-Income is measured by operating transactions that affect owner equity

- any increase in owner equity resulting from operations is termed revenue

any decrease in owner equity is called an expense

- net income is the difference between revenue and expense

- generated by cash sales and changes in inventory

- term unique to farm earnings statements

- the gross revenues of an operation less the purchases of assets that are included in the calculation of gross revenue

- Net income from farm operations is total gross farm revenue less total farm expenses

- the gain or loss from the sale of capital assets is accounted for to arrice at the net farm income

- non farm revenue is added to net farm income to arrice at income before taxes

- income taxes are deducted to arrive at net income after taxes

- inventory change( crops, feed, livestock)

- accounts receivable

- accrued interest earned

- futures/options account equity

- Unused assets: prepaid expenses, supplies, investments in growing crops

- Unpaid items: accounts payable, accrued property taxes and withholding

- accrued interest

- accrued taxes: income and social security, deferred taxes on current assets