Title: Construct a complete income statement using cost and accrual basis.
Course: Operating the Farm Business (18301-III) > Section: Developing and Analyzing Agricultural Production Records

Construction should include

- defining terminology used in income statements
  - revenues (operating and non-operating)
  - expenses (operating and non-operating)
  - net income
  - gross profit
  - loss
  - statement of cash flows
- differentiating between cost and accrual methods of accounting
- applying the four basic generally accepted accounting principles (GAAP) for preparing financial statements (i.e., historical cost principle, revenue recognition principle, matching principle, and full disclosure principle)
- determining revenue
- determining expenses
- determining net profit (earnings before interest and taxes [EBIT]).

Process/Skill Questions:

- How would one construct an income statement on a cash basis and then account for accrual adjustments?
- How would one compute management income?
- Why might a farm business use cost vs. accrual accounting?
- Why is the income statement referred to as a profit and loss statement?