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Knowing costs by enterprise unit is vital for farm accounting

Farmers are used to calculating net income and profits each year for the entire farm bus­iness. Most farms and ranches pro­duce more than one product, though.

By dividing the operation into multiple production entities, the contribution of each one toward the financial goals of the business can be evaluated.

Enterprise accounting

The individual sources of farm income can be divided into "enterprises" or "profit centers." Each crop being produced and each species of livestock present can be considered a separate enterprise. Generally, these will correspond to major commodities such as soybeans, corn, hogs, beef or dairy.

A general type of crop can also be divided into multiple enterprises that require different production methods or target special markets. An example would be dividing corn production into yellow corn, white corn, sweet corn, popcorn and seed corn.

Likewise, livestock enterprises can be divided into production phases. A cow-calf operation may divide its costs and returns into a breeding phase (up to the weaning date of the calves) and a finishing or feedlot...




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