefits obtained on the farm.
- Obtain the necessary information to make comparisons between periods and determine if there have been errors that in the futurecan be corrected according to lived experiences.
- Provide the necessary information to meet the requirements requested by financial entities for credit processing.
Agricultural Accounting Objectives
- Determine the value of the capital invested at the end of each financial year, as well as its difference at the end and beginning of the financial year.
- Know the most important reasons that cause the capital invested to increase or decrease.
- Determine the account of profitor loss from annual operations.
- Determine the difference between the amount of profit or loss for the current year and the previous year or from one monthto the next.
- Know the most important reasons for these gains or losses.
- Determine the easiest way to increase income from previous years.
- Provide sufficient information to the agricultural producer that serves as a basis for making informed and informed decisions.
- Provide real information for credit applications to financial organizations and institutions.
- Provide the necessary data for those contractual commitments.
- Provide the data for use in legal income tax returns.
- Provide useful data for scientific research.
Difficulties In Agriculture Accounting
The application of accounting principles to agricultural activities poses a series of difficulties specific to this type of economic activity:
- The normal growth of the animals that are owned, which implies changes in value, must also consider the fate of the animals. Depending on the destination, they can be considered as factors of production or as products. If a veal is sold for meatproduction , it is a product, if it is kept to become a dairy cow it is a production factor. But you can also change your destination depending on your growth. For example, after a shelf life as a dairy cow, it can be turned into a waste animal product.
- Difficulty identifying family expenses and income from companyexpenses and income .
- The agricultural activity depends on certain factors that are difficult to control by man, among them the climatic ones.
- The valuation of the cost of production of crops on landor in process depends on the stage of development of the crop.
- The direct consumption of the product and the monetary non-remuneration of daily work.
- The combination of agricultureand livestockthat makes it difficult to determine the cost of activities.
- Existence of family labor.
Analyze the process that means obtaining satisfactory or negative results for an agricultural business in a given period.
Observe the obtaining of monetary resources, to face the commitments of the agricultural business.
It reveals the chronological records of the economic events carried out by an agricultural organization during its life .
It reflects the economic facts, in quantities and values that reveal a real vision.
Notice how the tax provisions affect tax contributions.
Know the application of the commercial code and other laws that affect the operation of the agricultural organization.
Comparison with other branches of accounting
- Commercial Accounting: Main activity is the purchase and sale of merchandise, economic goods.
- Industrial Accounting: Main Activity is the transformation of the raw materialinto finished products.
- Agricultural Accounting: These are operations where living matter intervenes. Due to this characteristic, the Agricultural Accounting requires the use of own techniques and skills for the analysis, interpretation, classification and recording of operations.
The use of accounting in agricultural companies regardless of the importance of their exploitation, allows obtaining reliable information about the environment that involves the production process, establishing adequate controls and gathering timely information that is used for decision-making, thus having a better knowledge to determine whether to continue in the current crop, diversify it, combine it or lease the land.