 Welcome to this Farm Accounting 101 presentation for QuickBooks for Farmers. Today we will be covering Lesson 3, Introduction and Sample Entries Number 5 and 6. 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 farmer clients and eventually selected 10 very typical farm accounting entries. We believe if you can learn these 10 sample entries, you will find the majority of your accounting entries on your farm to be similar. In today's lesson, we will be reviewing the next two entries. Recording a Farm Debit Card Transaction for Sunday lunch and Record Farm Supplies Purchase with a Credit Card. The other entries will be covered in other lessons. Lesson 6 will cover useful financial and urine closing notes that the farmers should find useful. As a reminder, these 10 accounting 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. Caution, these lessons do assume the viewer has some familiarity with QuickBooks. Our objective is to show 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 on QuickBooks. Intuit and other vendors offer a wide array of training videos and manuals on this excellent software. As we have said in previous lessons, the Farm Accounting 101 series is intended 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 who are untrained in accounting, and management accountants who are trained in both accounting and business record keeping who may or may not be part of the farm family. This conclusion and assumptions presented in today's presentation are based on my years of experience working with farmers, their families, 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, as well as my time in public accounting prior to joining Extension. If we're going to be discussing farm accounting, we need a sample farm QuickBooks file. So we created the ACE's poultry farm number one. The key features of this sample farm include over 500 sample checks, and other transactions posted for this farm for the 2020 crop year. An expanded chart of accounts based on the standard farm analysis client file setup. Use of the class option to classify income expenses to one of three farm enterprises, which include poultry, livestock, and road crop for this sample farm. This class feature really can help us see which farm enterprises make the most money for the farmer and which enterprises need to be reviewed for possible changes. We will see some sample reports using this class option shortly. Now let's move on to sample entry number five. What are the facts? In this example, we're using the farm checking debit card to pay $42.40 for Sunday lunch for the family. This is a family living non-farm other expense account. In this example, the farmer is using farm funds, which are business funds to pay for a personal non-farm business expense. Therefore, this expense should be posted to either a non-farm expense account or an equity or net worth withdrawal account. Using standard farm analysis accounting methodology, this expense is charged to family living, an other expense account. Now let's change this view to look at QuickBooks. We're going to enter the check. So we write the check. Today's date. There's the check number. And let's just assume this is a local restaurant. Let's see what we have down here. We've got a restaurant. Well, we don't have a restaurant, so we'll just use local shop. And so we're going to pay $42.40 for lunch. And this is Sunday lunch with the family. Before I go any farther, let me point out I made a mistake. This is not a check number 2147. A debit card transactions would be either a electronic funds transfer or a DEB for a debit. You come up with your own code, but you need something other than a check number to identify that this is a non-check item. Now, normally we might charge this to a business expense of some sort, but this is not a farm expense. So we can't charge this to livestock surprise or miscellaneous farm expense like meals and entertainment. It's not meals and entertainment because that is non-farm business. This is taking the family to Sunday lunch. So we have to scroll all the way down in our chart of accounts down to other income. We've got in this particular farm, we've got some rental houses. So non-farm business, non-farm business, we've got two rental houses for this. And so now we move into the family living section of under other expenses. So in the standard farm analysis chart of accounts, we could have just one family living expense and just have it as 074 family living. This is the standard farm analysis numbering system. So contributions, medical expense, life insurance, cash withdrawals, food, clothing, personal items, entertainment, recreation, transportation, you know, could be any one of these. But we'll make it simple and just simply charge it to family living as an other expense item. Sunday lunch with family at local restaurant. Since this is non-farm business, you know, it's not going to be in here. It's not livestock, roadtop, grow crop. It has nothing to do with farming. So we're going to save and close. Remember, this is a family living other income or other expense account. That's where it is. So we're going to do a save and new. Nope, no class. Now let's take a look how that appears. Here's our aces poultry farm for the month of January 2021. And if you take a look so far of what we've entered in the previous lessons we've got, this is a class report. And so we've got some fertilizer crop. Here's this area up here is farm income expense. This area down here is other income and expense. And there's the sale of assets we just covered a few minutes ago. And here we are in other expense called 074 family living for $42.40, as well as my other favorite. If you don't know where to put something, just put it in 999 as my accountant. So if I wanted to see what this was, I could put it over this $42 and just double click. And up comes the check information and I could double click again. And there's the check that I just entered. Very simple, very easy to find out what it is. And this is a classic example so far of the profit and loss report by enterprise. We've got some livestock information here, some row crop information, but nothing yet on poultry. So that completes that particular entry. So now let's go back and take a look at it. As an accounting entry. So the accounting entry for the family dinner is family living, which is another expense account is a debit for $42.40. The offsetting entry is cash farm checking, which is a current asset, which is credited for $42.40. And total debits and credits are $42.40. Our next entry is sample entry number six, purchasing farm supplies with a credit card. What are the facts? Well, in this example, we will assume that the farmer used the ACES poultry farm Visa credit card, which is reserved for farm operations to buy $227.80 of cattle feed for their livestock operation. This purchase may be the only purchase on the card for the month or may be one of several purchases made by the farmer on this same card. This will be our first use of the enter credit card charges screen on the QuickBooks home page. So we're going to transfer over to QuickBooks. Here's our home page. And if you take a look right over here in the right hand corner, it says enter credit card charges. Now, if you take a look at credit card right up here at the top, we have built an account number called 821-431 Farm Credit Card. And it is identified in the chart of accounts as a credit card. So our purchase is to the local farm supply. So Farm Supply Store. We use today's date. If we'd have an invoice number would be 1234. And the dollar amount is $227.80 purchase of purchase of 20 bags of 50 pound cattle feed. So we're going to charge that scroll through there and we'll be finding livestock expenses right there. So livestock supplies. And once again, we can copy and paste. Now notice right here at the top, we've got attached file. So if we've got a copy of the invoice from the Farm Supply Store along with a credit card's receipt, we can scan both of them and attach it to this particular screen right here. Very, very important to be able to document whatever your accounting entries are. And if you have a scanner, it'll become your best friend. Just scan in the receipt you've got, attach it to this document and it's there. All right, now this one is going to be charged to livestock operations because this is cattle feed. That completes the entry. Save and close. Now let's go back to PowerPoint and take a look at the accounting entry. This is what that accounting entry looks like for this particular credit card transaction. Feed, which is expense, is at expense. Charged to 227.80 as a debit. Now in the QuickBooks entry I just made, I charged to livestock supplies. I could have charged it to feed. Either one is fine depending on the way you keep the books for your farm. The offsetting entry is for farm credit card payable, which is a current liability for $227.80. Total debits and credits, 227.80. Here's a big note. This is one purchase on the farm credit card for the month. There may be several more purchases during the month on this credit card. As part of the month in routine, the credit card statement will have to be matched up to the QuickBooks credit card entries to make sure the ending dollar balance on the credit card statement matches the ending dollar balance for the farm credit card payable account in QuickBooks. That's just very important that you may have 10 transactions on this credit card. You need to have all 10 of them posted in QuickBooks so that when you're reconciling it, the dollar amount in QuickBooks matches the dollar amount on the credit card statement. Now just as a point of reference before we get away here, since we've got two different, we've got a feed account. We've got a livestock supply account. Let me show you how easy it is to find and correct checks. We go back, check register, write checks or check register, either one. So we'll just use check register. It's not going to be in the check register. It's going to be in credit card charges. And we'll go find it right here under livestock supplies. And if we want to change this to feed, there it is, crop or feed purchases. That shows you how easy we can make a correction. And it happens all the time, friends. We just need to be able to change and correct it on demand, save and close. Yes. Now we'll go back and that completes our lesson for today. Lesson three for 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 at Auburn University in Auburn, Alabama. For additional information on the Farm and Agribusiness Management Team and other ACES programs, please visit our website at www.aces.edu.