Keeping accurate enterprise accounts helps you to evaluate the profit margins of each separate enterprise of your farm business operation. Compare balance sheets to discover your farm's financial position. A balance sheet describes your farm financial position by listing what you own and what you owe. 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.