USA Inventory Account for a Farm

[Roan]

Okay, this may seem simple but I must admit that I have not used my accounting education for more than 2 decades.

I am trying to set up my CoA and need several Inventory type accounts,
An example is Chicken Eggs on Hand.

My question is, since I do not purchase the eggs from my hens, how would I log the eggs gathered every day?

I would debit Chicken Eggs on Hand but what would I credit?

 

[Roan]

Actually, I think I just figured it out but need to know if this is the best way to go:

I gather 200 chicken eggs on 6/11/14

Debit Chicken Eggs on Hand by $41.67
Credit Owner's Capital by $41.67

That way, it increases my inventory and increases my capital. so that the basic accounting formula is in tact. Assets (Chicken Eggs on Hand) = Liabilities (none) + Equity (Owner's Capital)

Assets ($41.67) = Liabilities ($0.00) + Equity ($41.67)

 

[Counterofbeans]

My initial reaction when reading this was, "what?!?!?!"

If you are setting up inventory accounts, that's a fairly straight forward thing. I have no idea how capital accounts are getting involved here.

 

[Roan]

Yeah, as I said, it's been decades since I've used my accounting knowledge.

So basically, what's the correct procedure?

If I collect 200 eggs in a day and each egg is valued at $.21, I would debit Eggs on Hand by $42.00 but what would I credit since I'm not buying the eggs.

 

[bklynboy]

I think you transfer the eggs from the "chicken" asset to inventory. There is no impact on capital. There is some guidance out there on agriculture that may apply. Not my field of expertise but look IAS 41 for IFRS or ASC 905 for US GAAP. The chicken asset is valued at FV so that it includes expected production from the chicken. There should be no impact on P&L or equity/capital from producing eggs in my opinion. In other words the "chicken" asset gets reduced over time as it produces the eggs which is what the asset is being held for (or for meat) if being slaughtered.

 

[Roan]

Now that you mention it, it makes sense! Thanks tons!

 

[dorie]

@Roan
Ma'am/Sir, I have the same question as you.
What did you use in your entry?

 

[kirby]

From original post

Okay, this may seem simple but I must admit that I have not used my accounting education for more than 2 decades.

I am trying to set up my CoA and need several Inventory type accounts,
An example is Chicken Eggs on Hand.

My question is, since I do not purchase the eggs from my hens, how would I log the eggs gathered every day?

I would debit Chicken Eggs on Hand but what would I credit?

The chickens get the credit!