Accounting methods

[Central Fl Cracker]

A while back there was a post about two different accounting methods for a cow/calf operation

 

[HerefordSire]

Cash and Accrual.

 

[Douglas]

Central - Pratically all farmers are on the cash basis of accounting. Which basically means you can time your income and expenses to your advantage. I am a hack CPA, so ask any question you might have and I will try to help.

 

[George Monk]

I discussed the accrual method with my banker and he was against using this method for farming. Mainly because of inventory values are very hard to get right.
gm

 

[Douglas]

No reason why you can't do both and use them for different purposes. You could then show your banker the differences and include estimated inventory as part of your balance sheet. Any of us that produce a personal financial statement for the bank will list estimated cattle inventory values as part of our net worth. If you are a large enterprise accrual will be more accurate.

I once audited a large chicken producer with millions in revenue. They had computerized accounting records on the accrual basis. However when we prepared the corporate tax return we converted it to the cash basis which was allowed back then for large farm corps. The reason we did that was in years with potential large tax liabilities they would prepay a large chunk (like half a year) of their grain bills in December to defer the tax liability to another year. Not sure if you can do that anymore

 

[Brute 23]

A friend of myne that I talk alot of cattle stuff with operates his cattle on the accrual method if that means what I think it does. He has access to quite a bit of land and just builds, builds, builds his herd. When its time to retire he will "cash out".

Its interesting to talk to him because he operates off a big picture, long term.

 

[ScanlanFarms]

All taxes are on a cash basis. So if you use accrual you will have book tax difference.

 

[Douglas]

All taxes are on a cash basis. So if you use accrual you will have book tax difference.

For individuals, not businesses.

 

[BeefmasterB]

Iv'e been using the cash bassi fot the last 8 years and it's fairly straightforward and simple. It's the depreciation tables that always stump me! :help:

 

[Douglas]

Iv'e been using the cash bassi fot the last 8 years and it's fairly straightforward and simple. It's the depreciation tables that always stump me! :help:

Sec 179 baby.

 

[BeefmasterB]

LOL!!! O.k., how much Section 179 can a person take each year? Thanks!

 

[1982vett]

LOL!!! O.k., how much Section 179 can a person take each year? Thanks!

2008 tax year $250.000.00, limitations kick in at $800,000.00

Problem is you have to have a profit to use it.

 

[ScanlanFarms]

All taxes are on a cash basis. So if you use accrual you will have book tax difference.

For individuals, not businesses.

Douglas you are right I am wrong I looked back at the instructions for the 1120. Thank you for correcting me it has been a couple years since my last accounting class.