 Welcome to Farm Accounting 101 presentation on QuickBooks for Farmers. Today we'll be covering Lesson 1, Introduction and Sample Entries No. 1 and 2. I'm Robert Page, CPA and Regional Extension Agent with the Farm and Agribusiness Management Team with the Alabama Cooperative Extension System at Auburn University. The ACE's Farm Analysis Program worked with Alabama farmers for over 20 years, helping them to develop and maintain accurate financial and production records. In developing this series, we reviewed the different types of checks and deposits made in farm record keeping by these farmers, and eventually selected 10 very typical farm accounting entries. It's our belief that if you can learn how to make these 10 different accounting entries and their variations, you can keep a good set of farm books and QuickBooks. In today's presentation, we will be reviewing the first two entries, writing a check for a farm co-op bill and writing a check for farm equipment purchase. The other entries will be covered in later lessons. Lesson 6 will cover useful financial and year-end closing notes that the farmers should find useful. As a side note, these 10 entries are the same entries used in the ACE's Excel for Farmers YouTube presentations. For those viewers who prefer using an Excel spreadsheet to keep farm records, please visit the ACE's YouTube channel for Farm Accounting 101 Excel for Farmers. A word of caution. These lessons do assume the viewer has some familiarity with QuickBooks. Our objective is to show you how these sample transactions can be entered into QuickBooks quickly and accurately to produce useful farm financial and production records. In other words, this is not an introductory course in QuickBooks. Intuit and other vendors offer a wide array of training videos and manuals on this excellent software. Now, as we developed the Farm Accounting 101 series, our goal was to help Alabama producers to improve their farm financial literacy. In this QuickBooks for Farmers series, we are expecting three different types of viewers to be watching. There are farmers or other agricultural producers, farm family members untrained in accounting, and some management accountants who are trained in both accounting and business record keeping who may or may not be part of the farm family. And one point of clarification. Any assumptions, suggestions, or observations made on these videos are based on my years of experience working with farmers, their family, and their accountant tax preparers in the ACE's Farm Analysis Program, as well as my time teaching ACE's financial record keeping small classes, and additionally my time in public accounting prior to joining the Alabama Cooperative Extension System. As we go through each entry, we will cover some suggestions that you may find useful for your farm's records. If we're going to discuss farm accounting, we need a sample farm QuickBooks file. So we developed the ACE's poultry farm number one. The key features of this farm include over 500 sample checks, deposits, and other transactions posted for this farm during the 2020 farm year. An expanded chart of accounts list based on the standard farm analysis client farms that we have used in the past. Third, use of class option to classify income expenses to one of three farm enterprises, poultry, livestock, and row crop. Now we've chosen these because here in Northern Alabama, a poultry farm is a very common operation with two other side businesses such as livestock and row crop operation. And this class feature can really help us see which farm operations make the most money or need to be reviewed for possible changes. We'll be seeing some sample reports using this class feature shortly. So let's move into sample entry number one. Our first entry is a simple entry paying a bill from the local co-op store with a farm check. What are the facts? In this entry, the farmer purchased fertilizer seed and a farm gate from a local co-op store for $3,500 and paid for the purchase with the farm check number 2145. So there's 86 bags of fertilizer, four bags of corn seed, and one 12-foot gate. So remember, these are just sample made up entries. The dollar amounts may not be correct for your farm. We are focused instead on understanding the process of keeping the books using QuickBooks. Now let's switch our view over from the PowerPoint screen to the QuickBooks homepage. Here's our homepage. Our first entry could be made using the check register. And here's the entries through 2020, and this is going to be a 2021 entry, but we could use this screen if we wanted to, but we're not going to. This is the check register screen. Instead, we're going to use the right check screen because in farm analysis, we really prefer and recommend that farmers do print their checks using QuickBooks. So this will be check number 2145. Today's date. Be made out to the local co-op store. Dollar amount of the check is $3,500. And it'd be nice if we had an invoice, but we don't. And in this example, I would like to point out if you look up here at the top where it says Attach File, one of the things that every farm bookkeeper should have access to is a scanner so that you can take the original paper document, scan it, and then attach it to this particular check. And then if you're ever looking at this check again and you need to pull up a supporting document for it, there it is. You'll be able to just look at it very quickly and easily. Now let's do the breakdown of this particular check. Our first line item is fertilizer. So we just type in fertilizer. I could type F-E-R-T and it does find fertilizer in lime. Okay, the breakdown on this is 2142.55. That's a dollar amount. And we're going to recording 86 bags of 50-pound 16-6-16 fertilizer. Now I'm not making any notation here of what brand of fertilizer it is. If I had a scan of the invoice, we could have the original document anytime we wanted to look at it. But we do want to record what kind of fertilizer it is. Now the other thing we want to do here, as we mentioned earlier, we're going to be using the class option. And the ACES poultry farm number one is set up with three basic classes, livestock, poultry, and row crop. And then if we want to keep individual information for our corn, cotton, other row crop, or soybeans, we can select it. Now in this particular case, this is fertilizer and we're just going to simply say it's for row crop operations. The next line is for seed, S-E-E-D, and there is our crop and seed expense account. And that dollar amount is 1266.01. And that is for four bags of 25-pound corn seed. Once again, if we had the invoice, we could look at it. And this is also going to be for row crop, so I can just simply type an R for row crop and it comes up. And the remainder of this is going to be for building an fence repair. That's $91.44. And that's for a 12-foot utility gate. Because it's a utility gate, that's going to be charged to livestock operations. Very simple, very straightforward. We could print the check, doing it right here. So we'll assume we've printed the check, saving you, and we're ready for our next check. But we'll change the view and go back to the explanation of the accounting entry we just made. Here's the accounting entry for the co-op payment. One of the things we want people watching to understand is QuickBooks is a full-blown double-entry accounting system. So in this example, fertilizer, which is an expense account, is debited for $21.4255. Seed is debited for $12.6601. Building an fence repair is also an expense, and it's debited for $91.44. And cash and bank, which is a current asset, is credited for $3,500. And the total debits and credits equal $3,500. So QuickBooks does handle the basic double-entry accounting equation just fine. Now let's move on to our second entry, writing a check to pay for a piece of farm equipment. This is a real simple entry that we do lots of times. What are the facts? In this example, the farmer purchased a new eight-wheel hay rake for $2,979.45 from a local implement dealer using a farm check. So let's enter check number 2146 into QuickBooks. Check number 2146, today's date. This is the local equipment dealer. And the dollar amount of the check is $2,979.45. Once again, if we had a copy of the invoice, we would scan it, attach it to this particular check so we could look at it anytime we wanted to. So invoice number four new hay rake. So this is going to be to machinery and equipment. Now we'll just click our down arrow. And as you can see, we have a pretty extensive chart of accounts, far more extensive than what you're used to if you've got just the basic chart of accounts. But this goes into machinery and equipment, $2,979.45. And in our memo field, we're going to put in the fact that it is a hay rake carted eight-wheel, and we're going to make the notation that it's new as opposed to used. Now if we had any other information on it, we could put it in here. In class, we don't normally use the class method for balance sheet items, like assets. We use the class methods primarily for profit and loss items. So I'm not going to bother to put anything in here, but you'll notice that I will get prompted about it. Saving you, and yep, I'm going to save it anyway. Okay, that completes the second check, so let's take a look at the accounting entry we just made. Pretty straightforward. The equipment purchase entry is machinery and equipment, which is a fixed asset, is debited for $2,979.45, and cash and bank is credited for $2,979.45, with the total debits and credits matching at $2,979.45. Now, that concludes today's presentation, but we hope it begins to tell you that QuickBooks is full-blown accounting entry. Secondly, there's a lot of information you can enter, and thirdly, if you'll just take a little time, you can have it have some very, very good records. Thank you for watching. Lesson one, QuickBooks for Farmers is part of the ACES Farm Accounting 101 series, and has been produced by the Alabama Cooperative Extension System Farm and Agribusiness Management Team of Auburn University. And for additional information on the Farm and Agribusiness Management Team and other ACES program, please visit our website at www.aces.edu.