 depreciated. So because of that, in the United States, we often don't really have the sub-ledgers within the accounting software to record the depreciation because we're going to have to give it to the accountant to do depreciation on a tax basis anyways using other software such as tax software. Now then the question is, do you want to keep your books on a tax depreciation schedule or do you want to have it on the book depreciation? You have to do tax depreciation for taxes but it's not the best depreciation schedules to use for accounting purposes typically. So you could use the tax software then to run depreciation schedules on both a tax basis for taxes and a book basis for your books. So you want to kind of keep that system in mind because the sub-ledger being in another software means that you want to set up your accounts here. If that's how you're doing it, you want to set up your accounts to line up to the account categories that will be on the sub-ledger schedules created from the tax software. So that's what you want to keep in mind when you're adding your equipment account, your fixed assets, what are the asset classes and you might want to talk to your accountant about this on the tax software so that I can match them and mirror them over here so that when I do my adjusting entries for depreciation it will be as easy as possible. Also note that when you deal with your taxes what do you have to do with regards to the depreciation? You're going to have to give your tax preparer at least yearly in order to facilitate the depreciation schedules the additions and subtractions to the the fixed asset type of accounts. So you could give that to them with this like general ledger right here. You can give the tax preparer this at the end of the year. There shouldn't be too much going on because you don't purchase a lot of stuff and remove a lot of stuff during the year because equipment is stuff you don't purchase on all the time. You only purchase it periodically. However you want to make sure that you give as much detail to your tax preparer as possible so that when they put it on their books they they do a good job of being able to identify the exact pieces of equipment they're putting on their books. In other words if this 2082 represented three forklifts or something like that then you don't want your tax preparer putting it on the depreciation schedule as just equipment that would be way too generic. You don't even want them to put it on the books as three forklifts because that's two that's still too generic and you want them to put it on the books as three separate forklifts and be able to identify those three forklifts with basically an identification number if possible or some description so that you can actually locate them from the schedule to physical reality. Why is that the case? Well it won't be a problem if they shortcut when you first put the thing on the books for taxes. I can put 2082 and just call it generic equipment not a problem for this year. However if I sell the forklift five years from now it's going to cause a problem if the tax preparer put it on the book as one lump sum and just called it equipment because now I don't know where the forklift is that I sold and I can't figure out my depreciation schedule so make sure you're working with a tax preparer that is is doing a good job identifying the the actual pieces of equipment on the sub ledgers because it will make things easier in the future. Alright so that's the general idea let's open up a trial balance I'm going to right click on the tab to the right just to open up a trial balance so we'll open up the trustee trial balance over here going to the accounting drop down reports reports and then I'll type in trial balance to open up the trial balance just to see it being built kind of as we go so we'll open that up and this is for December 2000 so now you just got the balance sheet on top of the income statement there's our checking account they still put the checking account up top for for this one because I think it's ordered by the check numbers even though it's a liability because it's overdrawn at this time there's our equipment and then the income statement accounts of utilities and the telephone account the debits and credits mean the double entry accounting system it is in balance when I convert that to an accounting equation we can see on the balance sheet the assets of 2082 equal the liabilities and equity that's really the same thing that the the debits and credits is this in balance is the same thing is saying the assets equal liabilities in the equity how does the income statement fit into this the income statement is part of equity it's the breakout of equity of the 101 51 that you could see here these two items in the trial balance which is the income statement income minus expenses which we just have expenses of the 101.51