Implementing A Managerial
Accounting System Using
®
QuickBooks Pro
Lessons Learned From the
Tomorrow’s Top Agricultural
Producer (TTAP) Program
Texas Cooperative Extension
Management Accounting Team
Texas Cooperative Extension
James McGrann
Doug Richardson
Francisco Abello
Brenda Duckworth
Rob Borchardt
Stan Bevers
Christy Waggoner
Jay Yates
Karen Wilhelm
Management Accounting
Overview
What is Management Accounting?
 Accumulation of consistent,
conservative information by which a
business is managed
 End user prescribes information
needs
 Management Acctg end users =
manager, creditors, stock holders
 Tax Acctg end user = IRS
Management Accounting
Overview
Tax accounting vs. Management
accounting

Tax Acctg = cash basis acctg, calendar year,
depreciation is accelerated, results in a line item
expense
 Income = bad; Expense = good

Management Acctg = accrual-adjusted basis of
acctg in order to analyze the production cycle and
to “match” income with expenses incurred,
economic depreciation, consistent, conservative
 Income = good; Expense = bad
Management Accounting
Overview
Why is management accounting important?
 End-use of accounting information = management
 Decisions are made
 Conservative & Consistent (comparison & pro forma)

Cannot manage from Schedule F (tax return)
 Income = bad; Expense = good

Risk is better managed when cost of production is
known
 All costs are absorbed by product being sold
 Costs are matched with corresponding income
TCE Management Accounting
System
The “System”

Uses QuickBooks Pro®
 Interfaces with Excel
 Double-entry accounting package
 Relatively inexpensive

Standardized chart of accounts (to be
imported)
 Excel reports
 Schedule F


Instruction guide with examples
Farm Financial Standards Council
methodology
TCE Management Accounting
System
Classes


“centers”
Profit, cost, and support centers
Step-up cost transfer accounting
- Enterprise analysis
- Full absorption
- Production phase analysis
TCE Management Accounting
System
Centers (3 levels)
- Profit centers: phases of production
where commodity is to be sold (PC: Corn)
- Cost centers: phases of production
where value is added, but no product is
sold (CC: Irrigation)
- Support centers: accumulation of
general overhead (indirect) costs are
accumulated (SC: G&A)
TCE Management Accounting
System
Through transfer accounts (below NOI line),
costs are fully absorbed by the Profit Centers
and matched to corresponding income (via
journal entries)
Incomplete cost centers (production cycle not
complete) are held on B/S in “Investment in
growing crops” asset accounts
All Support Centers & Cost Centers are
allocated/transferred and, therefore, go to zero
Cash based tax information is intact (above NOI
line)
P&L by Center
Corn HWht Irrig
(PC) (PC) (CC)
Income
5,000 4,000
Expense
1,000
NOI
4,000 3,500
500
PWht G&A
(CC) (SC)
00
00
2,000
1,000
00
Total
9,000
3,000 7,500
-2,000 -1,000 -3,000 1,500
Other Income
Other Expense
Transfer SC
1,000
500
500
Transfer CC
2,500
00
-2,500
00
00
00
00
2,500
00
-2,000
00
500
Total Other Exp 3,500 3,000
00
00
00
00
Net Income
00
00
00
1,000
Transfer B/S
500
500
1,000 -3,000
00
TCE Management Accounting
System
What sets this particular system
apart?


Information from QBP is easily entered into
pre-designed Excel worksheets by which
reports are generated
Support materials and examples are
included
System is a financial management tool
Management Accounting
Teaching Modules
Set-up
Bridging the gap
Allocation/ Transfers
Management Accounting
Teaching Modules
Set-up & daily transactions
-
Import chart of accounts
Center description & allocation criteria
Daily transactions & common mistakes
Basic accounting instruction
Time requirements:
Producer: high
Instructor: medium
Management Accounting
Teaching Modules
Bridging the Gap

Balance Sheet
-
Beginning balance sheet (usually a challenge)

Getting it right
-
Medium level of accounting instruction
-
How transactions affect financial statements
Time requirements:
Producer: medium
Instructor: high
Management Accounting
Teaching Modules
Allocation, transfers, reporting/analysis
- In-depth accounting instruction
- Journal entries (allocations & transfers)
- Reports
P&L by Class (QBP)
FinAnalysis (Excel)
Total Unit Cost Report (Excel)
Commodity Cycle Reports (Excel)
Time requirements:
Producer: low
Instructor: low
Management Accounting
Lessons Learned - TTAP
Good management requires some
accounting knowledge
QBP is not a monster…
Rigidity leads to consistency & makes the
learning curve less steep
Requires commitment
On-site visits are a must
Tax accountant buyoff is important =
teamwork
Management Accounting
Pitfalls
Lack of willing CPAs
Mind-set = tax accounting
Business structure (cash transfers
between entities)
Balance sheet
- Incomplete
- Based on FMV (vs. historical cost)
Implementing A Managerial
Accounting System Using
®
QuickBooks Pro
Questions & Comments