 0. Accounting software. Purchase order form or PO form. Get ready to be an office hero with 0. Here we are in the custom 0 home page we set up in a prior presentation. I'm gonna zoom in a bit by holding down control and scrolling up on the mouse wheel currently at 175% zoom in. Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. We're going to go into the demo company but before we do going to reset the data just to note that you have the capacity to reset the data after entering transactions in the demo company which is a great tool. So we're going to do that it will open up the demo company for us. I'm going to hide this window up top typically I would then open up the major financial statement reports now that being the balance sheet and the income statement and then have this tab on the left to be working in but for this case we're looking at the purchase order which does not have an impact on the financial statements the balance sheet and the income statement so we will not do that this time. The purchase order can be located in the dropdown here it's one of our primary data input type forms and it's a little bit different than most of the other forms because remember our end goal is to generate the financial statements from an accounting standpoint and obviously also to facilitate the purchase in the case of a purchase order but just from an accounting standpoint we're trying to build the balance sheet income statement and related reports most of these other forms are used to make the data input as easy as possible to then create the end financial statements. The purchase order is different because although it looks like the same kind of data input form it being similar in look and feel to an invoice for example there we don't actually have a financial transaction because it's just basically a request so before we go into it let's first just take a look at the flow that would be involved. I'm going to go into a flow chart just to see the kind of flows that would be involved if we have a purchase order so we would be looking at the vendor flow of things or the purchasing side of things or the expense side of things you might call it and we're expecting at the end of the process that we're going to be spending or cash going out in this particular flow. We've talked about this flow in terms of purchasing say expenses like utilities for example in which case we might just have a check type form or an electronic transfer a decrease directly to the checking account to pay for expenses or we might have that accrual component using a bill entering this into the system a bill which to the zero system increases the accounts payable and then paying that off with in essence a type of check type form or decrease the checking account. Now we've got inventory involved if inventory involved you have a couple different options on how to handle inventory and this is what you really want to think about before you start setting up the accounting system you can either have a periodic system or a perpetual inventory system on a periodic inventory system you might decide that you're not going to track inventory within the accounting software within zero you might say I'm going to track it outside and say excel or some other software and then I will make periodic adjustments into the accounting system at the end of the day the end of the week and the end of the month in other words I'll record the purchases of inventory in the accounting system I'll track the actual physical units of inventory outside of the system I possibly will do a physical count at the end of the day week or month and then determine how much of the inventory has been sold beginning inventory plus purchases minus ending inventory kind of calculation for cost to get sold and do a periodic adjustment in that case it's a little bit easier to to not have to set up the inventory tracking within the system but if you want the full perpetual inventory system in zero then you're going to have to turn on you're going to have to track the inventory and use inventory items within the system which will not only record the purchase in terms of the account that will be affected inventory when you purchase the inventory it will also record the sub ledger tracking the units of inventory that you're purchasing and then when you sell the inventory with like an invoice or something then it's going to actually reduce the inventory account as well as the sub ledger for the units of inventory sold so in that case you might have a purchase order as well in the system note that you would only have a purchase order in the system if you have more leverage as the purchaser in this case of the inventory that you're later going to sell because usually when you purchase something like online you you have to pay for it if you're an individual at the point of purchase like if you buy something from amazon even though you haven't got it you typically pay for it at the point in time you're requested what you want but if you have more leverage in your state go into a manufacturing company in your order in a thousand cups or something from china or something like that a manufacturer and they're going to send those over maybe you can have a position where you request the cups they send them over and then they come with a box you can imagine a box of thousand cups with a bill in it that you can then match the bill to the purchase order in order to have a relationship like that you have to have trust between the two companies so that they're willing to give you the the goods before you know you bill it and so on so that's where the purchase order comes into play and that's why the purchase order doesn't have a financial transaction related to it because one we're not paying for anything at the point of the purchase order and two we didn't get any inventory at the point of the purchase order we're going to get the inventory we can imagine in a box in our warehouse full of cups at some future point with a bill in it that will enter at that point in time so given that then how do we track the purchase orders how do we deal with the purchase orders well we can enter the purchase orders of course here you enter the purchase order you would expect the next thing to happen is that you would then enter a bill would be the next thing in the flow that would happen and then of course you would pay off the bill as in essence you normally would at that point in time and then to track the open purchase orders we go into the business dropdown and we've got the purchase orders down here let's check that out going into the purchase orders so up top we could make a new purchase order up top so this is just another way to get i'm going to go back again to the same area as with the plus button so like most accounting softwares there's multiple ways to get to the same area i think zero is fairly streamlined that there's not too many ways i think some softwares kind of go overboard in that there's too many ways to get to the same thing it's almost confusing and it's taken up more space than maybe you need but zero is pretty pretty streamlined that they don't they don't aren't they're not too redundant on that because any case so now we've got the all items here you've got the drafts when you set up a purchase order in a draft you've got the awaiting approval so if you're going through a more like a longer approval process you can add them for approval then you've got the approved items which smaller companies when you enter the purchase order you might just enter it as approved up front and then uh then you've got the build items so you can imagine the build items would be once you've received the information for the purchase order you're going to have them be billed for meaning the vendor who you're purchasing from has issued you a bill and you've entered it into the system and typically the bill might be created from the data you put in to the purchase order so if I go back to the approved items let's just take a look at one that has been made here drilling down on a purchase order so we've got the information up top we've got the abc the contact information the date and let's look at it as if we're editing it so we can see it in an edit kind of format so now we've got the contact the date the delivery date the order number if applicable the reference if applicable the theme is standard so the type of forms that you're going to be using and they will give you standard forage you might be able to get into some custom formatting if you so choose purchase orders being a type of form that might be useful to do that make it more customized that is because you're giving it to someone else outside of the company it's not just an internal form us dollars we're going to be in uh tax inclusive on this one and then the item the description the quantity the unit price now now the item might be something that we would have to set up so we might set up the items in order to be purchasing and tracking the inventory items the discount the account the tax rate and the amount now note this looks a lot like what you might see in like other types of forms like a bill or an invoice or something like that and you would think hey there's a lot of numbers here wouldn't this have an impact on the financial statements the balance sheet and the income statement it looks like kind of form that would but it doesn't because it's just a request it's like it's kind of like an estimate form if you've done with job job costing where before you enter the invoice you might have an estimate so just because you made an estimate doesn't necessarily mean that you're going to invoice someone it's going to be an estimate and it doesn't have any financial impact this is similar you expect the purchase order to be fulfilled but you haven't actually done anything that requires the financial transactions in that you haven't actually paid anything and you haven't actually received the inventory so no financial transaction it's the step before the financial transaction which is when you connect the purchase order to the bill that we will have at a future point and then down below we've got then the delivery address attention uh foh telephone number delivery instructions if necessary you got notes that you can add and add expected arrival and more detail down below here for the related activity that has taken place so this is going to be kind of like your history and so on so i'm going to go back up top let's go back and let's go back and so so then of course you can use these items you can check off these items you might check them multiple items off and then apply them as build or you can print them you can send them and you can copy you can copy too now oftentimes you would think that you might use the purchase order to basically create the bill so when you have this copy two item here oftentimes we would copy it to a bill because when you're going to receive the goods the thousand cups for example then you would you would expect that that should match the purchase order and you can use the purchase order to pull over the same data into the bill uh if you so choose if you're going to make another purchase order then you can make another purchase order in that format and you can you can pull it over to an invoice which might be useful if you bought the cups for example custom for a particular customer and now that you've received them you're going to just roll them over into an invoice and turn around and sell them to the customer possibly that ordered them custom for them let's go ahead and see if we can just enter a purchase order just for the fun of it so i'm going to create a purchase order here let's make a purchase order we're going to say the contact is a a a again i'll just make another contact of a a a and the date that's fine delivery delivery date i'll keep that blank i'm not going to put any reference this is pre or pre filled the order number standard themed us dollars i'm just going to say no tax on it and then i'm going to choose here these t-shirts now note if i if i go to a couple of them like this item here they have it going to cost of goods sold and instead of an instead of an inventory account and if you have like a job cost type of system it might be it might be set up more likely to be kind of set up in that way meaning uh when it pulls through to the bill it's not going to go into inventory but instead basically be expensed in the form of cost of goods sold but if you're just buying and selling things traditionally you would track the inventory and you'd be pulling it into something like putting it into the inventory account now because i can see the account here again this makes me think well this is going to result in me this is going to result in me having to transaction no but this information will pull pull over into the bill which will result in a transaction so that looks good we're going to say i'm not going to add any lines this looks good down below and so then we have their options of just approving or we can say we want to approve and add another we also have the saving option so smaller companies might just go directly to the approve if you've got if you've got another kind of system another kind of link in the internal controls you might save the draft and then we could have we could save it as a draft let's go ahead and do that and just go through the cycle and say it's saved as a draft so now here it is as a draft and then if i was to go back into it as a draft and then say okay now what i'm going to do is move it to save and submit for approval so i could just approve it from here but no i'm going to go and save and submit for approval imagining i've got another step in my accounting process and so now it's going to be a waiting approval so here it is a waiting approval still hasn't recorded anything to the financial statements of course we're just going through the bureaucratic system in our office here and now we're going to say okay finally i'm going to approve it so i'm going to approve or prove and another i'm just going to approve it boom it has been approved and so now i'm going to go back into my purchase orders and so now it's in the approved area here so there it is here now then from here uh i i could then go into it and we could uh copy it over to a bill so i could hit the drop down and say i want to copy it to a bill which we'll do next time we'll focus in on the next bill next time or i can hit the drop down and make a bill and let's say i'm going to make a bill from aaa it says up here purchase order blah blah blah is outstanding for this company so i can once again kind of pull in the purchase order gives us that pop up telling us hey there's a purchase order so there's two ways we might do that i think the more systematic way would usually be to say okay if i got a box of inventory with this thing i ordered i would probably go to the purchase orders personally and then go to the approved items and then use this to create the bill check the purchase order make sure we got what we ordered and then copy the bill but you can just go directly to the bill and type in the the aaa that you bought from the vendor or supplier and then pull in the information from the purchase order once again no impact thus far on the financial statements next time we'll talk about linking and we'll go to the bill component and the only difference between the bill components what we saw in the last time in the bill well there's a couple differences one is that we're going to have the link between the purchase order to help create the bill and two now we're tracking the inventory in on it so when i purchase that bill information it's also going to track the inventory on a perpetual inventory system both having it on the balance sheet as well as sub ledgers for what it is we purchased