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Old 10-22-2017, 02:19 PM   #1
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Default How to track livestock as meat product

I'm part owner of a small guest/cattle ranch in Colorado and I'm responsible for keeping the books. I'm trying to figure out the best way of tracking livestock that is purchased (or raised) and then sent to a processor (which of course has an associated expense) and then sold directly to our customers as meat. For example, when we buy a feeder steer, we buy it as a single animal for a certain price, but when we sell it we're selling it as processed meat in quarters, halves, etc. So far we're not selling individual cuts, but that could be in our future. So I'm assuming the animals become inventory when they're purchased, but what's the best way of tracking them coming in as one unit (and animal) and going out as other units (quarters, halves, per pound, etc.)? And what about Cost of Goods Sold? I'm assuming the original purchase price and the cost of processing goes there, but anything else? Transportation to and from processor? Feed (if not pasture fed) or supplements? Veterinary costs? Or would these just be normal expense accounts? Any advice appreciated.
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Old 10-23-2017, 11:02 AM   #2
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Default Re: How to track livestock as meat product

There are several ways to handle resale livestock which get sold as meat.

First, in all cases, the resale livestock themselves should be inventoried as Inventory Part Items--that stores their purchase cost (also include any delivery or hauling charge).

Lets say you have a Resale Cattle Item, and you recorded the purchase cost using that Item for 10 calves. Now, you have slaughtered 4 of the calves for beef...

If you will only be selling halves, quarters, etc., you can have another Inventory Part Item for the beef--let's call it Resale Beef. When beef is slaughtered enter an Inventory Adjustment in QuickBooks to transfer the appropriate amount of purchase cost from Resale Cattle to Resale Beef. (The inventory unit of measure for Resale Beef can be whole beeves, so when you sell a beef quarter, the sale quantity is 0.25, etc.)

The problem of course, occurs when you want to sell some beef as halves or quarters and some by the pound--hamburger, or steaks, etc. Then the inventory units don't match up: whole beeves don't equate to pounds. After slaughter you may know how many pounds of hanging weight you have, but that doesn't equate to final pounds of retail beef.

There are several different ways to handle this situation. The one which is simple and works for most people who harvest only a few animals at a time for meat, is to not inventory the meat:

(1) When the 4 beeves are slaughtered, enter a Sales Receipt to sell them for a $0 amount--which simply records their cost as Cost of items held for resale (or COGS).

(2) Use a number of different Non-inventory Part Items to record sales of beef (halves, quarters, hamburger, various steaks, etc.), to capture the income to an income account for resale livestock & products sold.

Your meat inventory won't be included on balance sheets--but if it's just a few head, that may not matter, or you can make a temporary adjustment for their asset value before printing a balance sheet report.

Also, Cost of items held for resale (or COGS) at the end of your tax year will be overstated if you have meat in inventory. So you should adjust the Cost of items held for resale downward for the meat you have in inventory.

As for when processing costs, etc., are deductible, my opinion is that as a cash basis taxpayer they are deductible when paid, the same as feed or other production costs. But I'm not here to provide tax advice, so ask your tax preparer how to handle such pre-sale production costs, and go with his or her recommendation.

By the way, *everything* I've described here will be discussed in detail, with examples, in the forthcoming Vol. IV of The QuickBooks Farm Accounting Cookbook™, which is due for publication by around Christmas time, this year. (Vol IV will be about resale livestock & other farm resale items.)
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