Workshop
(Continued from Page 41)
amount of money we paid for the asset and how
much of the investment we have recaptured using
depreciation.
Equity is the value of the business assets we own
outright. Equity changes every day with each trans
action. Equity equals retained earnings minus
owner draws plus owner contributions plus income
minus expenses.
Liabilities are everything a business owes, includ
ing bank loans, credit card balances, and accounts
payable.
Costs and receipts should be correctly captured,
Peachey believes firmly in the double-entry system
for debits and credits. The balance sheet should be
able to provide a good “snapshot” of the operation,
he said. Those sheets are the navigational markers
on the road of business performance.
The formula, “assets equal liabilities plus equity”
provides “the foundation of double-entry account
ing,” Peachey said. And today’s computerized sys
tems provide accurate and automatic ways of doing
this.
Peachey provided examples of ways normal busi-
Dairy Farmers of America is all
about milk and the 24,124 dairy farm
families who produce it. We are
and operated by the dairy farmers
we serve. We offer cost-effective marketing and movement of milk,
global market opportunities, access to branded and value-added
markets, access to a wider range of services and programs, and
unity to dairy farmers nationwide.
Melissa Stoltzfus and her father David
Martin, Manheim, fill out a practice
worksheet during the Dairy Alliance ac
counting conference in Harrisburg.
ness practices affect the formula: When you issue a
check to pay for feed, expense formulas are af
fected.
• When you borrow money for an operating line
of credit, both assets and liability formulas are af
fected.
• When you write a check for groceries, you are
co-mingling personal and business expenses. “No
other business does that,” said Peachey. “It’s some
thing culturally with farming operations.”
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