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We are in our custom zero homepage We set up in a prior presentation scrolling in a bit holding down control scrolling up on the mouse wheel currently at one seven five Percent scrolling and opening the demo file, but doing so with the reset item So we're gonna reset the data and open the demo Then we're gonna open two tabs to put our financial statement reports in as we have done every time I'm gonna hide this first right click the tab up top to duplicate it I'm gonna right-click the duplicate a tab to duplicate it again Back to the tab to the middle. I count in drop-down. We want to go to the balance sheet and Then on the tab to the right. I count in drop-down go into the income statement or profit and loss Back to the tab to the middle changing the date and we're gonna bring it on up bring it on up to 2022 and So that's the set-up process update that we have been doing every time Going into the first tab now in prior presentations We've been looking at the cycles and just a quick recap of how the accounting system is basically constructed The end result from a financial statement perspective from a reporting perspective are the financial statements to construct them The normal day-to-day transactions are entered with forms Which we want to be set up as easy as possible so we can hire someone in essence if we want to To simply do the data input or if we do it ourselves the data input is as easy as possible To then create the financial transaction that constructs the financial statements balance sheet income statement related reports Now to do that we need the underlying foundation set up such as the chart of accounts Which we talked about last time which is the list of accounts that the financial statements are actually constructed from and Then we also the next thing would be like the items that we would have to set up So let's take a quick look at a flow chart here to think about that Note that we often have been looking at things in cycle That's that's a good way to memorize things or visualize things So the vendor cycle or the expense cycle We expect money to be going out at the end of the cycle for goods and services We purchases the customer cycle or revenue cycle money's coming in at the end of the process We would expect for goods and services We provide to customers and of course the employee cycle money's going to go out for the purchase of services of Employees so then within these cycles. That's when we have our data input forms And we can visualize the process of the data input forms Many of these data input forms we are going to need items to be set up specifically like Invoice or if I have a point of sale type of transaction like a Check register for example on the money in type of form and possibly in a bill form if we're paying for inventory So for example the invoice if I'm billing clients for things that we did We want to be able to to have it Populate as easy as we can and we saw that the invoice is actually a quite a complex Form to set up the especially if inventory is involved. There's a lot of action happening in it But if we set it up properly the data input is quite easy Part of setting it up properly is going to be the items So if we have inventory items Then clearly we need to track the inventory if we're doing it on a perpetual inventory system Within our accounting system Even if we have service items you might think we'll all just do hourly service Items, but you want to kind of think more beyond that So if you're a bookkeeper for example, you might not want to just charge hourly Because that can actually be kind of tedious if you could break down say even like bookkeeping Into fixed things that you are providing Then that can make your billing easier and more standardized Making it so that the customer can expect what they can expect a little bit more clear And it'll make the agony of doing the billing process a little easier often times So and then on the purchase side the bill if we're tracking inventory within the accounting system Is uh something that we were going to need items for as well So if I close this out and I go back up just to look at those forms this way If I see the invoice we're going to invoice the customer Then I would like someone that doesn't know much if I wanted to hire someone to be able to populate this as easy as possible So if someone came to them and say hey, what do I want to purchase? I want to purchase the golf balls or whatever it populates Automatically down here, which is nice. And if there's a sales tax it populates automatically everything gets populated Automatically that's great. If it's a service item it it would populate automatically as well So so and remember if it's a service item you still want to make I already said your billing process, you know as easy as possible so then If you go into the bill side of things that's another form Where you might be purchasing inventory So we have a similar kind of things here with the items that we're going to need If we have a purchase order Then that's another area of the purchasing cycle So you have your items field where you got your items are going to be necessary And then you could purchase things with just a money out form So you might just spend money directly and so that Out of the checking account Could be an area where you're buying inventory. You'd only have the items if you're buying inventory And then on the money in form receiving money Then this would be like point of sale like a like if you had a check register You might sell the item so you would like to be able to set it up So if someone just comes to the cash register or something with Whatever golf balls We can add them pretty mindlessly and notice this is the kind of area where if you have a self check out even You can see how the system can be set up so you can kind of just check out your own stuff without knowing anything about what's going on Uh and run that through that's because the whole system has been set up so that it runs pretty much automatically So a key component to that Is the products and services so if I go down to the products and services that are currently in the system Closing this out here. They are down below So we've got our products and services set up here Now if we look at these items you can see the ones that are tracking the inventory in the system down below because we have the Quantity item down below if we select one of these items that is going to give us detail on it This one having the tracking of the actual quantity on hand The five units the average cost the total here if we wanted to edit the item We can go up into the edit item up here and go into that information We'll take a look at that more shortly Closing this back out if I go back To this field and I chose one that wasn't tracking inventory and go into the item Then we don't have that same units So we still have the information for the item necessary to populate in an invoice But we're not going to have to purchase those items for example because it's going to be like a service item possibly So let's go back and let's add an item Let's add a couple items from like the easiest to more difficult items So let's just say that we're going to say a new item And I'll say this is service item one. I'll just make a generic service item We're going to say that's the name now You could make an hourly service, but I would try to to group my items in the format That I could that I can kind of sell them in packages if if possible And try to use hourly as the last resort if I can't find some other way to kind of sort how I'm going to organize My service items So then I'm not going to be purchasing Any items here because it's going to be a service item all I need is the sales information If there's going to be an amount of the sales I could say a hundred dollars for the amount of the sales price now note if if you just have An item where you're going to make up the price as you go Then then maybe you you just put a zero on the price or something like that and adjust it as you create the invoice But the more you can standardize it The easier the process will be to do your billing process And then the sales account is going to be some kind of revenue account and then taxes In the united states, we don't typically have taxes oftentimes on the service items So I'm going to say a tax exempt here. So no tax on that one I'll turn the tax on in a future example So I'm going to save that And then if we were to post this to something I'm going to go up top and just let's open an invoice Just to see that being populated. I'm going to make up a customer And then we'll say that we have service item One let's say we have two of them So there it is No tax applied because we told it not to apply the tax and we've got the the 200 down below What would this do as we saw in the invoice? It would increase accounts receivable by The 200 the other side would go to the revenue account Which would be the sales item driven by the item that we set up the sales account driven by the item that we set up And the sub ledger for the Customer a a a would be impacted as well. We could do the same thing I won't post it, but we could do the same thing if we did a receive money form and We had this item that we were selling receive money form There it is. Let's go check in account And we can pick up our item here too. So it'd be service item Boom similar kind of process. All right, let's go back to the drop down Products and services. Let's make it a little bit more complex with the inventory. So now I'm going to say all right, let's say new item and Let's say this is inventory item one now You would want to be more specific on your inventory items if you have inventory You have a question of how am I going to track inventory on a periodic system or a perpetual system? If it's a periodic system, maybe you're not tracking it within the zero system but outside of it possibly and then You're doing periodic adjustments In that case, you would still even though you have inventory You wouldn't need to track the inventory within the system because you might be doing a physical count and tracking the inventory On excel or something making a periodic adjustment into the zero system However, if you want to track the inventory real time within the system Allowing the zero system not only to record the financial transactions to the balance sheet and income statement, but also to a sub ledger Tracking the units of inventory Then we'd have to turn the inventory tracking on So now you got inventory on We're going to be having an inventory account that will be impacted on the purchases side of things We're going to buy inventory. So now we've got a cost on the purchase That one. Let's just say it was we're going to buy this time for 140 and then this is going to go to cost to goods sold So that means when we sell it It's going to go to the cost of goods sold account meaning We're going to we're going to decrease inventory and record the expense of cost to goods sold when we sell it with an invoice Or a receive money form. I'm going to say that there's a tax on the sale side of things And then description and then the add items the sales price We're going to sell for 200. Let's say the sales account is going to be some kind of income account And then I'm going to say there's a tax on the sale So it's going to be applying the tax at the point of sales now We've got sales tax involved in the united states oftentimes The sales tax is going to be when you when you sell, you know Inventory often times to like the end user of the inventory and the sales tax will change Uh, depending on the state. It's a state and local tax here. So that will be similar Taxes, there's nothing new under the sun with taxes. It's just a question of You know taxes are quite old, right? So it's just a question of how what tax are they using And where are they using it and which one do I have to basically apply and hopefully the software Is set up thus that it can kind of help you to pick that up, which is quite nice Now note that the taxes this is one of the driving factors Determining whether taxes will be put in place here. So in other words, if I go up to my forum And I say let's make a a an invoice again And we're going to make an invoice to let's say a a a again And we're going to say that the item is going to be this inventory One item So now we could sell two of them or whatever. There's no quantity on hand, but that's okay Well, I won't actually record it But the point I want to just point out is now we've got the sales tax being calculated Whether or not the sales tax is going to be applicable will be driven Primarily by the item saying whether the item is going to be a taxable item or not So you can get more complex with that. We might talk more. We will talk more about sales tax In the in the future, but generally usually what you have to consider is Is the is the taxable in the current location? taxed so Then if it is you're going to have to turn on the sales tax We have to set up the sales tax, of course And then we have to determine in the system whether something is taxable or not the primary term would be the the Item telling it whether it's going to be subject to the sales tax or not And then we can also think about certain customers That might have different Tax obligations. Maybe a customer is not subject to sales tax. So then when we set up the customers We can we can customize within the customers what tax they're going to be subject to based on their location possibly and possibly Whether or not they're not subject to tax because they're not the in customer or something like that Now notice that this invoice is actually quite complex in terms of the transaction as we saw in the past This is going to increase the accounts receivable by four seven four thirty seven It's going to increase the sales by four hundred. It's going to increase the accounts payable liability by thirty seven It's going to decrease the inventory by an amount not on here, but driven by meaning the numbers not here, but it's going to be What do we say one forty times two Because of the units that we're selling and it's going to record the cost of goods sold So there's kind of a lot going on and it's going to record the accounts receivable sub ledger for the customer a a a and the sub ledger for the Inventory items tracking not only the account of inventory, but also the units of inventory So that's a lot going on but notice that the data input Is so automatic that that you can even have like a Self-checkout thing in the grocery store is basically Recording all that with just someone that doesn't need to know much After it's all set up right and that's that that's how we that's how we want to get things going So it's easy on us in the future or easy on someone we're hiring in the future To do the just the data input because the underlying fundamentals Have been set up. So this would be the same if I go into the spend money form So you got a similar process I'm sorry not spend money if I go to receive money form and we go into the checking account So then you've got a similar process where you'd have the item but now the difference being That we're going to increase the checking account directly We can also go into the bill side of things Now when we purchase items because now we're purchasing inventory. So if I go into inventory item one Now we're going to populate that to pay for the inventory on the increasing of inventory side of things We could also pay for the inventory With a money out form or a spend money form if we're buying inventory out of the checking account And you've got your inventory form here We've seen these forms in the past so I won't go into them in too much detail here And when you're purchasing if you're using purchase orders to request inventory Again, you might have your inventory item here Now also note that you can make as we have seen in the past These items as you go so I can go and add an item as we go here And put the code and so on and track the items similar data input screen to make the items now note You want to be careful adding items as you go because ideally you'd like to set up the items already And especially if you're having someone else do the data input Have them just use the items that have already been set up You don't you don't really want people to be just making items like on the fly all the time unless You know that because that's going to get things are going to get kind of messy there So that's the general overview of the products and the services