Using these figures, you are then able to calculate your current financial worth. A balance sheet is often referred to as a snapshot of your own financial condition because it represents a picture of the farm business as of a particular date. Lenders require most farmers to prepare yearly balance sheets. Whether you program the information into a personal computer or enter your data on a balance sheet you have devised yourself is of little importance. The key factor is knowing what a balance sheet is and what it will tell you about your farm.
Assets are items that are owned.
The full value of stored grain is classified as an asset, regardless of liability, that is, regardless of whether there is a lien or mortgage on that property. A liability refers to a debt or obligation expressed in terms of money. Your net worth is simply assets minus your liabilities. There are a variety of styles and systems to choose from if you decide to select a formatted balance sheet. The balance sheet can be customized to fit your particular needs for the farm, the family, or a combination of both.