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Accounting for Progressive Dairies: An Innovative Approach to Teaching Proper Accounting Principles and Practices to Non-Accountants

Bradley Hilty

Summary

Accounting records form the foundation for managing the significant financial risk involved in modern agricultural businesses. However, reviews of on-farm accounting systems indicate that most do not provide information that is accurate enough to accomplish this task. Educational programs on how to use popular accounting software have improved the quality of records somewhat, but many mistakes are still made because the individuals responsible for maintaining those records lack a sound understanding of proper accounting principles and practices. “Accounting for Progressive Dairies” uses an innovative and highly effective approach to teach proper accounting principles and practices to non-accountants. Participants are taught how to keep their accounting systems in balance by using: 1) an expanded version of the basic accounting equation, Assets=Liabilities + Equity, which illustrates how income and expenses impact the equation through the integral relationship of the balance sheet and income statement; and 2) a system of up and down arrows to illustrate which factors in the equation must change to keep the system in balance during typical farm transactions. Day 2 of the course is devoted to advanced accounting practices such as managerial cost accounting. Instructors use hands-on, interactive exercises to keep participants engaged during the lecture sessions. This course has been offered for five of the past six years and over fifty people have completed it. Pre and post-test scores indicate a significant change in participants’ knowledge, while follow up surveys have indicated adoption of numerous accounting practices that have improved the quality of participants’ accounting records.

Details

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