agdm Understanding Double Entry Accounting Fagdm理解复式会计F.pdfVIP

File C6-33 July 2009 /agdm Understanding Double Entry Accounting arm families have traditionally used the single entry (often referred to as cash) method of account- ing for their farm business. This is a relatively simple method of accounting where items are listed as Fincome or expenses when cash transactions occur. For example, grain is recorded as income when it is converted to cash, that is, sold and delivered. Also, production inputs like seed, feed and fertilizer are record- ed as expenses when they are paid for rather than when they are used or ordered. The single entry method of accounting does a poor job of recording the true profitability of a business within or between accounting periods. For example, crops can be sold in a year other than when they are grown and expenses can be paid in the year before or after the inputs are used. To correct this problem, cash accounting uses an adjustment where inventories of production inputs and inventories of crops and livestock are taken at the beginning and end of the accounting period (e.g. calendar year) to adjust the income statement to a form of accrual accounting. The inventories shift production inputs and inventories of crops and livestock into the year in which they are used or produced rather than when they are purchased or sold. Double entry accounting goes a step further. Every time an income or expense transaction occurs and an entry is made, the net worth statement is updated at the same time. The two financial statements encompassed in double entry accounting are the net worth statement (also called the balance sheet or equity statement) and the income statement (also called the pro