University of Maryland Extension

Example farm income statement

Author: 
Dale M. Johnson, Extension Specialist, Farm Management

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The example farm is a part time small urban farm where the owner works nights and weekends on a 10,000 square foot plot (a little smaller than ¼ acre) in the city. The plot is intensely cultivated with a variety of vegetables produced in high tunnels and raised beds early spring through the summer peak period and into the late fall. Much of the land is double or triple cropped during the year. The produce is marketed through a CSA, on-farm sales, and minor sales to local restaurants.

Income - The income from three main marketing channels for last year is listed in the income sections – 10 member CSA ($600x10=$6,000), on-farm sales ($4,000), and minor sales to local restaurants ($3,000). Last year this farm brought in a total income of $13,000.

Expenses - The expense section first lists the variable/operating expenses of seed, fertilizer and compost, pest management supplies, and boxes. Next comes the fixed/overhead expenses of supplies, repairs and maintenance, insurance, utilities, marketing, office supplies, other expenses, and interest.

The owner/operator provides all of the labor for managing and working the farm and values this labor at $5,000. It is important for owner/operators to “pay themselves” for the work that they do. This can be accounted for by including it in the expenses like in this example. If a farm also hires other labor, this would be included on an additional line.

Depreciation is include as an expense for prorated cost of the high tunnel, equipment, and tools as discussed earlier. Total expenses last year were $12,000.

Profit - Subtracting the $12,000 expenses from the income of $13,000 results in a profit of $1,000. Remember that the owner has already paid themselves $5,000 for their management and labor so this $1,000 can be used to pay principal payments on the loan and for growing the business.

The farmer has projected the income statement for the coming year. Income is projected to increase through adding 3 more CSA subscriptions and additional on-farm market sales. Increasing income will also increase some expenses because of the additional production. Profit is projected to increase from $1,000 to $2,000.

  Example income statement. The income statement records historical income, expenses, and profits and projects estimated income, expenses, and profits for the coming year.
Figure 1: Example income statement. The income statement records historical income, expenses, and profits and projects estimated income, expenses, and profits for the coming year.

 

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