 0. Accounting Software 2023. Payment for Inventory Linked to Purchase Order or PO. Get ready because it's time to become an Accounting Hero with 0 2023. 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. Here we are in our custom zero homepage going into the new company file we set up in a prior presentation that being get great guitars. We're going to duplicate some tabs to put our financial statement reports in like we do every time right click in the tab up top so we can duplicate it right click in the duplicated tab so we can duplicate it again back to the tab to the middle I counting drop down let's open up the balance sheet I'm going to tab to the right as that is thinking and accounting drop down this time let's open up the profit and loss or income statement as that's thinking I'll tab back to the left change the range so we're going to go to the drop down let's do a custom range if I may 2023 and let's go to the end of it and update it so we have an up to date stuff here we like up to date stuff and then we'll tab to the right and this one looks like it is already up to date so we're good to go we're going to go back to the first tab now in a prior presentation we thought about the purchasing cycle of our inventory starting with the purchase order now we're going to make payments on the purchase order so if I look at my flow chart this is a quickbooks desktop flow chart but we're just looking at this nice flow of the general forms for an accounting cycle for purchasing inventory so we're up here on the vendor side of things or the the outflow ultimately the purchases cycle or expenses cycle noting that inventory will have a component both on the purchasing side as well as the sales side because obviously we're going to purchase inventory and then sell the inventory so we entered our purchase order last time which would only be used if you're in a situation where you can request the inventory without actually having to pay for the inventory generally right so then you have a transaction which doesn't actually impact the financial statements but is simply a request one that needs to be tracked because we expect then that we're going to receive the inventory so in our case we've requested guitars we didn't pay for them we don't have the guitars therefore didn't record a transaction but sent out the purchase order to epiphone in our case now we're going to imagine a box shows up in our store or warehouse with a bunch of guitars in it and also a bill a bill from the sender epiphone for the actual guitars so now we can take that bill and compare it to the purchase order that we had and see if everything lines up count the guitars and everything see if we have the inventory this properly there and then we could use the purchase order then to populate the bill so that's that's a common kind of setup that we would have we could use the purchase order to populate the bill and then we can we can generally use the bill to create the actual payment to pay off the the the bill that was given to us now notice that when I'm using these terms bills and particularly bills and invoices we have to think about them in perspective in terms of which side of the table we are on because we can use them interchangeably so I'm going to get for example a bill from epiphone the vendor in the box of guitars and in our case if I enter that into the system as an accounts payable that's what a bill means for us it means an increase to the accounts payable if however I simply paid off the bill and just wrote a check I never enter the bill into our system then even though we got a bill for our accounting system we entered it as just a payment we just paid the bill we never really entered a bill form into the system because the bill form increases the accounts payable and when we send out then an invoice to the client we can call that a bill too right but for our accounting software we often think of the outflowing item when we're charging the client as an invoice when we're getting charged by someone else then it's a bill for the accounting software perspective all right so we can go to our drop down up top here in the business and we can track our purchase orders so let's go down to our purchase orders and see what we have here we get this nice little flow so we were looking at the ones that are approved meaning they have been sent out these are requests for inventory now and generally the next step would say okay now I got some guitars from say epiphone we would typically copy that to a bill so we would copy it over and make a bill with it would be the general idea however you might be in a situation where you just pay it directly so you could just pay it directly and then mark here that it has been billed so that's what I'm going to do here like in the first month and then in the second month we'll mark it off and we'll copy it over to a bill which is probably the more common kind of thing to do so for example if I copy this over to a bill mark this purchase order as fully billed and I create the draft it'll pull over all the information from the purchase order to the bill and then mark this off as having been billed and move it from the improved area to the billed area the bill would then increase the accounts payable what I'm going to do instead for the first month is just open this thing up and then I'm I'm going to compare and contrast this as though we just paid off the bill when we when we received it so for example I'm going to right click on the tab up top let's duplicate it and let's say I I'm just going to pay off the bill by hitting the plus button up top and say we want to send spend money and note that if you have the bank feeds on and whatnot then the spend money is going through the cash account so if you if you have a system where you spend the money with an electronic transfer wait till it clears the bank to record it then that might be a system you can set up we'll talk more about bank feeds in a future course or section it's going to come out of the check-in account and we're going to say this is going to go to epiphone so I'm going to say this is going to go to epiphone I'm imagining I have the physical bill in my hand and I'm just going to pay the bill outright at this point in time instead of entering the bill into the system and then paying it so and then we'll do the other method in the second month of operation so we're going to say this is a 01 slash 14 slash 23 and there we have it and then I'm just going to mirror the same items down here so we had an ELP 20 ELP so I'll say 20 or this is an ELP 20 of them and then we had an EP on EPR EPR and we had five of those five of those and then we had an EPSH an EPSH and how many of those we had four of those four por favor and then EPSP and then an EPSP and how many of those we had five of those five of those and that gets us to our 13 880 is that what we had here yes so we pulled that over 13 880 so now this looks very much like the purchase order however this is actually going to record something whereas the purchase order did not what's it going to record well instead of entering a bill we went right to paying for the inventory paying the actual physical bill that we got with a spend money form so this is going to decrease the checking account and the other side is going to be going to inventory for 13 880 dollar amount but because we're also tracking inventory with the inventory items it will be on the sub ledger to broken out by inventory item now before I record this I'm actually going to add a couple more items I to it that weren't on the purchase order so we're going to say that we also are going to be putting on here direct purchases of an epiphone epiphone epiphone less Paul again another 50 of those is going to be tying out to my practice problem worksheet and then I'm going to add a new line so we'll add a new line and then this is going to be an epiphone semi hollow body semi hollow body and that comes out to we're going to have 10 of those and then one more new line and no that's going to be it okay sorry about that I probably should have added another purchase order to populate that other one those last two but that ties into our practice problem here so we're going to say that comes out to the 3780 and then we're going to say all right that's going to actually record the transaction and I'm not going to add another I'll just save it and check it out first and then we'll go in and add another possibly so if I go on to the balance sheet and then update the big balance sheet we're going to see within the checking account drilling down in on the data for the checking we love checking out the checking all right so then here there's the epiphone money out form if I go into it takes us into our money out form just like we would expect all right and then we're going to go back on over to the balance sheet the other side going to the income state or to the balance sheet as well at the inventory so there's the inventory let's go into the inventory and we have our inventory populated so we had our beginning balances and then we had our purchases no notice it's putting them on the books like one line item at a time even though these are all coming from the same form so so it puts it on there you know by line item but it doesn't really give me the total detail I need and for that we're going to have a sub ledger when I'm trying to track my inventory and tie it out to the physical count for example so to see that I'm going to right click on the tab to the to the right and open up another report and let's take a look at our inventory sub ledger reports so let's go to the reports on the left or you could hit the drop down and go to reports and let's type in inventory and look at our inventory item list checking out the inventory item list see what we got kind of stuff we have in here so there's our detail we're down here on the inventory items we have our list of of guitars which should have going up now here's the number of guitars that we have here's the total dollar amount 39976 that should match what's on the balance sheet now the 39976 because we're tracking it on a perpetual inventory method so now we're going to go back into that money out for and make one minor adjustment making a couple of the inventory items billable meaning we purchased them specifically for a particular customer now note there's a couple ways that you might do this for example if I go to the purchase order in the first tab when we made the purchase order the request for inventory if we did so for a particular customer when we get the inventory then we could use the options drop down and copy it over to the bill for our payment options and we could copy it over to an invoice so that we can take the purchase order directly to an invoice and bill the customer that we purchased those pieces of inventory for however sometimes you might not do a purchase order or you might be in a situation where the whole purchase order wasn't for for one customer but part of it was for a customer so you might try to use the billable items now oftentimes when you think about billable items we think about them as being used for like if you want if you have expenses that you paid for like gasoline or supplies or something like that that you want to pull over to billable items but we'll test it out here with the inventory we purchased inventory particularly for a specific customer so first I'm going to set up the customer so I'm going to go let's go to this tab to set up the customer I'm going to go into my drop down on the contacts and we can look at all contacts and let's just make a new customer and I'm going to call that customer just we're going to say Eric Music that's going to be the customer name and so that's all I need for this example so let's save it and close it and then I'm going to go back into my balance sheet drill back down on that check that we wrote or the money out form let's drill back down on it so here it is it's the epiphone so I'm going to go back into that one and then I'm going to go to the options up top and I'm going to edit the transaction and I'm going to imagine that a couple of these items specifically these two were purchased for a particular customer and try to assign those customers to the item so it'll pull over to the invoice and test that out so let's assign expenses to a customer down here and this is like the billable items to make the expenses kind of like billable and then so they'll pull over to an invoice so I'm going to just say for these two items I'm going to try to assign that to Eric Music that we just set up so Eric Music we're going to assign those two items to Eric Music so I'm going to say all right assigned two items assigned let's go ahead and say okay so that looks good and then let's update our form all right so now I'm going to open my balance sheet back up because I messed up my balance sheet over here so I'm going to hit the drop down and open the balance sheet back up and let's change the range and I'll bring the range back up to 2023 and the end of 2023 now there's another report I'm going to go to the tab to the right right click on the tab and duplicate it just to note that you can track those billable expenses that we have now so I'm going to go to my reports and just show that now we have some billable items if I want to find those billable items I can go to an billable expense outstanding report and check it out and so now we've got those billable items that are pulling in from the billable expense report so now if we test this out let's go to the first tab and we'll make invoices in future presentations but just to test it out if I hit the plus button and I was to then turn around and make an invoice then I'm going to say that this is going to be going to Eric music if I type in Eric music and tab it gives me this little item down here says two billable expenses can be added now when I go into them we have these two billable items now note we have to kind of be careful here because uh usually when we use these billable items when we pull it in uh it might not be fully using the inventory items and therefore it's pulling them in with a like like at cost as opposed to the sales price so we'll test that more out in in future presentations when they pull those over but again you've got to kind of be careful with those with using those billable items because we have to be determining what's going to be the income accounts that will be effected and affected when we pull those over and so we'll kind of point that information out in a future presentation so we'll take a look at that in more detail later okay so the next thing we can just track are the purchase orders so if I hit the drop down over here and I look at my purchase orders now we've got the this one that we didn't automatically pull over because we didn't make a bill with it so I'm going to go to the approved item and manually pull it over now I'm going to hit the the check here and we're going to say it has been billed so mark one purchase order as billed so that moves it over to the build item so let's do it again I'm going to do it for this one uh now I'm just going to pay it straight off and I'm not going to enter a bill for it so again it's kind of designed to enter the bill or pop to populate a bill to create a bill from the purchase order and then pay the bill but we'll do that in the second month so right now let's just open up the second purchase order and then we'll do a transaction related to I'm going to pull this to the first tab so there's our purchase order and then on the second tab I'll enter another check so let's hit the drop down and we're going to say this is going to be a spend money form and I'll just populate it based on that so I'm going to say it's from the checking account and we'll say this is going to be for Gibson we're paying Gibson guitars now and we'll say this is on 01-15-23 and I'm just going to populate it from the information on the purchase order so we just had a GSB and 10 of them so GSB and we had 10 of those which comes out to $5,980 is that correct $5,980 looks good now I'm going to do this again where I'm going to add another item that wasn't on the purchase order because I want to tie this out to my practice problem here so I probably should have made another purchase order but I'm going to add this other item to it so it's going to be a GI USA GI USA and we're going to say three of those to bring the balance up to $6,892 and then also on that first item I'm going to make it that billable do that billable thing to it just to test out the billable thing with the inventory so and then you can see whether or not you would when you would want to use this kind of billable thing so assign expenses to a customer so I'm going to say this first one we're going to assign to a customer and it's going to be for musics I'm going to make up a customer called music stuff store now notice it's not allowing me to add a customer kind of on the fly or as we go here so what I'm going to do is first go to the first tab and let's add a customer over here by going to our contacts and all contacts and I'm simply going to hit the new customer and then we're going to say that we want to just call this customer music stuff store it's a very generic name for this particular customer let's save it and close it and then if I go to the tab to the left I probably have to refresh the tab say if I could just go back out of it and say this is music there it is it didn't even have to refresh the whole screen and it pulls it in so we're going to say there it is and I'm just going to say that partial part of this which is going to be this one I purchased specifically for that customer and I'm going to turn around and make an invoice with it although again it's not this bill this billable functionality thing we'll see you know what method might be the best method in future presentations so same kind of concept but we'll assign it here and say okay what's this going to do it's a spend money form it's going to decrease the checking account the other side's going to go to inventory for a dollar amount of $6,892 and it's going to affect the sub ledger for inventory by unit so let's go ahead and say let's save it and check it out so if I go to the balance sheet and update the balance sheet and go into my checking account we see in the checking account we've got that amount for Gibson so that looks good I'm going to go back on up and go back to my reports again the other side is going to be in inventory so here's the inventory account going into the inventory and so we have the Gibson items broken out by the the two different items that we purchased but we need to further break it out by the actual units of inventory for tracking on a perpetual inventory system so that ties out to four six eight six eight which should be also on the inventory report if I update the inventory report we then have our units of inventory over here and the total cost four six eight six eight which ties out to the balance sheet four six eight six eight our billable expenses over here are if I update this report we have the the epic okay so there we had I've updated it now so it's the Eric music and then we've got the music stuff store these are the items that if we create an invoice for these customers we should get that pop-up saying hey look you've got these items that you could pull in to the invoice which we will follow through on in a future presentation now I'm going to make one more adjustment I'm going to imagine that that we paid actual checks so I'm going to go back on over here and add a check number to our form so I'm going to go back in to a balance sheet again balance sheet and I want to put check numbers just so it can tie out to the the mock bank reconciliation we're going to be doing in a future course or section so I just want to put check numbers in place so I'm going to say this is going to be for a custom date 2023 and update it and then I'm going to go into those checking account and take a look at that form and so we have these two two that were made so let's go into this one and see if I can edit it with a check number so I'll go into their options edit transactions and then I'm going to put a check number of 1004 so that'll tie out to our bank rec so we're going to say check number 1004 epiphone no memo and then now notice if you were actually printing out the checks you would still have to buy pre-printed checks because they have the check number on it so this would be tying out to the actual check number and then you put those in and print out the check so let's go ahead and save it here and I'm going to say okay so now I'll go back up top accounting again balance sheet and check out the other one the other one just like the other one custom date 2023 and go into the checking and so now we should have a reference to the check number and so there we have that and then I'm going to do the same for this one here I'm going to say this one if I go into it let's edit it and I'm going to say this is 1005 so pay by check and I'm going to say update and Gibson this is check 1005 the next available number so I'll save that looks good so now if I look at my transactions I have those I have those reference numbers which might help with our bank reconciliation obviously these days a lot of transactions are basically electronic instead of checks and we'll talk more about you know how that plays out when we do our bank reconciliations and whatnot and in the bank feeds in a future presentation so one more thing we want to go to the first tab over here and let's go to our business let's go to our purchase orders and then I'm just going to once again go from approved and manually pull that purchase over purchase order over and say it was billed and so now it's pulling over to the billed items so we have received those those are good now all right let's finally go to the tab to the right and let's open up then a trial balance actually we'll enter one more purchase of let's enter one more purchase of inventory I'm going to go to the first tab again and we're going to then say let's let's say we're going to say spend money spend money and we're going to say it's coming out of the checking account okay and this is going to go to diamond head this is who we buy our ukulele's from so I'm going to say there's a new contact and let's say the date is on 01 slash 15 slash 23 and so and we'll say okay then I will once again pay it by check here the item is going to be a duk for the ukulele's and let's just say we're buying three of those we're not going to be buying them specifically for anybody so we're not going to assign them to a customer my voice just cracked sorry about that so that's the same thing so this is going to be in decreasing the checking account the other side going to inventory and then also to the sub ledger for the ukulele's so let's save that and check it out so if I go to the tab over here we need to open the balance sheet up again because I keep messing it up open up the balance sheet keep the balance sheet open for crying out loud and then hit the drop down we want to say this is going to be custom date for 2023 and the end of the year update it so we should once again have a decrease to the checking account the other side going into inventory here so if I go into the inventory there's our purchases for the ukulele so here it is I had to refresh it I'm going to go back on up again and then we can go back to our report it's also on the inventory report so we've updated our ukulele's on the inventory report so that's great let's go and open our trial balance now and just check where we stand at this point in time so we're going to hit the account drop down and we want to go then to the reports and just open up the trial balance that's the easiest form to kind of check out that we have everything the way it should be going forward as of this point in time a lot of action going on this time so we're going to hit the drop down we're going to say let's let's do this for a custom range end of 2023 and this is where we stand so you can check your numbers if your numbers tie out to these numbers great if something's off it might be the inventory and the checking account for example then you might expand the date range and see if they change and if so it might be a date issue drill down on those numbers and then adjust the dates