 And if we scroll down here we're looking for job 14 and job 15 So we're gonna scroll over all the way over to our job sheets over here, and we have a job 14 which is 186 1000 and job 15. I'm gonna hold down control which is three first a word from our sponsor Well, actually these are just items that we picked from the YouTube shopping affiliate program But that's actually good for you because these aren't things that were just given to us from some large Corporation, which we don't even use in exchange for us selling them to you These are things that we actually researched purchase and use ourselves Acer 27 inch monitor I've been using an Acer monitor as my primary monitor for a few years now This is the first Acer monitor that I have used after having used a series of different brands of monitors in the past The Acer monitor has been performing well, and I'm trusting the Acer brand more and more as I use the monitor I have a 27 inch monitor, which I think is ideal for what I do which is of course the screen recording and the editing if you would like a commercial free Experience consider subscribing to our website at accounting instruction.com or accounting instruction dot think of it Dot-com where we have many different courses You can purchase one at a time or have a subscription model given you access to all the courses Courses which are well organized have other resources like excel files and PDF files to download and no commercials B14,000 that adds up to five hundred thousand So five hundred thousand is the amount that we're gonna transfer from work in process to finish goods So I'm gonna scroll all the way back over here. So both the debit 500,000 to finished goods and the credit credits of five hundred thousand to work in process That's the transaction. Let's make this smaller on the taskbar like so and scroll over here and post this out So we're gonna post the finished goods here, but here it is on the trial balance Here's the finished goods on the general ledger. We are on the debit side in you 18 equals pointing to that five hundred thousand that brings the balance up in the debit direction Then we're looking for a work in process here. It is on the journal entry Here it is on the trial balance and working process is right here We are on the credit side this time reducing the working process in sell the 12 equals and pointing to 500,000 bringing our balance down Now note that what we did is we brought down the working process to 260 We're gonna have to do something with our backup account now in order to in order to back that number up in our jobs Cost sheets because if we go over here to the job cross sheets, we still see the job cross sheets here We still see them. So we have to indicate in some way on the job cross sheets that hey, you know We transfer these jobs. They're no longer in working process. They shouldn't be included in this number They shouldn't be in here. So how do we take it out of there? Well, there's different softwares that'll do that But in this case we could say well, you know, this is no longer an open job We can say that it is now a closed job. Maybe just highlight that the fact that it's now closed Like so and therefore it needs to be removed from the yellow area here So we can say this is this job is closed. We'll make it green like that So this should only include the yellow jobs which are open indicating that they are open. So this one's open Maybe this should be yellow too Okay, so I'm gonna double click on that then that means that or we could just we could just delete it And I'm gonna say that the new entry should just be this job That's all that should be in there and that means that that now ties out to the work in process so the green jobs are now closed out and The the only open jobs that are being backed up by this cost sheet now are the ones that have not yet been transferred to finished goods being the 260 so we can see that 260 just includes that job that 260 is what is in Work in process and of course we could see what's in finished goods to the 500 being in this case the 186 and The 314 as up to the 500 Okay, and then once we transfer it out of there. I'm gonna say it's it's shipped. All right. We also see the Work in process and the finished goods over here on the trial balance respectively at the 260 and 500 All right, let's make it larger again back up to a hundred percent on the side scrolling back over to the left We are now on the next transaction Which says that we on 131 record sale of job 14 So we sold job 14 for 380,000 so we are 131 Okay, so we sold the job now we can think of the first half of the sale just like any type of sale We made a sale what happens when we make a sale? Well, we think what is cash affected in this case. Did we sell it for cash? Yeah, we did so cash is affected cash is going up by the one third by the 380 So cash has a debit balance. We're gonna make it go up by doing the same thing to it Which in this case is another debit So I'm going to copy cash going to put that up in h13 right click paste 123 And then we're gonna credit income or in this case sales. So this is the actual sale that happened So we're down here in sales sales have credit balances We're gonna make it go up by doing the same thing to it, which is another credit just like any sale There's just a normal transaction for any type of business where we we Generated revenue and got cash for it. We increased cash We increased the revenue account cash is being debited revenue is being credited And I just did the wrong thing on a right click and copy and our revenue account being called Sales in this case because we sell stuff and we have the amount of 380 Now a lot of people are gonna get confused on the 380. We're saying well How did we come up with a 380 that arbitrary number? Why don't we I mean don't we have to look at the job cost sheet in some way to think about how much We sold it for and notice that we might get the sales price from the job cost sheet Meaning we might have a rule that we're saying hey, whatever the cost of the project is We're gonna mark it up by 30% Meaning we might use the job cost sheet to come up with the sales price But the cost is what we've been tracking not the sales price The sales price should of course be higher than the cost unless we underbid the job But notice that in a lot of problems They might just give you the sales price and and or they might not even talk about the sales price And just talk about the movement of the inventory So when we start thinking about the inventory, it's a lot of times it gets Confusing because people ignore we tend to ignore the sales side of things and lose sight of the fact that the sales Is going to be slightly different than what we've been working on We've been working on tracking the cost the whole time So we might use the cost in order to come up with the sales price But many problems might just give you the sales price and then we have to record the other half of the journal entry Which is similar to the other half of any journal entry if we we were a Merchandising company and that is that we have now reduced the inventory Meaning our inventory now being the finished inventory because we're not going to sell the stuff that's in process Unless someone wants to finish it themselves and we're gonna like sell it at a discount or something But otherwise we're probably gonna sell the inventory that has been completed and it has a debit balance We're gonna make it go down So I'm gonna copy that I'm gonna skip a line and skip another line to put it on the bottom so we're gonna credit that and If we're gonna credit the finished goods, then we're gonna debit the expense related to us Giving up the inventory that expense is finally called cost of goods sold So just like in a merchandise and company we're selling the inventory we're expensing it in the form of cost of goods sold So I'm gonna copy the cost of goods sold I'm gonna paste that in sell H 16 right-click paste 1 2 3 So we're gonna have to get this information from of course the job cost sheet So this is the number that's gonna come from the shop cost sheet the reduction in the inventory and the Expensing of the cost of goods sold. So we we sold job 14 Let's scroll over to our job cost sheet and see what's in Job 14 here it is. I'm gonna say now it's closed So I'm gonna make it a different color again. Let's make it like blue maybe cool blues closed So it's no longer here We're gonna say it's closed Or shipped it's been shipped meaning it's closed. All right So now we have it over over there and the amount in there is the 186 so notice it at this point in time. We're finally gonna expense all this stuff We're expensing the material the direct labor and all the overhead all the rents and stuff that we applied to this particular job We're expensing at this point in time in the form of cost of goods sold because that's the point in time And then it helped us to generate revenue and that's the point of time We expense things under the matching principle, which is an accrual principle. So 186,000. So we're gonna scroll over here 186,000 credit 186,000 Also note that these two things basically happen at the same point in time But it's a lot easier most of time to think of them as two separate journal entries So we're gonna think of the sales half cash and sales and then the reduction of inventory and the recording They cost a good soul as two entries even though they're happening at the same point of time. I'm gonna make this smaller Back down to 80. We're gonna post this out. We're gonna post cash first scroll over here a bit So here's cash. Here's cash on the trial balance. We are in the debit side So we are in q13 and point to the cash of the 380 bringing our balance back up to 534 now we're gonna post the sale. So here's sales here here sales way down here So it's gonna be way over here in the dark blue first dark blue in ad so it's an ad 13 So I'm gonna select equals and go way back over here to the 380 and that's gonna hit enter And what that does is it increase the sale? So notice that increase of sales. It's represented by a credit That's not a negative number net income is now including just that number. So all this stuff that we've done We haven't recorded any expenses even though we've paid the utility bill and we've paid Certain salaries and whatnot because all that went into our asset up here So we only have revenue at this time until of course we report and record the cost of goods sold So here's the cost of goods sold here. It is on our income statement. It's gonna be over here way over here on the general ledger it's gonna be a debit in AC 18 and Equals and we're gonna point to that 186 and enter so note that the net income on this transaction is the revenue We got as 380 minus cost goods sold 186. We've got the 194,000 again that 186 includes so many things that we've been talking about right it's got the direct labor it's got the Direct materials it's got the overhead. All right, so then we have the Finish goods is here finish goods is here on the trial balance of the and finished goods is over here on the general ledger We are in v 19 equals pointing to the 186,000 brings the finished goods down So now we have in finished goods just the 314 if we scroll over to our jobs All that's in the finished goods is the 314 now We still have in open jobs just job 16 of the six 260 and in the work in progress we have the 186 Okay, so then we're gonna have one more thing happen here. So we're gonna make this larger We're almost done. We're almost half to stop because we have completed this very entertaining problems. So now we're down to Adjust for any under appropriated or over appropriate factory overhead. All right, so what are they talking about? So remember if we if we look at the factory overhead, then we're done with the period here and We have three thousand negative in fact or three thousand credit in factory overhead. What does that mean? well, if we think of factory overhead kind of like part of inventory as part of the Work in process and the raw materials the finished goods and overhead are all the things that kind of we're using to record inventory The work in process is where we put a bunch of stuff All the stuff we couldn't apply to the job and then we applied it to the jobs in the using a Predetermined rate now that predetermined rate is just an estimate We had to come up with an estimate an estimate is never gonna be perfect And therefore in this case we applied out more to the jobs based on the predetermined rate Then we actually Expensed or included or debited or increased factory overhead by so we over applied The factory overhead now there's a couple of ways we can treat that Usually if we say hey that factory overhead is pretty small We were pretty close three thousand in relation to the rest of the numbers isn't too far off then We just want to make that zero so that when we start over next month It's it's at zero. We don't want to start off with three thousand in it So what we're gonna do is we're just going to make that go to zero And we're gonna put the difference to cost of good sold So this is gonna look kind of like a funny entry it could it's gonna go the wrong way I mean it's gonna it's gonna be a credit to cost a good sold Which is unusual because cost gets sold as an expense basically and it usually only goes up in the debit direction but the reasoning behind this is that you know, it's just an estimate and The related account on the income statement that will then clear out to retained earnings So we'll never have to look at it again is cost of good sold and because it's insignificant Then in relation to the other numbers it's immaterial. Let's just clean it out to the income statement The related account being cost to get sold close it out to retained earnings And therefore we won't have to worry about it again when we start the next month over So idea being that as of the end of the month 131 We have a credit balance in here because the factory overhead was over applied We need to make it go down to zero. How do we make something go down? We do the opposite thing to it, which in this case is a debit So I'm gonna copy that we're gonna put it on top in so H 19 right-click paste 1 2 3 debit for the 3000 we're gonna credit something and again, what are we gonna credit? I was just gonna plug it into cost of good sold Therefore it'll be closed out and we'll know and we'll never see it again And so we're gonna put it in the cost good so notice cost good sold has a Debit balance it usually only goes up. You almost never credit cost good. So this is an exception to the rule That we're actually gonna credit cost a good sold so we're gonna copy that we're gonna put that in each 20 right-click and Paste it 1 2 3 gonna make this a little smaller back down the 80 scroll back over here Here's the factory overhead in I 19 Here's the factory overhead down here in you in column you and we're way down here We're gonna we have the credit balance we have this 3000 in it I'm down here in v 31 and we're gonna say equals and point to that debit and what we want to happen is for this 3000 to hopefully go down to Zero so we've cleaned that out. We're out of where our balance by the 3000 of course now. Here's the cost of goods That's where we're gonna just plug the difference. Here's the cost goods on the trial balance way over here last count over here on The general ledger so we're gonna credit it which is kind of weird, but it's okay This is the exception to the rule equals. I'm in ad 19 pointing to that 3000 and Enter so notice that affects net income by by the 3000 there for that adjustment and So there there we have it and that's it