Prepare for Version 10.0, Ag accounting timing issues, Payroll closing entry.
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 FarmSMART                                                     January 2011 

In this Issue:

Winter Events Schedule
Prepare for Version 10.0
Timing is Everything
New Website
Q&A:  Payroll Closing Entry
 

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Greetings! 

January is a busy season for anyone involved with farm accounting and records.  Plus it's also a big month for farm trade shows, conferences... and blizzards!  We look forward to answering your questions, saying "Hi" face-to-face as well as helping you upgrade your management systems and practices for the new year.

On behalf of the staff at FBS Systems, we wish you a "Happy New Year!" 

                                                               SDG

 
January-February Event Schedule

 

Iowa Pork Congress

Please join us at one of these events in January and February.

Minnesota Pork Congress, January 19-20, Minneapolis, Minnesota.
Iowa Pork Congress
, January 26-27, Des Moines, Iowa. 

Illinois Pork Expo, February 1-2, Peoria, Illinois. 

National Farm Machinery Show, February 16-19, Louisville, Kentucky. 

Prepare Now for Version 10.0 

 Next month we'll begin shipping the first commercial copies of a new generation of agricultural softwareVersion 10.  Here's a preview of what to expect and how to prepare.

  • Version 10 is our fourth major programming rewrite (MS BASIC,COBOL, Visual BASIC and now, .NET Framework).  To learnwhy we made this time-consuming and costly transition andwhat it means to you, visit Microsoft's .NET website.
  • Most of the external features of Version 10 are already active on the latest Version 8.1 updates.  The internal "engine" of Version 10, of course, is quite different and will require more "horsepower" (RAM memory and CPU speed) than what's on board many of the older XP computers.
  • We'll be rolling out TransAction Plus first, followed by Crop Auditand Smart Feeder, then E.CLIPSE Managerial Accounting and last of all, LifeCycle Budget
  • If your computers run Window 7 and you'd like to begin working with a beta Version 10 now, contactsupport@fbssystems.com
Timing is Everything--Especially With Ag Accounting 


In the past issues of FarmSmart we've identified three critical shortcomings of out-of-the-box accounting programs compared with dedicated ag systems:
 
  

"Big bucket" accounting

When you can't "count" on your accounting program

Following the accounting "golden rule"

In this issue we'll examine the crucial influence of timing

Quite inconveniently from an accounting perspective, agricultural production and marketing cycles rarely match accounting years.  For example, as the year 2010 drew to a close, most corn growers were still marketing their 2010 crop while accumulating work-in-process costs for their 2011, 2012 and even 2013 crops.  (See Figure 1.) 

Corn Crop Years
Figure 1 -- Crop years compared with calendar years.

As a result benchmarking corn revenue and expense by calendar yearis meaningless and distortive since that twelve-month period may include from zero to three production and/or marketing years, each comprised of varying acres and inventories.

Livestock groups can follow similar, multi-year patterns (as with cow-calf operations) or repeat themselves many times within a calendar year.  (See hog group example in Figure 2.)

Hog group flow chart
Figure 2 -- Feeding groups within one calendar year.


In order, then, to provide meaningful analysis and control of a farm's primary business process (producing and marketing crops and/or livestock), the accounting system must perform the following:  

  • Track multiple processes that can start and end at any time and often span accounting years.  (FBS uses production andmarketing centers, which can be further classified into groupsor projects.)
  • Roll inventory values and work-in-process costs between accounting periods.
  • Unwind the distortions created by prepaid expenses ordeferred sales for tax purposes.
  • Matching costs with sales.
  • Keep prior periods permanently open for reporting.
  • Allow consolidation of multiple fiscal years.
     

The foundation of a serious ag accounting system must be built from management segments with varying life cycles.  Yet those segments must also be rolled into into the whole entity and accounting year.

To discuss accounting topics, visite our blog site.

Visited Our New Website Yet?
FBS Systems Home PageThere's a wealth of timely information waiting your inspection at our new website. Check them out now by clicking on the image or any of the links below.

To start your tour, click on the image above. 

Leave comments or suggestions regarding our website.

Q&A of the Month--Payroll Closing Entry

Q.  I use the Payroll module and pay taxes on a cash basis.  What do I need to do to adjust the accrual postings for payroll taxes expensed and accrued to employer's FICA, Medicare, FUTA, SUTA and any employer contributions so I can close 2010?

A.  Follow these steps to convert year-end accrued payroll entries to a cash basis:

Year end payroll reversing journal
Reversing journal entry

 

  1. Run a User Defined Report for all the payroll liability accounts (Federal payroll taxes, state payroll taxes, etc.) as of the last day of your fiscal year.   The ending balances of these accounts are the values that will need to be "backed out."  Keep this report open.
  2. Record a Cash/Tax journal entry on the last day of your fiscal year.  Debit (reduce) the balance of each of the liability accounts by the amount from the report.  Offset the liability balances by crediting (reducing) the corresponding payroll expense account.
  3. Before saving this entry make sure to check the Reversing Entry* box.
  4. Refresh the User Defined Report to verify that the payroll liability balances have been zeroed out.

* A reversing entry resets the original liability and expense balances on the following day so you'll have the correct liability balances in the new year.

Note:  It would be a good idea to save this entry as a Macro so that you can perform the same entry next year.  (Just change the amounts.)

January-February Webinar ScheduleWebinar Screen

 

Advanced Budgeting, January 24th.
"Dirt Simple" Crop Records, January 31st.

LifeCycle Budgeting, February 7th.

Accounting for hedging transactions, February 14th. 

DTN Interface, February 21st.

Smart Feeder reports, February 28th.
To register, e-mail support@fbssystems.com by 9:00 am CST on the day of the webinar.

 
Sincerely,

FBS Systems
 

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