 In this presentation, we will record a transaction related to raw materials being applied to a job. Get ready because here we go with zero. Here we are in our job costing company dashboard. We're going to start off by going over to our Excel worksheet to see what our objective will be from a journal entry type of standpoint. So now we're going to be on the second transaction 1-7 in our description, our narrative here. And it says the direct material transactions from raw materials to a job. In other words, we're going to take the items out of the raw material now, apply them to the jobs. We're going to have three jobs and we're going to apply them in this format. 100,000 to job 14, 170 to job 15, 80 to job 16. That's going to add up to 350,000. From a journal entry standpoint, it's a straight up easy journal entry with regards to the actual general ledger type of accounts. We're going to be debiting the cost of goods sold because we're going to be taking this directly to the cost of goods sold as we incur these items. And then support that number with the job sheets. And then the other side is going to be going to the raw materials, decreasing the raw materials. So from a journal entry standpoint, if we were to post that out then the cost of goods sold, which is basically it, which is a revenue type of account or an expense type of account income statement account would be going up. That's going to make the expenses go up. We have no revenue at this point in time. So that would affect net income. So it would be a decrease to net income revenue minus expenses. And then the raw materials is going to go down because we're taking it out of basically the inventory. You could imagine it going out of the warehouse and then being applied to the jobs and being removed. And as we do so, we're going to take it out of there, bringing it down to 50,000. So that's going to be the transaction. The difficult part, of course, is that we also need to support in essence this cost of goods sold account with the jobs. So if we go on over to the jobs, then we got the job sheets. So we need to break this out. We got job number 14, job number 15 and job number 16. We said we're going to be allocating to the jobs, the direct materials of the 100,000, the 170 to job 15, and then job 16 is going to be the 18,000. That adds up to the total of the 350,000. So we're going to allocate over and note in our, in our sheet here, if we did this in Excel, we basically have to do this kind of separately. And we pretty much have to group it all into materials because if we break out any further detail than that, it'll get kind of, it'll get really messy quickly for doing this all kind of by hand in Excel. Then in the system in zero, however, we're going to add more detail. We're not just going to call it the direct materials, but we're going to add more detail to those direct materials. And those details are going to be the accounts we set up in prior presentations and the items to help us to drive that. So that's what we're going to do. Now we can do that here. This transaction over here, we did with a journal entry and you can't really do that. And note also that there's no form that really supports this transaction easily because cash isn't affected. So there's not a cash form. We're transferring from one accounts to another. We're taking it out of the raw materials and putting it into the cost of goods sold. There's no form that really is set up just for that, for that process. So what are we going to do then? You might say, well, then we could just go to the journal entry. So we can't go to the journal entry and I'll explain why. Let's take a look at why. So if I go back over here and say, well, if there's no form, then we go to a journal entry. But let's take a look at the journal entry first by going to the accounting. We're going to go down to the reports. And then we're going to go down to the accounting reports down below. And we want the general report. So we want the journal report in general. The journal report. I was looking at the general ledger. That's why. And then if I open up a add new journal entry, this is where we go to add a journal entry. You'll note this is the description. We could enter the accounts easily just like we did before in our Excel system, but there's nothing here that allows us to put in items. And the items are what allows us to apply this information to the jobs or the projects. So it doesn't have the thing that we need, which is going to be the items in order to enter this into the system. So we can't go to the journal entry because that only takes care of half of what we need to take care of. It takes care of the GL accounts, but not the job or projects. So we need a form that's going to have items in it. And this is typical with different softwares, you know, have the same kind of method. It seems kind of unusual, but it is what it is, right? We need a form so that we can have the items. And it's great to have that work around because what we're trying to do is actually multiple things at one time. If you do this in Excel, then you have to do this journal entry and then you have to do basically this applied to the job and then make sure that those two things kind of check out and tie out. In this format, we're trying to do it in zero in such a way that we do those things basically at the same time. Also note while we're over here that when we're supporting this cost of good sold number, we're supporting this cost of good sold number with the current data that's happening in the job. So what we would like to know then, this is the total for all the open jobs right now. This is the total for all the open jobs. And this is the beginning balance that we had for the jobs, right? We'd like to know what those beginning balances are. And that'll basically reconcile from the 350,000 that's in the cost of good sold to the amount that's the 433 for all open jobs. And that's important to note just to recognize that part of this item rolled forward into the retained earnings or capital account after the end of last period. So we want to be able to kind of reconcile that so that we know that the cost of good sold numbers in essence being supported by the jobs over here because we could do that reconciliation. And if we need to change our system for financial reporting purposes to record a working process account or something like that, we can do that adjusting entry periodically at the end of month or year if necessary. So just to point that out as we go. All right, let's go back on over and now we're to use another form to achieve our objective. And we're actually going to use a money out type of form even though the cash isn't being affected. But we're still going to use the money out type of transaction or the spend money form. So I'm going to hit the plus button. We're going to go to the spend money form. Now, oftentimes you may want to actually set up another cash account in order to do these transactions because they're not actually going to be money coming out of the checking account. They're really going to be zero balance. Nothing's going to be coming out of the checking account. We're going to use this form to record a journal entry. So in other words, it shouldn't have an effect on the checking account. It's not a problem, but you might want to put it into another kind of account just to just to show that those zero transactions are clearing. If there's any problem with them, then you'll see that there'll be a balance in that account. So I won't do that now because it will be a zero balance. But just recognize you may want to do that. And that's kind of like an internal control check when you're using these kinds of transactions. So I'm going to say next. Now I'm going to say to I'm just going to say miscellaneous. I'm just going to pick up a contact because it doesn't really matter because this is an internal transaction. It's not actually going to anybody. We're just using this transaction to enter a journal entry. The date is going to be January 7th. So let's pick up the date. I'm going to bring this on back to January springing on back to January, January 7th. And so there we have that. And then we're going to go down to our items down below and I'm going to enter these items. I'm going to be using these items now and these are going to be the items that are going to be adding up to. I'm going to note that the date should be at January 7th. So if you see it bouncing back and forth to December 19th, it's going to be January 7th at the end of the day. So be aware of that as we go. First add up to the amount allocated to job number 14, the 100,000. I'm going to record these separately as we go. So I'll do these three transactions. We'll just do this one now adding up to the 100,000. But we're going to give more detail than just the direct materials. We're going to list out the direct materials, which we'll do somewhat randomly as we go. So we're going to say that we have the cement render. So this is going to be materials that we're going to apply to job number 14. So cement render and that's going to be for 15,000. Now we're going to apply the job you'll recall by the assigned items to the job down below. We'll do that afterwards after we've entered all the transactions and after this number adds up to that 100,000. Then we're going to say this is going to be the wood finishing. So we need the wood finishing of course in our project here. It's a key component to this particular task. And that's going to be and then we need the next thing we're going to have is I'm going to say wall covering wall covering. These walls definitely need some covering because they have and so we're going to say that that's going to be 16. So we'll put in 16,000. Actually 10th let's put the head 50s put 8,000. And next we're going to have the stucco. So we'll say stucco and pick up the stucco and that's going to be for 16. So let's put in 16,000 for the stucco and then we'll pick up the paint. So I'm going to say paint and wood stain so on and so forth is going to be 12,000. And then let's put some marble and then I got to add a line. So I'm going to add another line and then we got to say marble. That's what I'm going to say. That's what we're going to add marble 25. It's a lot of marble or maybe really expensive marble. And then we're going to say, oh, I don't know how much marble costs. I'm going to say flooring and then this is going to be 14,000. All right. So that adds up. You can see to the 100,000 down below, you can see all the all the transactions here. In essence, we want to enter these items in such a way that in our example problem, it's going to add up to the 100,000 and that'll give us more detail for the raw materials. Now note that this 100,000 if we leave it as is will be decreasing the checking account because it's in a money out form that we put to the checking account. That's not what we want. This side is going to where we wanted to go. It's going to be using these items. These items are going to draw into the cost of good sold account and apply it to the job. Once we apply it to the job and that's going to be great. However, the other side needs to be decreasing the raw materials, not decreasing cash. So how can we do that? Well, let's try to add another item here. I'm going to add another item and then instead of having an item or another row, I'm adding another line. I'm not going to add an item. However, we're going to be putting this directly to the account. So I'm going to say that this is going to be 100,000 and it's going to be the raw materials. So I'm going to pick up the raw materials account here and I'm sorry. This 100,000 should be negative 100,000 and that brings the total down to zero. So this is going to be transferred out of the raw materials and you could put in the description transferred to job and then you might want to spell it right if that's important to you. So you can use the spell check for that. So now you can see that this should be doing what we want it to do, right? It's going to be applying these using the items which are going to apply it to the correct account. And then the other side of the journal entry is going to be that 100,000. Now we just need to make sure that we apply these items to the job, right? So we got to say, I'm going to say now assign to the job. I need to assign these items to the job. I want to assign all of them, but I don't want to pick up that last 100,000. So I'm going to uncheck this one. This one's not going to be assigned to a job, right? All the marble and whatnot, all that kind of stuff, the materials need to be assigned to the job. Now, before you hit OK and I miss this often, you want to then go back up top and make sure that you're actually assigning it to the correct job. So I'm going to make sure that we're going to pick the job, which is going to be job number 14 here. And even when you have that assigned up top, you're going to be tempted to then click just OK without actually selecting the assign button, or at least I'm tempted to do that oftentimes. So I have job number 14. We're applying these items out to the job number 14. We're now going to go ahead and assign that. That will then indicate on the right-hand side that we have job number 14 here properly assigned out. Once that is the case, then you can hit OK down here. And note, you can also verify on this form that it has been assigned as we've seen in the past by it having the customer down below and the job 14 here. So once we record this transaction, also just note that the date should be January 7, 2020, January 7, 2020. Okay, so what's going to happen when we record this? These items are going to be driving this to be recorded in the GL accounts, which will be the cost of goods sold accounts that have been set up. The other side of the transaction is going to be going to this driven by this item to raw materials, decreasing raw materials, no effect on cash, even though we're using a money spend type of form, and the jobs will be affected by the fact that we're using these items that will affect the jobs, otherwise known as the projects. Let's go ahead and record this where I'm going to update this. I did make some adjustments as we went. So we're going to update this and record it. And then it's all green. All green means that everything is recorded properly. So now let's take a look at our financial statement. So let's go up to our accounting up top and then we're going to go to the accounting and open up the balance sheet first. So accounting and then the balance sheet. Let's bring the date out to 2020. So we're going to bring it into January of 2020. I'm going to bring January 31st and then update that report. Then I'm going to scroll down and we're going to see that there should be an effect on the raw materials. Now at the 300,000, it's not yet at, if I go back to our Excel sheet, not yet at the 50, because we only recorded the one item to job number 14 and not to 15 and 16, which we'll do in a future presentation. But we could see this transaction. If we go into that, if we click on the raw material and here is our transaction, there's the 100,000. It's a money spend form. If we go into that item, if we go into that 100,000, we see our form, we see our money spend form. Now if you need to edit this, it's in the options up top and you can edit this transaction if necessary. So then I'm going to go back, I'm going to go back to the balance sheet using the back button and then the back button once again to get to our balance sheet. The other side of this transaction will be on the income statement. So to do that, I'm going to go up to the tab up top, right click on it and duplicate this tab. So I'm going to duplicate this tab so we have the balance sheet to the right and then I'm going to go back to the tab to the left where we will generate our income statement by going to the accounting dropdown and then on down to that income statement. We're looking at the income statement for 2020 now. So it's not going to be including the beginning balances, of course, that we entered for 2019. So that those rolls forward to the equity section on the balance sheet. If we look at the income statement, then here's our 100,000. Here's the cost of goods sold. It's all being grouped in the cost of goods sold. It was driven here by the items that we put in place. Now note once again that we could group these further into something like within the cost of goods sold, the direct materials, because that's what they are. And we talked about how to do that with the edit layout down here, which is actually a very versatile tool. We won't go into that again. We might go into the formatting a little bit later so you can see how you would group this together. But if you're using software like QuickBooks, you will have the subcategories, which is a way you can group and you might be used to. But this is a nice format too. It's very flexible to be able to use this format to save reports and group reports. In any case, if we go into one of these, then if we go into an item here, we will then see our spend money form. And there it is. There's the spend money form. If we were to click on that, it would take us back to that form once again. Let's go back up top and go back to our income statement. Also note that the bottom line of the income statement now being at that 100,000, that'll be on the balance sheet. If I go back into the balance sheet and we go down to the balance sheet, then that amount is going to be in the 100,000 current year earnings. It'll roll into the equity into retained earnings after the end of the year. Let's go back to the income statement and let's now duplicate this tab. I'm hovering over the income statement tab. Going to right click on it and duplicate that tab. So now we have the balance sheet. We've got the income statement. I'm going to go back to the tab to the left now. And now let's take a look at our projects. So let's go to the projects up top. We'll go to the projects tab and look at all projects. The project that we have adjusted is project number 14. So if we were to go into project number 14, then we now see the total time and expenses at the 141. And then if we go down to the to the information, this is all the all the transactions that we basically have put into this item grouped in this area. Now realize this is going to be for the life of the job, which is a little bit different because we had that cut off that cut off over in 2019. We had some stuff in the prior year and then we're working in 2020. So for the life of the job, we're at the 141. If we talk at look at the income statement for the current time period, then we only have the 100,000 that are applied to job number 14. That's all that's included thus far. So you got to be kind of aware of those of those date issues as you think about the open jobs. Now also note, we could go to the reports for the jobs as well. So I'm back to the tab to the left going to go to the accounting dropdown. Let's take a look and open the reports. So if we go to our reports, we're going to go down to the projects and let's look at the project details. So let's look at the project details. Now, this is a nice report because you can sort by the projects that are open or closed, right? And I'm just going to pick all projects, which is they're all open at this point. And so I'm going to say, okay, now also note that this report basically pulls everything up. I would see this date as the as the date that you applied everything out. So I basically keep this date as is on today. This is the date actually ran the report and then adjust the date fields as you want to manipulate the numbers down below with the filtering tab. You can see in job 14, we have the 141,000. So there's the 141 in job 14 and job 15. You can see we have this amount and this was all from the prior period. Now note, you can also go to the reports up top. And I think this is important to keep this. I would actually save it or memorize it with the date field on. So I'm going to say, let me see the dates because I want to see when these items were assigned, especially if there's a job that had items in 2019 and 2020. So now you could see basically the 2019 and 2020 items and you could sort it by date here. So if I sort it by date, now I can see the items that are 2019 and the activity for the 2020. If I then want to sort the dates, then I would go to the reports up top and then go down to the filter options. So I want to see the filter options so I can see a range is what I want for the dates. So I'm going to go to the date item here and I want to adjust the date range. And if I just want to look at what happened in 2020 now, so I could say just show me 2020. Now I can pick the range from January to let's say March is fine, whatever anything in 2020 and update. And that's the way we can adjust the range of this report and that'll show me just 2014 and only that 100,000. So this report takes a little bit getting used to with these dates because this date right here was a bit confusing to me. And that's a set point in time and really if you want to adjust the date ranges this filter field is a really nice function to do that. And once you have that then you can sort this report really well and it's a nice report. But of course this 100,000 now ties out to the current information on the income statement. So there it is on the income statement and then we can figure out the jobs that are open, the jobs that are closed, the beginning balances for the jobs that are open in our current period and so on and so forth by using these tools. So that's going to be it for now. Next time we're going to be going into and of course doing the same thing for the 170,000 and the 80,000 similar process applying to job number 15 and 16. Alright, that's going to be it for now. Let's get out of here.