Understanding Financial Statements Layout

NQF Level: 2 US No: 116083
Learner Guide
Primary Agriculture
The basic
layout of financial
statements
My name: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Company: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity: . . . . . . . . . . . . . . . . . . . . Date: . . . . . . . . . . . . . . .
The availability of this product is due to the financial support of the National
Department of Agriculture and the AgriSETA. Terms and conditions apply.
Illustrate and understand the basic lay-out of financial statements
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Primary Agriculture NQF Level 2 Unit Standard No: 116083
Before we start…
Dear Learner - This Learner Guide contains all the information to acquire all the
knowledge and skills leading to the unit standard:
Title: Illustrate and understand the basic lay-out of financial statements

US No: 116083 NQF Level: 2 Credits: 2
The full unit standard will be handed to you by your facilitator. Please read the unit
standard at your own time. Whilst reading the unit standard, make a note of your
questions and aspects that you do not understand, and discuss it with your
facilitator.
This unit standard is one of the building blocks in the qualifications listed below.
Please mark the qualification you are currently doing:
Title ID Number NQF Level Credits Mark

National Certificate in Animal Production 48976 2 120
National Certificate in Mixed Farming Systems 48977 2 120
National Certificate in Plant Production 48975 2 120
Are you enrolled in a: Y N

Please mark the learning program you
Learnership?
are enrolled in:
Skills Program?
Your facilitator should explain the above
Short Course?
concepts to you.
This Learner Guide contains all the information, and more, as well as the activities
that you will be expected to do during the course of your study. Please keep the
activities that you have completed and include it in your Portfolio of Evidence.
Your PoE will be required during your final assessment.
This Learner Guide contains all the information, and more, as well as the activities
that you will be expected to do during the course of your study. Please keep the
activities that you have completed and include it in your Portfolio of Evidence.
Your PoE will be required during your final assessment.
What is assessment all about?

You will be assessed during the course of your study. This is called formative
assessment. You will also be assessed on completion of this unit standard. This is
called summative assessment. Before your assessment, your assessor will discuss
the unit standard with you.
Version: 01 Version Date: July 2006

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Assessment takes place at different intervals of the learning process and includes
various activities. Some activities will be done before the commencement of the
program whilst others will be done during programme delivery and other after
completion of the program.
The assessment experience should be user friendly, transparent and fair. Should
you feel that you have been treated unfairly, you have the right to appeal. Please
ask your facilitator about the appeals process and make your own notes.
How to use the activity sheets…

Your activities must be handed in from time to time on request of the facilitator for
the following purposes:
The activities that follow are designed to help you gain the skills, knowledge
and attitudes that you need in order to become competent in this learning
module.
It is important that you complete all the activities and worksheets, as

directed in the learner guide and at the time indicated by the facilitator.
It is important that you ask questions and participate as much as possible in

order to play an active roll in reaching competence.
When you have completed all the activities and worksheets, hand this
workbook in to the assessor who will mark it and guide you in areas where
additional learning might be required.
You should not move on to the next step in the assessment process until
this step is completed, marked and you have received feedback from the
assessor.
Sources of information to complete these activities should be identified by

your facilitator.
Please note that all completed activities, tasks and other items on which
you were assessed must be kept in good order as it becomes part of your
Portfolio of Evidence for final assessment.
Enjoy this learning experience!

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How to use this guide …

Throughout this guide, you will come across certain re-occurring “boxes”. These
boxes each represent a certain aspect of the learning process, containing
information, which would help you with the identification and understanding of these
aspects. The following is a list of these boxes and what they represent:
What does it mean? Each learning field is characterized by unique terms and
definitions – it is important to know and use these terms and definitions correctly. These
terms and definitions are highlighted throughout the guide in this manner.
You will be requested to complete activities, which could be group activities, or individual
activities. Please remember to complete the activities, as the facilitator will assess it and
these will become part of your portfolio of evidence. Activities, whether group or individual
activities, will be described in this box.
Examples of certain The following box indicates a summary of

concepts or principles to concepts that we have covered, and offers
help you contextualise you an opportunity to ask questions to your
them easier, will be shown facilitator if you are still feeling unsure of
in this box. the concepts listed.
My Notes …
You can use this box to jot down questions you might have, words that you do not understand,
instructions given by the facilitator or explanations given by the facilitator or any other remarks that
will help you to understand the work better.
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What are we going to learn?

What will I be able to do? .....................................................……………………… 6
Learning outcomes …………………………………………………………………………… 6
What do I need to know? .................................................…..……………………… 6
Introduction …………………………………………………………………………………… 7
Session 1 Gross margin Statements.................……………………………….. 8
Session 2 The income Statement......................………………………………. 16
Session 3 The balance sheet............................……………………………….. 23

Session 4 The cash flow Budget and Statement………………………….. 31
Session 5 The Financial legal Responsibilities of an agri-business…….. 40
Am I ready for my test? ........................................................... 45
Checklist for Practical assessment.......................................... 46
Paperwork to be done.............................................................. 47
Bibliography............................................................................. 48
Terms and conditions…………………………………………………… 48
Acknowledgements.................................................................. 49
SAQA Unit Standard

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What will I be able to do?

When you have achieved this unit standard, you will be able to:
Define and illustrate the gross margin statement, income statement, balance
sheet and cash flow budget as well as the different cost aspects that one can
find in a business.
Extend their learning and practice into other areas of costing and basic financial
statements.
Strive towards professional standards and practices at higher levels.
Know if the business is making a profit or a loss, and how to generate basic but
effective managerial information from it.
Learning Outcomes
At the end of this learning module, you must be able to demonstrate a
basic knowledge and understanding of:
Gross margin analysis.

Production costs.
Income statement.
Balance sheet.
Cash flow budget and statement.
Statutory/legal requirements, rules and principles.
What do I need to know?

It is expected of the learner attempting this unit standard to demonstrate
competence against the unit standard:
NQF 1: Identify the need for capital and understand the need for the recording
of the income and different costs in an agri-business.

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Introduction
The farmer should set up a business plan or project outline of how much produce or
crop he would like to calculate. It is important to know what size of field he/she
would like to cultivate or for example how big his poultry farm would be. It is
necessary that the farmer can identify the infrastructure needed for this purpose and
what inputs are needed, financially and support services. The extent of labour
needed to do the job is important in the planning phase of the project, since the
workforce or labour is responsible for spraying, weeding, cultivating, dipping, feeding
etc.
My Notes …
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Session 1 Gross margin statements
After completing this session, you should be able to:

SO 1: Define and understand the gross margin statement
and distinguish between direct and indirect costs, as well as
fixed and variable costs.
In this session we explore the following concepts:

Fixed costs.
Variable costs.
Indirect costs
Direct costs
In order to run a farm enterprise one has to incur costs i.e. one has to buy farming
requirements, and also pay for services rendered. Costs can be classified as direct
costs, indirect costs, fixed and variable costs.
Fixed costs
Fixed costs are those costs, which cannot easily be allocated to the different
enterprises or parts that make up the whole of the farm. These costs include
transport, the monthly electricity account and rental or purchase payments. These
costs are relevant to the farm as a whole. Fixed costs do not change if the size of
the farming enterprise changes. Fixed costs will have to be paid continuously even
if no production occurs.
These costs include:

Depreciation in the value of vehicles and machinery
Insurance premiums on fixed assets such as buildings and machinery
Licenses
Permanent labour
Monthly payments for the property if money is still owed.
Others
Variable costs
Variable costs are costs, which can be allocated to each individual section of the
farming enterprise. These are costs that are needed for production, and will only be
incurred when production takes place. Variable costs will change as the size of
farming enterprise is changes.

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Variable costs are costs that vary with the extent of production of outputs. When
output increases, more labour is needed, more irrigation may be required and more
fertilizer will be used. If the enterprise reduces, production costs will also reduce.
The total variable costs increases as output increases and falls as output decreases.
Variable costs include, but are not limited to the following:

Seed to plant crops
purchases such as fertilizers, chemicals
marketing costs such as packaging, materials
casual labour
transport
Irrigation costs for field crops
Indirect costs
Indirect costs are those costs that are essential for the daily running of a business.
They are also known as overheads or fixed costs as they remain the same
irrespective of the extent of production. Included in these costs are rent, interest
payments, electricity and water, municipal rates and taxes, communication costs and
management costs.
Direct costs
Direct costs are those costs that are directly linked

with the production of a crop. They are also called
variable costs as they vary with the output. They
would include materials (fertilizer, seed) and wages
paid to temporary labour.
Income sources
Income sources refer to the various obvious markets that you supply your product
to. Income sources could also include homeowners that purchase things like
manure from a chicken farmer or spent bark mix for compost. An income source
thus is not limited to those sources that you purchase your core products from. The
money you would receive for your produce should be known to you in order to set
up a budget.
Material costs
Material costs are costs for items that are used for production and may include
costs for fertilizer, pesticides, herbicides, etc.
Production costs
Production costs entail all the costs involved in producing as well as the costs
associated with delivering the product to the market. It will therefore include the
costs associated with the field production, as well as the packaging and transport
associated with marketing.

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Foreign factor costs
Foreign factor costs are costs that are totally unforeseen at the beginning of the
season, when the production budget is prepared. Such costs could include a new
levy for training that is implemented by the government.
The Gross margin The Gross margin is defined as the amount that
can be calculated by the difference between
enterprise gross value of the product (Gross
income) and the directly allocated variable costs.
• A financial budget for cotton can be calculated if the following is known:

• Field size of the crop (cotton), the estimated yield and the crop value per ton or per
kg. If one assumes that you would get R3.10 per kg seed cotton, and all input costs
adds up to a total of R5.561, then the Gross income would be R9300 @ 300kg per ha,
(calculated at the above price of R3.10 per kg) and the Gross margin would be the
difference between the Gross income and the input costs.
• In this case an amount of R3 739.00.
Please complete My Notes …

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I understand Questions that I still would

Concept (SO 1)
this concept like to ask
The ability is demonstrated to explain

and define fixed and variable costs.
The ability is demonstrated to identify

and quantify the fixed and variable
costs.
The ability is demonstrated to identify

and explain the various income
sources.
The ability is demonstrated to list and

quantify the various income sources.
Material cost, labour cost and overhead

costs are defined and explained.
All possible material costs, labour,

direct and indirect costs for a specific
agri-business are listed.
An understanding of the gross margin

concept and its application within
agriculture is demonstrated.
The ability to complete a template,

show and calculate the production costs
and gross margin is demonstrated.

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1
Instructions: My Name:
Group Activity ..................
My Workplace:
..................
My ID Number:
SO 1 AC 1-8
...................
1. Complete the template for Gross margin statement and explain what the
following terms mean? – Fixed costs, variable costs, sources of income, material
costs, labour costs, direct and indirect costs mean.
2. Explain why Gross margin statement is so important to agriculture?
Instructions to the learner:

You have been provided with two templates.
The first is an example of a gross margin statement that describes the

production of potatoes under intensive irrigation.
The second template is a blank template that you need to complete. Use figures
relating the production cycle of the crop you are involved with.
If you get stuck on a point ask the group or the facilitator to help you.
Note: Remember that this is just an exercise and you can research exact figures
when you get back to your workplace.
Before you fill in the blank template you need to have worked through the points
above. This will help that the blank template makes sense to you and is essential for
you to be able to complete the summative assessment.
After having worked through the above points you need to record the fixed and
variable costs as well as the various income sources.
Ensure that you gather all the possible material and labour costs that will occur in
the production cycle of your crop, and place them into the blank template provided.
You are required to provide the total production cost compared to the gross margin
and indicate the gross profit you could expect from your crop.

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Template 1, providing the Gross margin statement, for a farmer who has 400
hectares of potatoes under irrigation.
Production of potatoes under irrigation. Potatoes
Yield : (ton/ha) 60
Price/ton R1500
Rand per year income Hectare
Product sales 90000
Gross production value R90000
Direct expenses
Seed 13 800
Fertilizer 2 877
Weed control 358
Pest control 4 493
Spraying costs- aero plane 990
Harvesting costs 400
Irrigation costs 359
Fuel costs 300
Total direct costs R23577
Variable expenses
Harvest insurance 2400
Marketing costs 8625
Packaging 5000
Casual labour 3500
Transport costs from land(10km) 500
Transport costs 6500
Total Variable expenses R26525
Fixed expenses
Taxes 150
Fuel 497
Depreciation and repairs 1708
Operators costs 132
Interest on irrigation equipment 1245
Interest on production costs 1658
Telephone 100
Accounting and legal fees 250
Management salaries 250
Total fixed expenses R5990
Total expenses R56092

Split margin/ expected profit per ton R33908
Break even (price/ton) R1200
Break even (yield/ha) 48 TONS

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3. Discuss, in your group, why a farmer needs to have an understanding of the

gross margin concept and its value in agriculture.

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Now, complete Template 2 below:
Template 2. This is a gross margin statement for a generic production cycle.

Complete this template as an example.
Yield : (ton/ha)
Price/ton
Rand per year income Hectare
Product sales
Other sources of revenue
Other sources of revenue
Gross production value
Direct expenses
Total direct costs
Variable expenses
Total Variable expenses
Fixed expenses
Total fixed expenses
Total expenses
Split margin/ expected per kg/ton?
Gross margin.
Break even (price/ton)
Break even (yield/ha)
Facilitator comments: Assessment:

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Session 2 The income statement

SO 2: Define and understand the income statement.

Elements of an income statement.
2 .1 Elements of an income statement

Farm Income
Refers to those items that represent the income to the farm business.
Farm Expenditure
Refers to the costs of operating a farm business. Some of the items can be
allocated to the specific production enterprise and some cannot. Allocated costs
include seeds, fertilizers, feeds, labour costs etc… Non-allocated costs (overhead
costs) include permanent labour wage, telephone, fuel, repairs, electricity etc.
Net Farm Income

The net farm income is the income the farm generates after overheads have been
deducted. It is calculated by deducting overheads from the total farm gross margin.
Net farm income provides a measure of performance and factors of production
including management, capital and land.
Farm Profit
This is the income that remains after all costs have been deducted.
This is calculated by deducting external factor costs from the net farm income. The
farm profit is a measurement of the return or reward to the owner, management,
capital and land.

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SCHEMATIC DIAGRAM OF INFORMATION FLOW IN A FARM INCOME STATEMENT
TOTAL FARM MARGIN
Over Including payment to management, interest on capital and lease or

head rental on land; electricity, water,
costs
Variable Fuel, oil, and lubricants
costs Repairs and spares for vehicle and machinery
Variable costs in respect of sundry farm income
Others
Fixed Depreciation on vehicle and machinery
costs Insurance on fixed improvement, vehicle and machinery
Licenses
Regular labour, Repairs for fixed improvements.
Others
Net Farm Income
External Factor cost
Farm Profit

Activity 2 at the ..........................................
end of this ..........................................
session.
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Concept (SO 2)
Ability is demonstrated to understand,

distinguish between and quantify all
possible fixed and variable costs such
as marketing, personnel and admin
costs, as well as foreign factors costs.
The ability to provide inputs to an

income statement, which reflects
production costs, income, foreign cost
and profits or losses, is demonstrated.
The ability to generate managerial

information from the income statement
is demonstrated.
My Notes …
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2
Group Activity ..................
My Workplace:
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My ID Number:
SO 2 AC 1-3
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After having completed activity one, you will be familiar with the terminology and as
a group complete this activity. The activity deals with income statements.
Go through the example that provides information on the production of potatoes

under dry land conditions (template 2.1).
In this example there are fixed, variable and foreign costs that have been omitted.
As a group, identify the costs to be omitted. Report back to the bigger group. It is
important that all the information is documented, as it will help you to prepare for
the completion of a generic income statement (template 2.2).
After the group session you may complete template 2.2 on any other crop or
produce than potatoes. The completed generic income statement (template 2.2)
must reflect the production cycle of the crop you are involved with. (Use any
amounts just to complete the example).
Once you have completed your income statement decide whether you have made a
profit or a loss. It is vital to record all information from the feed back sessions, as it
will help you in the summative assessment.
My Notes …
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Template 2.1
Income statement for production of potatoes under dry land farming (example)
Fixed costs/ R1000
Depreciation (facilities and equipment) 800
interest 1500
Repairs and maintenance (facilities and 600
equipment)
Taxes 200
insurance 480
Office expenses 300
telephone 12
accounting 200
Travel 1000
Management salaries 600
automotive 2000
8600
Foreign costs
Training 300
Inspection by health inspector 50
Traffic fines 3
353
Variable costs
Seed 1500
Advertising 120
electricity 200
Fuel 400
Sales costs 500
Labour 1000
Fertilizer 500
herbicides 200
pesticides 100
Harvest insurance 60
packaging 100
Transport costs 200
4880
Total expenses 13833
Sources of income
Production sale- first grade 15000

Production sale- second grade 3000
Production sale- third grade 1000
Seed potatoes- for planting 2500
Sale of scrap machinery 50
Total income 21550
Total income – total expenses 21550-13833= 7717

profit R7717

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Template 2.2
Generic Income statement
Fixed costs/
Depreciation (facilities and equipment)
interest
Repairs and maintenance (facilities and
equipment)
Taxes
insurance
Office expenses
telephone
accounting
Travel
Management salaries
automotive
Foreign costs
Variable costs
Total expenses
Sources of income
Total income
Total income – total expenses

Profit
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Record all information / notes

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Session 3 The balance sheet

SO 3: Define and understand the balance sheet.

Elements of balance sheet.
Balance sheet analysis.
3.1 Introduction
A balance sheet is a statement summarizing the assets and liabilities of a business at
a particular point in time. This time is usually at the end of the financial year. The
primary function of a balance sheet is to measure the financial solvency of a
business as it indicates the extent to which the assets match to the liability.
3.2 Elements of balance sheet

A balance sheet is made up of three aspects: capital, assets and liabilities. These
three are related to one another as shown in the equation below:
Capital = assets – liability
Or
Assets = capital + liability
It is important to recognize that assets and liabilities are usually grouped

according to their lifespan as follows:
Short-term/current
Medium term
Long-term
They have a strong impact on the results of financial analyses of a business.

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3.3 Balance sheet analysis

Balance sheets are used to establish the financial strength or weakness of the
business concern. Furthermore they are used to establish trends from historical
information contained in the balance sheet.
Financial Ratio Analysis is used to gain overall financial view of a farm business as
well as indicating financial progress.
Financial ratios are classified according to the following:

Solvency
Liquidity
Growth
Solvency Solvency refers to the business’s ability to

meet its long-term obligations if it does not
go bankrupt.
Liquidity Liquidity measures the business’s ability to
continuously generate sufficient cash to
meet its financial commitments. A decrease
in liquidity will render the farm business
unable to meet its short-term requirements,
continue operations and expand. A
business’s cash in the bank is referred to as
a liquid asset.
Growth Growth of a business or farming venture is
measured by the change in value of the business
from one financial period to the next.
Assets - are economic resources that can provide potential service in the future.
These are divided into non-concurrent assets that would include property, plant
and equipment. In addition there will be current assets, sometimes referred to as
liquid assets, which includes the debtors and other receivables payments, bank
balances and cash.
Short-term assets -current assets that management could convert to cash

within the year (cash, receivables, stock)
Medium term assets – intermediate assets that would take longer than a year,
but shorter than five years to convert to cash. Includes investments that have a
set time frame to them - policies or actual intellectual property (work that can be
patented but takes time).

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Long-term assets - fixed assets like machinery, land, buildings, motor vehicles,
computers, furniture and fixtures.
Liabilities - are obligations that the owner must pay to other parties such as
creditors, employees
Short term liabilities - current liabilities- these are amounts that must be paid
within a year. - Salaries and wages, taxes, short-term loans, money owed to
suppliers of goods and services.
Medium term liabilities - are amounts owed on contract work carried out on
research that does not have a specified time limit, but will be paid for when the
project is complete.
Long-term liabilities - these are debts that are due on long-term (more than
one year) loans (mortgage) from the Land Bank. These are bank bonds on
farmland and infrastructure, machinery and plants that are paid off over twenty
years.
Owners’ equity is the amount owed to the owner after the liabilities have been
deducted. - For example, if the owner of a farm is worth R30 000 000 and owes
the bank R20 000 000, you would subtract the amount owed on the farm from
the owner’s capital worthiness. This renders the owners equity which would be
R10 000 000. If the farm is a closed-corporation, the amount owing to the
members’ share after all amounts are deducted which is owed on the farm and
other liabilities , is called the employees’ own.

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session.
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Concept (SO 3)
An ability is demonstrated to identify

and quantify the components of short-
term assets.
Ability is demonstrated to identify and

quantify the components of short-term
liabilities.

quantify the components of medium
term assets.

quantify the components of medium
term liabilities.

and quantify the components of long-
term assets.

and quantify the components of long-
term liabilities.
An understanding of owner`s equity

and what it consists of is
demonstrated.
The ability to complete a balance sheet

when the template is given is
demonstrated.
My Notes …
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3
Please complete ..................
My Workplace:
..................
My ID Number:
SO 3 AC 1-8
...................
A balance sheet should be updated every month to keep track of changes within the
business. Usually at the end of a financial year a balance sheet is compiled to
summarize the non-concurrent assets and the current assets.
A typical balance sheet would look like this:

31 March 2006-10-23 Notes: 2004/2005 2005/2006-10-23
Farm owner: TJ. Buthelezi
Assets: R R
Non-concurrent assets (Fixed 70 000 100 000
assets)
(Property, plant and equipment)
Current Assets (Running costs) 200 000 300 000
(Debtors and other receivables)
Bank balances and cash 40 000 20 000
Total Assets: 310 000 420 000
Equity and liabilities:

Capital and reserves 250 000 390 000
(Accumulated funds)
Current liabilities 60 000 30 000
(Creditors and other payables)
E.g. labour, salaries, interest
Total equity and liabilities 310 000 420 000
Note to the learner: You should now complete activity 3 in your workbook, and
compile a balance sheet for your own farm. Make use of any figures (amount) to
illustrate your point. Please look at the components of the business plan and decide
on what equipment you have and see if you can come to figures for your assets.
Calculate your cash and your costs. Complete Template 3.2 in your workbook.
Look at the example of a balance sheet for the potato farm provided (template 3.1).
Apply what you learned in session 3 in order for the sheet to make sense. Write
down anything that you do not understand and discuss it with the main group. The
facilitator will now help you to make sense of those points of misunderstanding.

28
Template 3.1
Potato farm during year 2005/2006

Values presented is (x R1000)
Fixed assets (long term) 2004 2003
Farm land– 400 hectares 90 80
Plant and machinery 30 25
Buildings 20 16
Motor vehicles 10 8
Computerized equipment .100 .80
Trade mark 10 9
Non-current receivables 10 9
Deferred taxation 8 -
Deferred expenditure 6 -
Total fixed assets (long term) 184.1 147. 8
Thus; R184 100.00 R147800.00
Medium term assets
Investments in stock 1.200 1
Total Medium term assets 1.200 1
Short term assets
cash .200 .50
receivables .300 .200
Merchandise inventory 1.200 1.100
inventories 1.000 .900
Taxation prepaid - -
Deferred expenditure .500 .400
Total Short term assets 3.200 3.1
Total assets 188.5 150,9
Equity
Capital and reserves
Share capital and premium 56.55 52
Non distributable reserves 42.412 26
Retained earnings 14.137 13
Debentures 21.206 26
minority interests] 7.068 13
Total equity 141.375 130
]
Liabilities
Non-current liabilities
Long term borrowing 14.137 7.84
Deferred taxation 10,603 3.92
Retirement benefit obligations 7.068 1.96
Deferred revenue 3.534 1.96
Total-Non-current liabilities 35.344 15.68

29
Current liabilities
Trade and other payables 4.712 2.08
Bank overdraft 2.356 1.04
Current tax liabilities 1.178 .522
Wages and salaries 2.3562 1.04
Deferred revenue 1.1781 .522
Total- Current liabilities 11.781 5.22
Total liabilities 47.125 20.9
Total assets
Total equity 141.375 130
Total liability 47.125 20.9
Total equity and liability 188.500 150.9

30
At the end of the group session, complete the blank balance sheet provided
(Template 3.2). Use the example as a guide and ask the group and facilitator for
help if you get stuck. Complete the template for the crop you are involved with.
Keep notes of proceedings during the activities.
Template 3.2
Balance sheet your enterprise
Fixed assets-long term 2004/2005 2005/2006
Non-concurrent assets (Long-term &

Medium term assets)
Current assets (Short term assets)
Total assets
Equity
Capital and reserves
Total equity
Liabilities:
Current liabilities
Total liabilities
Total assets
Total equity
Total liability
Total Equity and liabilities

31
Session 4 The cash flow Budget and

Statement
SO 4: Define and understand the structure of a cash-flow
budget and statement.

Cash flow budget.
The need for the 12-month cash flow budget.
4.1 Introduction to cash flow budget

Cash flow is the money needed to run your company on a day-to-day basis. This is
the money available after all the expected expenses have been covered, for
unexpected expenses.
Cash flow statements are a tool that reflects the sources from which funds are
generated during the accounting period as well as the purpose for which these were
used.
The cash flow statements must be compiled for one year or at least until positive
cash flow is achieved if not attained within the first year.
The most important feature of a cash flow budget is that only cash expenses and
cash income are indicated at the estimated time of payment or receipt.
The cash flow statement reflects the source from which funds were generated
during the accounting period. Cash flow is an important consideration when it comes
to financing a business. The bank and monthly bank balance are important
elements of a cash flow statement. A cash flow statement consists of three
components: income, expenditure and bank balance.
Income consists of operating income, capital income and cash income.
Expenditure is classified as operating expenditure, capital expenditure and debt

repayment.
Shortfall/surplus is calculated by deducting total expenditure from the total

income.

32
The various components of a cash flow budget statement are:
Opening cash balance Farm Income

Capital income
Non farm Income
Farm Operating Expenses Fertilizers
Leases or rental
Sprays
Wages
Repairs
Capital expenditure Machinery
Livestock
Other expenditures Income statement
Living wages
Scheduled debt payment Interest
Redemption
Total cash outflow
Closing cash balance
4.2 The need for the twelve month cash

flow budget
In order to understand a cash flow budget it is necessary for a farmer to understand
which activities take place during the season, and the associated costs to complete
these activities successful. For example, cotton is a cash crop. In order to set up a
cash flow budget the farmer must have a cultivation programme in place as the crop
will need attention (insecticides, fertilizers, picking, ext.) at different growing stages,
and therefore, cash must be available for every event according to the programme
arranged beforehand.

33
August Sept. Oct. Nov. Dec. Jan. Febr. March April May June July
Slash
or
graze
Plough
& disc
Plant
Weed
control
Top -
dress N
Scout and
spray (SS)
Pest
Control
Pest Control
Harvest
Soil analyses
Maintenance
Training
COTTON GROWTH
PATTERN
xxxxxxx
xxx x xxxxxxxxxxx xxxxxxxxx xxxx xxxxx xxxxxxxx xxxx xxx xxxx
Plant Vegetative phase (6w) Reproductive phase
First lowers & peak
Boll development
Bolls open
Harvest & Sell
A CRITICAL PATHWAY OF ACTIVITIES FOR COTTON PRODUCTION
The farmer should have a good knowledge of:
i. Length of the crop season.
ii. In which months every activity should take place to produce the crop.
iii. Plant development for each crop cultivated should be clear, in order to
express good pest control, and optimum yields.
iv. The farmer should set up an outline of the crop size he would like to
produce.
v. He/she should be able to recognize the infrastructure available

vi. Which inputs are needed, financially and support services.

34
vii. Have a clear comprehension of the available workforce (labour)
viii. When a critical programme has been drawn up as above, the learner can
compile cash flow statements. These are probably the most important aspect
of the financial management of a farming business. Many farming based
businesses currently experience cash flow related problems. A 12-month
cash flow budget predicts an estimate of cash needed for a year.
EXPENDITURE/CASH
OUTFLOW Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Office lease 1 500 1 500 1 500 1 500 1 500 1 500 1 500 1 500 1 500 1 500 1 500 1 500 18 000
Traveling expenses - 5 000 - - - - - - - - - - 5 000
Training Equipments - 3 500 - - - - - - - - - - 3 500
Vehicle costs 30 000 - - - - - - - - - - 30 000
Stationery 1 200 - - - - 1 200 - - - - - - 2 400
Admin costs 100 50 30 40 30 50 40 30 20 40 50 30 510
Telephone cost 500 450 300 250 500 250 200 250 100 250 150 100 3 300
Electricity 150 200 250 180 150 280 200 250 150 200 100 250 2 360
TOTAL 65 070
EXPENDITURE 33 450 10 700 2 080 1 970 2 180 3 280 1 940 2 030 1 770 1 990 1 800 1 880
ACCUMULATED 65 070
DEFICIT 33 450 10 700 2 080 1 970 2 180 3 280 1 940 2 030 1 770 1 990 1 800 1 880
A Cash flow budget is a budget that breaks the yearly cash flow into twelve-
month segments. This allows for greater control of the flow of cash.
A cash flow statement presents the source and use of the funds of the enterprise
according to operating activities, investing activities and financing activities.
Operating activities describes the cash received for the product and cash
payments made for production costs.
Investing activities describes the purchasing of new equipment or expanding the

operation.
Financing activities describes the repayment of long-term loans.

35
Cash flow table for cotton production
Item: Aug Sept Oct. Nov. Dec. Jan. Feb. Mar. April May June July
Plough 300.00
Disc 200.00
Seed 70.00
Plant (Hand) 195.00
Roundup 65.00 65.00
Fertilizer LAN 95.00
Labour weeding 35.00 35.00
Labour spraying 35.00 35.00 35.00 35.00
Jassid control (Mospilan) 60.00 30.00
Stainer control (Fastac) 21.00 22.00
Harvest 250.00 250.00
Total: 300.00 565.00 135.00 95.00 151.00 87.00 250.00 250.00
Cumulative 300.00 865.00 1,000.00 1,095.00 1,246.00 1,332.00 1,582.00 1,832.00
Loan plus interest (13.5%comp.) 303.00 878.00 1,025.00 1,132.00 1,145.00 1,158.00 1,324.00 1,425.00 1,694.00 1,966.00
Income: 1,550.00 1,550.00

Activity 4 at the ..........................................
end of this ..........................................
session.
..........................................
. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
..........................................
.........................................
My Notes …
. ...................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................

36

Concept (SO 4)
The ability to source various financial

data for the cash-flow budget and
statement is demonstrated.
The ability to fill in the template of a

cash flow budget and/or statement is
demonstrated.
An understanding of the need for a

twelve-month budget is demonstrated.
An understanding of the various

components of a cash flow budget and
The ability to transfer the month-end

balance to the next month`s opening
balance is demonstrated.
An understanding of the influence

interest rates on the budget and
The ability to interpret basic results of

the budget and statement is
demonstrated.
An understanding of how the cash-flow

budget/statement links up with the
income statement is demonstrated.
An understanding and ability to use the

cash-flow budget in a cash-flow

37
4
Group Activity ..................
My Workplace:
..................
My ID Number:
SO 4 AC 1-9
...................
In this activity an example of a month-to-month budget and statement for cash flow
of an operation is provided (Template 1). The example only provides information for
two of the twelve months.
Additional Information:
Budget statements are often presented on two separate sheets. To simplify the
process we will use only one combined statement.
Brainstorm in your groups: Why it is necessary to have a twelve-month budget and

not only an annual budget? This is applicable to agricultural businesses where
income and expenses vary over the twelve months. It is also important to notice
that an agricultural operation often owes money to various entities, and the
repayment of the interest needs to be budgeted for. It could happen that in some
months a loss may be budgeted.
The gross margin statement, income statement and the balance sheet provided as
an example in the Learner Guide, contain sufficient data for you to complete the
blank copy of the cash flow statement (Template 4.2). (You can use any figures to
complete this exercise).
Before you start this exercise, you need to go through the example copy to get an
idea of what is expected of you to consummate the blank copy. An important point,
you must determine how to transfer the one-month’s end balance to the next
month’s opening balance.
Once you have completed the input of required data into the blank statement you
need to look for important results that are highlighted, such as whether the cash
flow is positive or negative. Also determine whether and how you could improve the
flow of cash.
It is advisable to ask the group and the facilitator for guidance as this section can
get confusing and complicated.
At the end of this exercise you must be able to link the cash flow budget/ statement
to the income statement.

38
Template 4.1
Mark activities (with an X) when they are scheduled to take place (you could adapt
the months and activities to suit the crop).
Activity table for crop

production
Plough
Disc
Seed
Plant (Hand)
Roundup
Fertilizer LAN
Labour weeding
Labour spraying
Early Pest control
Mid-season Pest control
Late-season Pest control
Harvest
Total:

39
Template 4.2.
Cash flow budget /statement (values in brackets are negative). Use the example in
the Learner Guide and complete the table below. Check Template 4.1 to see which
months you have already scheduled which tasks.
Cash flow table for crop

production
Plough
Disc
Seed
Plant (Hand)
Roundup
Fertilizer LAN
Labour weeding
Labour spraying
Early Pest Control
Mid season Pest Control
Late season Pest Control
Harvest
Total:
Cumulative (budget)
Budget carried over from
previous month
Loan plus interest (13.5%
comp.)
Gross Income:
Gross margin
(expenditure)
Net Profit (negative

number in brackets)

40
The Financial legal

Session 5 Responsibilities of an agri-
business
SO 5: Demonstrate an understanding of the legal
responsibilities of an agri-business owner.

Legal responsibilities of an agri-business owner.
There are many South African agricultural laws and Acts that govern the way in
which a farmer operates on a farm. In groups of four, discuss these laws and
provide your understanding of why they are in place. These laws and Acts include:
Labour laws that refer to the following Acts;
Taxes: PAYE and income tax.
Types of crops produced: Restrictions on the production of certain products

(cannabis/dagga) or certain animals.
Environmental legislation: The control of activities that concern the environment.
Health and safety: Storage and dealing with livestock.

Export and import: Certain crops and animals are not allowed to be imported or
exported.
Labour and industrial relations: These are laws that cover the relationship
between employers and employees and the state.
Basic conditions of employment Act of 1983.
Occupational health and safety Act, 1993.
Wages Act.
Workmen’s compensation Act.
Unemployment insurance Act.
Labour relations Act of 1995.
Employment equity Act of 1998.
Skills development levies Act of 1998.

41
Skills development Act of 1998
Income tax: A tax levied by a government on the income of individuals and

business firms. Taxes on personal income and business profits are major
revenue sources for South Africa. These taxes are applied to repair roads and
infrastructure, pays for government hospitals and clinics, government services
(policy, military), training subsidies, housing etc. Discuss your personal feelings
about taxes
Value added tax - it is the law of the country that tax must be included in the
price of goods and services, commonly referred to as VAT-
Workmen’s compensation - this is an Act that forces employers to insure their

employees against disablement or death caused by accidents while they are on
duty or illness caused as a result of the kind of work that they do.
Skills levy payments - this is a levy imposed by the government on all businesses
and government institutions in the country. This levy is set up to accelerate the
training and development of skills in all areas of the workforce and to ensure
that South Africa becomes a world-trading competitor.

Activity 5 at the ..........................................
end of this . .........................................
session.
. .........................................
. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .........................................
My Notes …
. ...................................................................................
. ...................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................

42

Concept (SO 5)
An understanding of the legal

environment in which the agribusiness
operate is demonstrated.
An understanding of what income tax is

and why it should be incorporated
within the planning process is
demonstrated.
An understanding of what value-added

tax is and why it should be
incorporated within the planning
process is demonstrated.
An understanding of what workman`s

compensation is and why it should be
An understanding of what skills levy

payments is and why it should be
My Notes …
You can use this box for your own notes/comments.
. ...................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................
....................................................................................

43
5
Group Activity ..................
My Workplace:
..................
My ID Number:
SO 5 AC 5
...................
1. Give a brief understanding why there is a need for legislation covering every
aspect of agri-business (from the environment to labour relations)?

44
2. Give a brief understanding of the following and explain why you need to
make provision for these expenses in your budget:
Understanding Reason for provision
Income tax
Value added tax
Workman’s
compensation
Skills levy payment

45
Am I ready for my test?

Check your plan carefully to make sure that you prepare in good time.
You have to be found competent by a qualified assessor to be declared
competent.
Inform the assessor if you have any special needs or requirements before
the agreed date for the test to be completed. You might, for example,
require an interpreter to translate the questions to your mother tongue, or
you might need to take this test orally.
Use this worksheet to help you prepare for the test. These are examples of
possible questions that might appear in the test. All the information you
need was taught in the classroom and can be found in the learner guide that
you received.
1. I am sure of this and understand it well
2. I am unsure of this and need to ask the Facilitator or Assessor to explain what it means
Questions 1. I am sure 2. I am unsure
1. Explain what the following terms mean. Fixed,

variable costs, sources of income, material costs,
labour costs, direct and indirect costs mean
2. Demonstrate the ability to fill out an income

statement using the information gathered during
your learning place experience and workplace
research that relates directly to your production
cycle
3. From the income statement identify what

information would be valuable to management
4. Explain what is meant by short, medium and long

term assets?
5. Explain what is meant by short, medium and long

term liabilities
6. Explain the need for a twelve month cash flow

budget
7. Give a brief understanding why there is a need for

legislation

46
Checklist for practical assessment …

Use the checklist below to help you prepare for the part of the practical
assessment when you are observed on the attitudes and attributes that you need
to have to be found competent for this learning module.
Answer Motivate your Answer

Observations
Yes or No (Give examples, reasons, etc.)
Can you identify problems and deficiencies

correctly?
Are you able to work well in a team?
Do you work in an organized and

systematic way while performing all tasks
and tests?
Are you able to collect the correct and

appropriate information and / or samples
as per the instructions and procedures that
you were taught?
Are you able to communicate your

knowledge orally and in writing, in such a
way that you show what knowledge you
have gained?
Can you base your tasks and answers on

scientific knowledge that you have learnt?
Are you able to show and perform the

tasks required correctly?
Are you able to link the knowledge, skills

and attitudes that you have learnt in this
module of learning to specific duties in
your job or in the community where you
live?
The assessor will complete a checklist that gives details of the points that are
checked and assessed by the assessor.
The assessor will write commentary and feedback on that checklist. They will
discuss all commentary and feedback with you.
You will be asked to give your own feedback and to sign this document.
It will be placed together with this completed guide in a file as part
of you portfolio of evidence.
The assessor will give you feedback on the test and guide you if there are
areas in which you still need further development.

47
Paperwork to be done …
Please assist the assessor by filling in this form and then sign as instructed.
Learner Information Form
Unit Standard 116083
Program Date(s)
Assessment Date(s)
Surname
First Name
Learner ID / SETA
Registration
Number
Job / Role Title
Home Language
Gender: Male: Female:
Race: African: Coloured: Indian/Asian: White:
Employment: Permanent: Non-permanent:
Disabled Yes: No:
Date of Birth
ID Number
Contact Telephone
Numbers
Email Address
Signature:
Postal Address

48
Bibliography
Books:
Cash flow diagram: Adapted from Cotton SA Skills Training Program
Terms & Conditions

This material was developed with public funding and for that reason this material
is available at no charge from the AgriSETA website (www.agriseta.co.za).
Users are free to produce and adapt this material to the

maximum benefit of the learner.
No user is allowed to sell this material whatsoever.

49
Acknowledgements
Project Management:
M H Chalken Consulting
IMPETUS Consulting and Skills Development
Donors:
Boland College
Weskus College
Authenticator:
Le Toit Management Consultants cc
Technical Editing:
Mr R H Meinhardt
Ms A Bennett
Language Editing:
Mr D Erasmus
OBE Formatting:
Ms P Prinsloo
Design:
Didacsa Design SA (Pty) Ltd
Layout:
Ms A. du Plessis
Ms A. N Matloa

All qualifications and unit standards registered on the National Qualifications Framework
are public property. Thus the only payment that can be made for them is for service and
reproduction. It is illegal to sell this material for profit. If the material is reproduced or
quoted, the South African Qualifications Authority (SAQA) should be acknowledged as the
source.
SOUTH AFRICAN QUALIFICATIONS AUTHORITY

REGISTERED UNIT STANDARD:
Illustrate and understand the basic layout of financial statements

SAQA US ID UNIT STANDARD TITLE
116083 Illustrate and understand the basic layout of financial statements
SGB NAME REGISTERING PROVIDER
SGB Primary Agriculture
FIELD SUBFIELD
Field 01 - Agriculture and Nature Conservation Primary Agriculture
ABET BAND UNIT STANDARD TYPE NQF LEVEL CREDITS
Undefined Regular Level 2 2
REGISTRATION REGISTRATION START REGISTRATION END SAQA DECISION
STATUS DATE DATE NUMBER
Registered 2004-10-13 2007-10-13 SAQA 0156/04
PURPOSE OF THE UNIT STANDARD

A learner achieving this unit standard will be able to define and illustrate the gross margin statement,
income statement, balance sheet and cash flow budget as well as the different cost aspects that one
can find in a business.
In addition learners will be well positioned to extend their learning and practice into other areas of
costing and basic financial statements or, to strive towards professional standards and practices at
higher levels.
Competent learners will know if the business is making a profit or a loss, and how to generate basic
but effective managerial information from it.
LEARNING ASSUMED TO BE IN PLACE AND RECOGNITION OF PRIOR LEARNING

It is expected of the learner attempting this unit standard to demonstrate competence against the
following unit standard or equivalent:
• NQF 1: Identify the need for capital and understand the need for the recording of the income and
different costs in an agri-business.
UNIT STANDARD RANGE

Whilst range statements have been defined generically to include as wide a set of alternatives as
possible, all range statements should be interpreted within the specific context of application.
Range statements are neither comprehensive nor necessarily appropriate to all contexts. Alternatives
must however be comparable in scope and complexity. These are only as a general guide to scope
and complexity of what is required.

UNIT STANDARD OUTCOME HEADER
N/A
Specific Outcomes and Assessment Criteria:
SPECIFIC OUTCOME 1
Define and understand the gross margin statement and distinguish between direct and indirect costs,
as well as fixed and variable costs.
OUTCOME RANGE
All direct costs that forms part of the production costs not limited to material, labour, overheads,
stock and production costs, direct and indirect cost. All income generated by the specific enterprise
should be identified and quantified.
ASSESSMENT CRITERIA
ASSESSMENT CRITERION 1
The ability is demonstrated to explain and define fixed and variable costs.
The ability is demonstrated to identify and quantify the fixed and variable costs.
The ability is demonstrated to identify and explain the various income sources.
The ability is demonstrated to list and quantify the various income sources.
Material cost, labour cost and overhead costs are defined and explained.
All possible material costs, labour, direct and indirect costs for a specific agri-business are listed.
An understanding of the gross margin concept and its application within agriculture is demonstrated.
The ability to complete a template, show and calculate the production costs and gross margin is
demonstrated.
SPECIFIC OUTCOME 2
Define and understand the income statement.
OUTCOME RANGE
The income statement refers to income, production costs, net farming income, foreign factor costs,
farming profit/loss.
ASSESSMENT CRITERIA

An ability is demonstrated to understand, distinguish between and quantify all possible fixed and
variable costs such as marketing, personnel and admin costs, as well as foreign factors costs.
The ability to provide inputs to an income statement, which reflects production costs, income, foreign
cost and profits or losses, is demonstrated.
The ability to generate managerial information from the income statement is demonstrated.
SPECIFIC OUTCOME 3
Define and understand the balance sheet.
OUTCOME RANGE
Short term, medium term and long-term assets and liabilities and owner`s equity.
ASSESSMENT CRITERIA
An ability is demonstrated to identify and quantify the components of short-term assets.
An ability is demonstrated to identify and quantify the components of short-term liabilities.
An ability is demonstrated to identify and quantify the components of medium term assets.
An ability is demonstrated to identify and quantify the components of medium term liabilities.
An ability is demonstrated to identify and quantify the components of long-term assets.
An ability is demonstrated to identify and quantify the components of long-term liabilities.
An understanding of owner`s equity and what it consists of is demonstrated.
The ability to complete a balance sheet when the template is given is demonstrated.
SPECIFIC OUTCOME 4
Define and understand the structure of a cash-flow budget and statement.
OUTCOME RANGE
This includes cash, credit, income, other income, costs, etc. over a period of twelve months.
ASSESSMENT CRITERIA

The ability to source various financial data for the cash-flow budget and statement is demonstrated.
The ability to fill in the template of a cash flow budget and/or statement is demonstrated.
An understanding of the need for a twelve-month budget is demonstrated.
An understanding of the various components of a cash flow budget and statement is demonstrated.
The ability to transfer the month-end balance to the next month`s opening balance is demonstrated.
An understanding of the influence interest rates on the budget and statement is demonstrated.
The ability to interpret basic results of the budget and statement is demonstrated.
An understanding of how the cash-flow budget/statement links up with the income statement is
demonstrated.
An understanding and ability to use the cash-flow budget in a cash-flow statement is demonstrated.
SPECIFIC OUTCOME 5
Demonstrate an understanding of the legal responsibilities of an agri-business owner.
OUTCOME RANGE
This includes but is not limited to tax, VAT, PAYE, workman`s compensation, RSC, and skills levy
payments.
ASSESSMENT CRITERIA
An understanding of the legal environment in which the agribusiness operate is demonstrated.
An understanding of what income tax is and why it should be incorporated within the planning
An understanding of what value-added tax is and why it should be incorporated within the planning
An understanding of what workman`s compensation is and why it should be incorporated within the
planning process is demonstrated.

An understanding of what skills levy payments is and why it should be incorporated within the
planning process is demonstrated.
UNIT STANDARD ACCREDITATION AND MODERATION OPTIONS

The assessment of qualifying learners against this standard should meet the requirements of
established assessment principles.
It will be necessary to develop assessment activities and tools, which are appropriate to the contexts
in which the qualifying learners are working. These activities and tools may include an appropriate
combination of self-assessment and peer assessment, formative and summative assessment,
portfolios and observations etc.
The assessment should ensure that all the specific outcomes; critical cross-field outcomes and
essential embedded knowledge are assessed.
The specific outcomes must be assessed through observation of performance. Supporting evidence
should be used to prove competence of specific outcomes only when they are not clearly seen in the
actual performance.
Essential embedded knowledge must be assessed in its own right, through oral or written evidence
and cannot be assessed only by being observed.
The specific outcomes and essential embedded knowledge must be assessed in relation to each
other. If a qualifying learner is able to explain the essential embedded knowledge but is unable to
perform the specific outcomes, they should not be assessed as competent. Similarly, if a qualifying
learner is able to perform the specific outcomes but is unable to explain or justify their performance
in terms of the essential embedded knowledge, then they should not be assessed as competent.
Evidence of the specified critical cross-field outcomes should be found both in performance and in the
essential embedded knowledge.
Performance of specific outcomes must actively affirm target groups of qualifying learners, not
unfairly discriminate against them. Qualifying learners should be able to justify their performance in
terms of these values.
• Anyone assessing a learner against this unit standard must be registered as an assessor with the
relevant ETQA.
• Any institution offering learning that will enable achievement of this unit standard or assessing this
unit standard must be accredited as a provider with the relevant ETQA.
• Moderation of assessment will be overseen by the relevant ETQA according to the moderation
guidelines in the relevant qualification and the agreed ETQA procedures.
UNIT STANDARD ESSENTIAL EMBEDDED KNOWLEDGE

The person is able to demonstrate a basic knowledge of:
• Gross margin analysis.

• Production costs.
• Income statement.
• Balance sheet.
• Cash flow budget and statement.
• Statutory/legal requirements, rules and principles.
UNIT STANDARD DEVELOPMENTAL OUTCOME

N/A

UNIT STANDARD LINKAGES
N/A
Critical Cross-field Outcomes (CCFO):
UNIT STANDARD CCFO IDENTIFYING

Problem solving relates to specific outcomes:
• Define and understand the gross margin statement and distinguish between direct and indirect
costs, as well as fixed and variable costs.
• Define and understand the income statement.
• Define and understand the structure of a cash-flow budget and statement.
UNIT STANDARD CCFO ORGANIZING

Self-organisation and management relates to all specific outcomes.
UNIT STANDARD CCFO COLLECTING

Information evaluation relates to all specific outcomes.
UNIT STANDARD CCFO COMMUNICATING

Communication relates to all specific outcomes.
UNIT STANDARD CCFO SCIENCE

Use science and technology relates to all specific outcomes.
UNIT STANDARD CCFO DEMONSTRATING

Inter-relatedness of systems relates to all specific outcomes.
UNIT STANDARD CCFO CONTRIBUTING

Self-development relates to all specific outcomes.
UNIT STANDARD ASSESSOR CRITERIA

N/A
UNIT STANDARD NOTES

N/A
All qualifications and unit standards registered on the National Qualifications Framework are public property. Thus the
only payment that can be made for them is for service and reproduction. It is illegal to sell this material for profit. If the
material is reproduced or quoted, the South African Qualifications Authority (SAQA) should be acknowledged as the
source.

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NQF Level: 2 US No: 116083

Title: Illustrate and understand the basic lay-out of financial statements

Title ID Number NQF Level Credits Mark

Are you enrolled in a: Y N

What is assessment all about?

Version: 01 Version Date: July 2006

How to use the activity sheets…

It is important that you complete all the activities and worksheets, as

It is important that you ask questions and participate as much as possible in

Sources of information to complete these activities should be identified by

Enjoy this learning experience!

Version: 01 Version Date: July 2006

How to use this guide …

Examples of certain The following box indicates a summary of

Version: 01 Version Date: July 2006

What are we going to learn?

Learning outcomes …………………………………………………………………………… 6

What do I need to know? .................................................…..……………………… 6

Session 2 The income Statement......................………………………………. 16

Session 3 The balance sheet............................……………………………….. 23

Session 5 The Financial legal Responsibilities of an agri-business…….. 40

Am I ready for my test? ........................................................... 45

Checklist for Practical assessment.......................................... 46

SAQA Unit Standard

Version: 01 Version Date: July 2006

What will I be able to do?

Strive towards professional standards and practices at higher levels.

Gross margin analysis.

Cash flow budget and statement.

Statutory/legal requirements, rules and principles.

What do I need to know?

Version: 01 Version Date: July 2006

Version: 01 Version Date: July 2006

Session 1 Gross margin statements

After completing this session, you should be able to:

In this session we explore the following concepts:

These costs include:

Version: 01 Version Date: July 2006

Variable costs include, but are not limited to the following:

Direct costs are those costs that are directly linked

Version: 01 Version Date: July 2006

Foreign factor costs

• A financial budget for cotton can be calculated if the following is known:

Please complete My Notes …

Version: 01 Version Date: July 2006

I understand Questions that I still would

The ability is demonstrated to explain

The ability is demonstrated to identify

The ability is demonstrated to identify

The ability is demonstrated to list and

Material cost, labour cost and overhead

All possible material costs, labour,

An understanding of the gross margin

The ability to complete a template,

Version: 01 Version Date: July 2006

2. Explain why Gross margin statement is so important to agriculture?

Instructions to the learner:

The first is an example of a gross margin statement that describes the

Version: 01 Version Date: July 2006

Total expenses R56092

Version: 01 Version Date: July 2006

3. Discuss, in your group, why a farmer needs to have an understanding of the