Livestock Economics, Marketing and Business Management

INCOME STATEMENT,REVENUE AND EXPENSES

 Income statement

• Simply stated, income statement is a statement showing excess of revenue over expenses.
• If expenses exceed revenues, the result is a loss to farm. Income statement is generally prepared for one agricultural year, i.e. at the end of year.
• However it may also be prepared over a period of time, so that one can know the trend in receipts and expenses which indicates success or failure of farm business. It shows whether farm is running under loss or profit.
• Hence it is also called as Profit and Loss Statement.
• It is different from balance sheet in that balance sheet indicates about assets and liabilities but not about the operational efficiency of farm business in terms of receipts, expenses, profit and losses.
• The objective of preparing Income Statement is to summarise income and expenses incurred in farm throughout year and present them in a schematic picture. This statement lists all farm expenses on one hand and all receipts on the other. 

Revenue

• In the revenue realized through the sale of following items are included.

A. Operating Receipts

• Crops and feed
• Livestock and Poultry sold
• Livestock and Poultry Products sold
• Custom work- cash
• Government payments and patronage dividends, gifts etc.

B. Capital Receipts

• Breeding stock
• Machinery and equipment
• Appreciation in the value of assets

C. Non Farm Income

• Interest and dividends

Expenses

• Under the expenses column the following items are included.

A. Operating Expenses

• Labour charges
• Repairs
• Rents and Leases
• Seed and Fertilizer
• Chemicals
• Livestock expenses (Breeding Vet., etc)
• Gas Fuels, Oil
• Insurance
• Utilities (Electricity, Gas, Telephone)
• Marketing and transport expense
• Interest on working capital

B. Live stock and Feed Purchase

C. Capital Expenditure/ Fixed expenses

• Machinery and Equipment
• Building and Improvement
• Depreciation
• Interest on fixed Capital
• Rental value of owned land

D. Other expenses

• By subtracting the expenses from the receipts “Net income” for a year can be calculated.
  • Operating ratio= Total Operating expenses / Gross income
  • Fixed ratio = Total Fixed expenses / Gross income
  • Gross ratio = Total expenses / Gross income