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Multi-Commodity Chart of Accounts

Commodity groups work together to build a chart of accounts that is compatible for livestock and crops. The term chart of accounts is one of those references commonly used but difficult to define. I've checked dictionaries, even accounting texts, without success. A search of the Internet for a definition yields tens of thousands of matches. Yet a quick scan of the listings reveals largely sample charts

Commodity groups work together to build a chart of accounts that is compatible for livestock and crops.

The term “chart of accounts” is one of those references commonly used but difficult to define. I've checked dictionaries, even accounting texts, without success.

A search of the Internet for a definition yields tens of thousands of matches. Yet a quick scan of the listings reveals largely sample charts of accounts from various industries, companies or organizations and accounting systems.

Perhaps those in the accounting business consider the term chart of accounts to be so basic as to be intuitively understood. It would be unwise to make that assumption here.

Business Accounting

The accounting process for a business involves determining and recording the impact of each transaction that occurs with the business. Ultimately, the cumulative affect of these transactions is reported to those interested in how the business is performing.

To make this reporting easier, we generally categorize (or sort) the transactions according to their nature (e.g. labor — wages expense) or function (e.g. animal health — veterinary services expense). This categorization is accomplished by creating a ledger account for each group of transactions we wish to have available for analysis and reporting.

Essentially, if we want specific information readily available, we had better set up a ledger account in which to capture it. Otherwise, the information gets combined with other transactions and is not practically available.

Accounts Listed

The chart of accounts is the listing of the ledger accounts that have been established for use by a business. It defines the most detailed amount of information captured in the accounting system.

Given the core purpose it serves in the accounting process, it is easy to see the importance of establishing an effective chart of accounts. The chart of accounts we choose will impact the amount of detailed information that is readily available, our ability to compare our results to others or to ourselves over time and the extent to which comprehensive analysis can be easily performed. All of this affects the knowledge we obtain about our businesses.

Pork Industry Background

Given the significance of the chart of accounts in any comprehensive accounting system, the pork industry (like many industries) established a standard chart of accounts during the development of its production and financial standards. This standard chart of accounts is essential to realize the benefits of incorporating the production and financial standards into a management process.

Over the years, many sample charts of accounts have been presented for use in agriculture.

However, as the commodity organizations began establishing a standard chart of accounts, some concern arose.

The primary concern was compatibility. As the pork, corn, soybean and beef commodity organizations established their own chart of accounts, what would be the impact on a diversified producer if they did not work together in a single accounting system?

Maintaining good accounting records seems to be a sufficiently difficult process in agriculture without the additional burden of having to assemble similar types of information differently for each commodity produced.

These concerns ultimately surfaced in a resolution by the Farm Financial Standards Council (FFSC) to meet with commodity organizations and discuss the concern and their interest in coordinating a standard chart of accounts.

The first multi-commodity chart of accounts meeting was hosted in January 1999 by the National Pork Producers Council (NPPC). Pork, corn, soybeans, beef and cotton organizations were present. The outcome was that all agreed a coordinated effort was essential to their members' interests.

The next step was a series of work sessions as part of individual commodity initiatives and, ultimately, by the multi-commodity group. By this point, pork had established the first version of its standard chart of accounts.

Corn and soybean groups conducted several meetings, using the pork chart of accounts as a starting point and modifying it to meet their specific needs. Dairy, through the national Dairy Herd Improvement Association (DHIA) Performance Economics Committee, had taken a similar approach in approximately 1997. Beef, which had established a set of accounts as part of its Standardized Performance Analysis (SPA) initiative in the mid-90s, reviewed and updated their material.

In July 1999, the corn and soybean growers hosted work sessions to dig through each organization's chart of accounts seeking compatibility.


As the standards evolved, so have the standard charts of accounts. It became apparent that some formal mechanism to keep the multi-commodity chart of accounts initiative viable over time should be considered.

A second multi-commodity chart of accounts work session was held in July 2000. The FFSC made a proposal for funding by the commodity organizations to review and coordinate chart of accounts compatibility issues. Subsequently, pork, corn, soybean and beef groups provided the funding.

The present multi-commodity chart of accounts (see pages 41-43) represents six commodities — pork, corn, soybeans, beef, cotton and dairy.

The dairy perspective is essentially the work of the DHIA Performance Economic Committee. Although the dairy industry has not been formally represented in the work sessions, participants with considerable dairy experience have spoken up to be sure dairy relevant matters are considered. However, the dairy standard chart of accounts has not been officially approved by a national dairy organization.

The multi-commodity chart of accounts uses the structure set by the pork production and financial standards, including a primary account and up to five sub-level accounts of detail. The example on the following page lists only the “primary” level.

This structure allows much flexibility by accommodating those who want a very simple chart of accounts and others who want a very detailed chart of accounts.

The pork production and financial standards require participation at only the primary level in order to submit information to the National Swine Database. Producers can add as much detail as they wish so long as the additions roll up into the more summary accounts as specified in the standard chart of accounts.

Through the work sessions, all chart of accounts incompatibilities seem to be eliminated between the various commodities. Some inconsistencies in the handling of otherwise similar types of transactions continues, however.

For example, in the “income” section of the chart of accounts, pork places several accounts at the primary level, while the other commodity organizations have chosen to combine their equivalent accounts under common headings such as “crop revenues” or “livestock products.”

Beef has chosen to segregate the sale of purchased and raised livestock into separate, primary accounts. Pork, on the other hand, distinguishes purchased and raised livestock at a more detailed level.

Still, these differences do not prevent a diversified producer from using the standard chart of accounts from each relevant commodity to assemble quality accounting information for their businesses — all under a single accounting system.

Chart of Accounts Overview

The chart of accounts tables on pages 41-43 provide a multi-commodity snapshot of an income statement and balance sheet accounts.

The chart of accounts containing income statement accounts (page 41) shows the list of accounts in the center of the table. Due to space limitations, only “primary” level accounts are listed.

To the left of the accounts listing are the same commodity focused columns as contained in the balance sheet accounts tables that follow (pages 42-43). Entries in the income statement account columns mirror those of the balance sheet accounts table.

(See note at end of story to obtain a copy of the Multi-Commodity and Sample Farm Chart of Accounts - Income Statement Accounts and Multi-Commodity Chart of Accounts Balance Sheet Accounts.)

To the right of the account listing in the income statement accounts are several columns for profit and cost centers. This configuration of profit and cost centers is intended to represent a typical, diversified producer of pork (farrow-to-finish), corn and soybeans. The account selection was achieved through personal experience and by using the NPPC chart of account application, which reflects producers' survey responses. Copies can be obtained by contacting Jenny Felt at NPPC, (515) 223-2771 or [email protected].

There is a chart of accounts appropriate to each profit and cost center of the business. This mechanism simplifies the chart of accounts. For example, it isn't necessary to have several repair accounts for each focus. Rather, a single “repairs” account tracked in conjunction with a particular profit or cost center provides appropriate detail. In this way, the chart of accounts is reduced from several hundred items to tens of items.

In fact, in this example the income statement is made up of approximately 35 primary accounts. Extending the detail level to “Sub-level 1” (not shown) would add 95 detail accounts to comprise the entire income statement account set for this producer.

The headings for cost centers include breeding, nursery, finishing, general pork, equipment, corn, general and administrative (G&A) and finance. Profit center headings are pork sales and soybeans.

The balance sheet accounts (pages 42-43) consist of the account listing and five columns headed with various commodities. An “X” in a column for a particular account indicates that a commodity organization has determined that particular account is relevant for use by its producers.

Multi-Commodity and Sample Farm Chart of Accounts — Income Statement Accounts
Commodities Accounts Profit
Cost Centers
Pork Soy/Corn Dairy Beef Cotton Area Primary Level Pork sales Soy Breeding Nursery Finishing Gen'l Pork Equipment Corn Gen & Admin Finance
X Commercial Pig Sales X
X X X X X Contract Production X
X X Crop Revenues X
X X X X Custom Services X X X
X Genetic Premium for Pigs
X X X X X Government Payments X
X X X X X Hedge (Gain/Loss) X X
X X X Livestock Products
X X X X X Other Revenue X X X X X X X X X
X X Purchased Livestock Sales
X X Raised Livestock Sales
X X X Animal Health X X X X
X X X Breeding X
X Breeding Cull Pig Sales X
X X X X X Chemicals X X
X X X X X Contract Production
X X X X X Custom Hire X X X X X
X X X Death Loss X X X
X X X X X Depreciation X X X X X X X X
X X X Feed X X X
X X X X X Fertilizer and Lime X
X X X X X Fuel, Oil & Gasoline X X X
X X X X X Insurance X X X X X X X X
X X X Irrigation Water
X X X X X Items Purchased for Resale
X X X X X Labor and Management X X X X X X X
X X X X X Marketing X X
X X X X X Miscellaneous X
X X X X X Production Enhancers X
X X X X X Professional Services X X X X
X X X X X Rent or Lease X X X X X
X X X X X Repairs X X X X X X X
X X X X X Seeds and Plants X X
X X X X X Supplies X X X X X X X X
X X X X X Taxes X X X X X X
X X X Undepreciated Cost of Breeding Animals X
X X X X X Utilities X X X X X X
X X X X X Asset Sales (Gain/Loss) X
X X X X X Dividend Income X
X X X X X Interest Expense X
X X X X X Interest Income X
X X X X X Federal Tax
X X X X X Local Tax
X X X X X State Tax

Donald W. Gillings Ag Education & Consulting LLC Savoy, IL

To request a printed copy of this article and accompanying sample reports and educational spreadsheets, please click here to e-mail Jenny Felt or call (800) 767-6888.