 In this presentation, we will record the purchase of raw materials on account. 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 file just to consider what our objective will be. We'll take a look at this transaction in the format of a raw journal entry and then think about how we'll enter this into our accounting system into zero. So the transaction is going to be a 1-1 or January 1st purchase raw materials on account 400,000. This is going to be what the journal entry looks like and then we're going to consider the effect on the financial. Now note that when we're considering the raw materials we have to consider whether or not that raw material is going to go directly into a particular job as we purchase it or if we're going to have to allocate it to the jobs in some way, shape or form. If the materials were going directly to the job when we purchase it then we could assign it to the job and basically assign it to a cost of good sold account and we'll see examples of that in the future. It would be similar to when we entered the beginning balance in the system. If however we're purchasing raw materials and we're imagining that we have them adding up somewhere that we're then going to have to allocate to the job, take basically out of our warehouse, imagine them coming out of our warehouse and then do the job then we need basically kind of an inventory type of account in order to track that. So that's what we're going to do here. We're going to be putting this information into in essence an inventory for raw materials and then we're going to be purchasing it on account meaning we're not paying cash for it at this point in time. We're going to put it on account and we owe the money in the future. What would be the effect of this transaction on the financial statements? The raw materials basically inventory account then would go up so it's going to be increasing. On the other side go into accounts payable because we have not paid cash but increase in the liability something that we owe in the future. Also note that if you have this 400,000 now that's in materials and we have to allocate that to the job then at this point in time and you have multiple jobs that we're going to allocate to then there's a question do we want to track that raw materials item by item like wood planks you know stuck or whatever or in the accounting system actually in zero and then track the inventory items that will be more complex to do within the accounting system but it is possible to track that or we can just basically put it into a general ledger account and track it in some other way shape or form possibly in Excel or some kind of worksheet that we're tracking that will support this number and possibly use a periodic type of inventory system in order to track this information and then just basically make an adjusting entry into our accounting system that's what we're going to do here we're going to put it into the raw materials it's not affecting the jobs right now because we haven't allocated it out once it does affect the jobs we're going to take it out of the raw materials and be allocating it to those jobs that are affected. Okay so what how would we do this then in our system in zeros let's go back on over to zero we're going to be using a form to do this we're not going to do this with a journal entry but with a form as our most transactions that's what the default kind of method will be we don't go to the journal entry we go to some type of form if we can and then if we cannot go to a form then we default back or go back to a journal entry. The form we're going to use is just a bill type of form so the easiest way to get to the form is to go over to the little plus button on on the upper right hand side and then we're just going to enter a bill so we're going to enter a bill now remember when we enter a bill on our side it means it means that this is a bill coming to us right and when we bill somebody else like for our services we call that an invoice so a bill typically for the system here for zero is going to be the bill that we owe to somebody else as opposed to a bill we're sending to somebody which is going to be called an invoice. All right so we're going to say this is going to Home Depot Home Depot and I'm going to say tab the date here we're going to say is January 1st so I'm going to make this 010120 and then the due dates I didn't pick that up let's do this with the drop down we'll say the drop down and bring this on back to gin you wary first and then we'll say this is February for the due date so this is when it do we'll say February at the end of February and so that's going to be that we're going to go down to the items then we're actually not recording an item we're going straight to the description and I'm just going to say raw materials that we're going to purchase now if it was something that we're going to track in the system as basically an inventory item and we wanted the system to be able to track and count the inventory then we'd have to set up the inventory as an inventory item here however like we said before we're just going to be putting this in the general ledger account and then we're using like a perpetual system to track the inventory then we'll move it out of the raw materials to the jobs with another transaction which we will see in the future so I'm going to say one the unit price is going to be that four hundred thousand and then it's going to go into the raw materials account which is going to be the asset account let's see what we have thus far we may not have a raw materials asset account so far so if I scroll here through here we've got looks like equipment no we do not so let's go ahead and add it I'm going to put it in there as something like let's say 300 140 so 140 is going to be the account number and so remember that number so when we get there you could tell me what it so we're going to go back up and say this is going to be add new account so we're going to go into the add new account and then the account number I'm going to keep here at the 140 so the one and I say it's not available one is a is not available and so let's make it 142 142 and then I'm going to say the account type account type is going to be current asset type of account and then the name we're going to call it raw materials so raw materials we have up top and I think that's all we need that's going to be it so let's go ahead and say save and so we're going to add that account and there is our bill so what's going to happen when we record the bill the bill is going to be increasing now the asset account that we just set up for the raw materials that 142 account and then the other side is going to be going to accounts payable increasing the payable let's go ahead and approve that and then we'll take a look at our financial statements to see it on that side all right so it looks like it's been approved let's go open our financial statements going to the accounting drop down we're going to be opening up the balance sheet first so accounting drop down opening up the old balance sheet going to bring the date out to 2020 so I'm going to bring this on out to 2020 end of January and then I'm updating that report so we'll update that report and then what we see down here is of course the raw materials I'm going to hold down control and scroll up a little bit bring that to that like that 125 that's where I like it so then we've got the raw materials here 400,000 if we select that 400,000 then and go into that 400,000 here is our transaction so there's going to be the 400,000 if we were to drill down further and select that 400,000 you'll notice it's a it's a payable invoice that's what they call it on the type of form basically the source document the form the data input form let's go into that 400,000 and that then will take us to the bill so here's the bill here's the data input form so that's how that works I'm going to be bringing this back I'm going to go back then to the balance sheet so I'm going to bring it back here and then go back to the balance sheet okay so there where's the other side it is of course in the accounts payable so there's the accounts payable the 445 so here's the 445 if we were to select that item then we'll see the detail for it and of course the detail shows that payable invoice as well so there it is no effect on the jobs thus far so no effects on the jobs we haven't applied it to the jobs when we do we're going to transfer this to the cost of goods sold in essence and then of course apply it to the jobs or projects at that time now we can compare basically the trial balance or the balance sheet to what we have on our Excel worksheet now so you can see it in both formats and debit and credit format so at the end of the day we've got the 300,000 in cash and then we increase the raw materials to the 400,000 so if we go over here here's the 300,000 in cash there's the 400,000 raw materials then we have on the liability side of things or we have the equipment and the accumulated depreciation still on the books no effect to them no effect there so we have the accumulated depreciation and the equipment then on the liability side of things now we have the 445 thousand in the liability there it is 445,000 and the cap look count or the retained earnings in our case is going to be the 612 so everything lines up we will be making the trial balances as we go and and printing nails out so you can have a check your numbers kind of thing as you go but of course you can also check your numbers here with the Excel worksheets as we move through these tabs and look at it from a from a trial balance format from a journal entry format and then enter it into our database system where it's a little less transparent but we still be it we should be able to generate in essence the same general forms that being the trial balance and then the related balance sheet and income statement that are created from it so that's going to be it for now let's get out of here