If you are considering a career in accounting, agricultural accounting could be an excellent choice. Yes, agricultural accountants perform a lot of the same tasks as more traditional accountants but there are aspects that are unique to the agricultural industry. If this industry piques your interest or you live in a rural area, learning more about what agricultural accounting is and what agricultural accountants do might be your next step toward a new career.
The Farm Financial Standards Council (FFSC) is the governing body of agricultural accounting. The FFSC has come up with two sets of financial guidelines that are to be used uniformly for agricultural producers. The guidelines are called Financial Guidelines for Agricultural Producers (FGAP) and Management Accounting Guidelines for Agricultural Producers.
While agricultural accountants work in a unique niche of the accounting profession, like all other accountants they must have a four-year bachelor's degree in accounting. However, there are special issues in the agricultural industry that agricultural accountants must know. For example, agricultural producers usually use cash basis accounting. So, an agricultural accountant must be able to produce cash basis financial statements when the accrual basis typically is used. Agricultural accountants must also know about equipment particular to farming, such as wind turbines. Also, the typical chart of accounts (e.g. accounts used to complete journal entries) is different for agricultural producers than a typical business entity. Agricultural accountants still do all the same tasks that other accountants do – complete monthly journal entries, financial reporting, tax items, etc. They just use methods particular to the agricultural industry.
There are several differences in the way that FGAP financial reporting is completed vs. the traditional Generally Accepted Accounting Principles (GAAP) method. One example of this is the way that assets are reported on the balance sheet. GAAP specifies that assets be listed at their book value, which is the acquired cost minus any accumulated depreciation. FGAP states that assets should be listed at their fair market value on the balance sheet. Another key difference applies to the income statement. GAAP requires that the income statement be completed based on the accrual method of accounting. FGAP requires that the income statement be completed on a cash basis, with some accrual-based adjustments made at the end of the year.
Agricultural accounting’s financial methods are very different from those of other entities. They are so unique, in fact¸ that there are accounting software products out there specific to the agriculture industry. These products produce financial statements, perform journal entries, financially close out the month all based on a farm’s unique account structure and financial requirements. An example of one of these products is FarmFact Agricultural Accounting Software.