I have to make a confession, I like accounting. In fact, I like accounting so much, that there have been times that I've wondered if I chose the wrong profession. Why, you ask, am I making this confession? An obvious reason would be the jokes; A nun, an accountant, and Tiger Woods walk into a bar...I am definitely guilty of teasing my accountant friends, but that's not it.
I like accounting for the rules. If I told anyone who knew me well that I considered myself a "rule follower," they may laugh; there are many examples where this is not true. However, when rules exist that make order out of otherwise complex situations, I find great comfort in the assistance and clarity that a framework of rules provides.
That's where accounting enters my professional life. When I teach Farm and Ranch Management, one of the biggest overall learning objectives is to help students understand how liquidity, solvency, and profitability are three distinct concepts that depend on each other throughout the life of a farm business.
One of the paradoxes of business that accrual accounting sorts out is the reconciliation between cash flow (liquidity) and profit. The rest of this article is a summary of a case study/example utilized in Farm and Ranch Management to explain how profits and cash flow can be opposite, how this can be analyzed, and how the concept of financial feasibility and investment analysis can be used to make strategic farm and ranch decisions.
