 So if I go to the tab to the right, the balance sheet and run it, we should have an increase to accounts receivable. That's what an invoice does. Let's go into that and check it out. There it is. There's the 3622. If I go into that down drilling down to the source document, that's for the full amount, 362250. That looks good. Scroll in back up. I'm going to close up the invoice and go back to my form. The other side's on the income statement to the profit and loss, run it. Finally, activity has happened. There's our sales. Note that the sales is on the books for, they give us three line items because there were three line items on the invoice, but the total 3450 does not include the sales tax. So they put it on line item by line item and the sales tax is not included. Where does the sales tax go to be in balance? Close in this back out. Back to our income statement. That's going to be on the balance sheet back to the balance sheet. And then we go down to the liabilities. We should have a payable. They put it into the California department because it's going into that's the vendor that we pay for the sales tax and that could help you instead of just putting it into a generic sales tax payable account. If you had multiple sales taxes that you're going to pay because it's going to break it out by department instead of what you would expect, which would be like sales tax payable, but we're going to go in there and there it is. There's the sales tax being calculated and that is that 172 that we put on the generic sales tax item. It's only one line item because we did the generic tax. If you did the California tax that might break it out into three line items because you're actually paying three different kind of for three different kind of things, state, local and whatever. And so then I'm going to go back and then inventory also go impacted. So if I go up to inventory, that's going to go down. So if I go into that, you can see this one invoice had four line items related to it because there's multiple line items on the invoice. If I scroll down a little bit more and go into one of those, you can see that that 1600, for example, that amounts not here because it's going down by it's going down by the cost, not by the sales price. This is the sales price. So I'm going to close this back out. Also note that you might say, Hey, look, there's three line items here and there's four and there's like four line items here and I believe that's due in part to the fact that they're using a tracking of first and first out for the flow assumptions and so possibly due to layers on the flow assumptions, you might end up with different levels here versus what's on the line items on the invoices. I believe is what's going on with that. So let's go back up. I'm going to go back up and back and then the other sides on the profit and loss report and the cost of good souls representing the expense of us consuming the inventory when we used it to generate revenue. So we're matching the time period. This isn't when we paid for it necessarily. It's when we used it when we sold it. So we're going to go into that and there is the other side for the cost of goods sold. So then the impact on the profit and loss we can see clearly because this is the one only transaction we have sales went up by the sales price cost of goods sold the expense went up by the cost of the goods that we sold gross profit is the difference between the two now also what's impacted if I go back to the tab to the left we've got the accounts receivable also needs to be broken out not by just the date of the transaction but by who owes us the money we can see that in report form and we can see it in the detail on the left hand side when we track our customers. Let's go to the tab to the right right click on it and duplicate the tab and look at it first in report form. So we're going to go to the reports on the left hand side which we've seen in the past and then I'm going to scroll down a bit and we're going to go down to to the AR who owes you and we can look at a couple of these but a common one is the accounts receivable aging summary. Let's look at that one and change the range or just the date 1231 23 run it and it breaks out the dates here because I put it at the end of the year that's why it's all over 90 but the point is we've got the people that owe us money broken out in that format and then the total ties out to the 24122 50 that's what should be on the balance 24122 50 now in practice we're going to have to collect on that receivable so we're often going to go internally tab to the left into the sales tab on the left hand side and then we're going to be tracking this information by going to the the in my one of my on the sales tab and then we might go into the customers and then close in the hamburger and we can look at our customers. We can look at our invoices up top and look at the open invoices this way that will show us our customers that have open invoices this one has two of them for Anderson I can go into Anderson there's our open invoices and then we might also go into our sales tab over here and then look at the all sales up top and we can search in here as well sorting our sales transactions note that if you're in the business view these are in a different little bit different location they're kind of separated if we were on the get paid and paid area that's where your customers are and then if you were in the bookkeeping area that's when you can go into your transactions up top where we saw the expenses before now we're on the all sales transactions they kind of put those side by side and a little bit different fashion on the business view but once in here we can then say okay now we can sort our transactions they got some sorting options up top so we've got for example open invoices I can select that item and there's our open invoices you see the drop down we got all invoices here you can also sort for this way you know all invoices and we've got those invoices here that were set up when we set up the the beginning balances and this is the invoices that we created now we would expect the next thing to happen is we receive payment we'll go into the receive payment in a future presentation and obviously when we're communicating with the client we're going to have the receive payment and we might then send them you know reminders or statements about the open invoices that they have that we could set up to do periodically okay let's do another one so we're going to go back on over and say let's do another one let's hit the plus button up top make another invoice this one I'm going to say is going to go for Jones guitars which I think we already have a client or customer for Jones guitars so it's set up good to go we're going to got the email address and so that looks good billing and we're going to have the terms of 30 days that looks good let's set the date let's move the date up like a day here I'm just hit the plus button so that that moves it up a day so that's a like a little bit of a quick way to do that we've got the invoice number populating automatically the sales location populating which will help us to calculate the sales tax generally no tags that we're going to be adding and then I'm just going to type in what they're purchasing they're going to be buying a g i us a g i us a and so that's a Gibson us a we're going to say the quantity we'll just keep it at one so we're going to say there it is and then that's good and it should be taxable so it is a taxable item so I'm going to say okay and then we've got a ELP so I'm going to say ELP and that's going to be an epiphone less Paul so that looks good so we'll say that one and so that's going to be an epiphone we're going to say we want eight of those and say eight of those it is a taxable item so that looks good and so that puts us at four thousand three eighty and then I'm going to change the sales tax for the generic problem to be to be the five percent so we'll change it to the five percent to make it generic you can change it there or you can change the math here if you just want to work work and make it kind of a generic five percent for practice problem purposes okay so that what's this going to do same thing let's just let's just recite it again it's an invoice that means that counts receivable is going to go up by the full amount including sales tax four thousand five ninety nine the other side then is going to go to revenue but only by the four thousand three eighty on the income statement because that's what we charged the difference is sales tax two nineteen it's not on the income statement because in theory we didn't charge them that amount by the way the expense is also not on the income statement you can imagine a system where we charged the two nineteen as income and then expense when we pay the expense that would be kind of like if we were if it was part of our business but it's we're trying to imagine that we're just a tax collector and therefore the incomes not hitting and therefore we have no expense related to it as well as just going to a payable account it's a balance sheet item not going through the income statement increase in the payable by the two nineteen also inventories going down by an amount not on the invoice but driven by the items and cost of good sold the expense related to us selling the inventory is going up the net impact on the income statement will be the increase in the sales price minus the cost of good sold and the accounts receivable sub ledger will track the accounts receivable by customer not just by dollar amount and the sub ledger for inventory will track inventory on a perpetual basis by unit not just by dollar amount so like a lot going on actually quite complex we're going to save it and close it and check it out so now let's go to the tab to the right to check it out and we're going to we're going to run it up top run it running I don't think I looked at the inventory report last time we'll look at it this time accounts receivable has been changed so there's Jones Jones is on there that looks good that amount four thousand five ninety nine is the full amount including the sales tax closing that back out back to the balance sheet other sides on the income statement tab to the right run it to refresh it income sales has gone up now it's going up it put multiple line items to increase it because we had multiple line items notice the prices though four thousand three and three eighty do not include the sales tax of the two nineteen so we're out of balance by the sales tax where does that go double entry accounting system has to be in balance back to the report it's going to be back on the balance sheet in the liability section and this is the tax we're collecting for our trustee California Department of administration basically sales tax payable there it is there's the difference on that one but we're not done yet we're not done yet going back we also have inventory going down because we're tracking it on a perpetual system not it not a periodic one not a periodic one inventory let's go into that one it's going down multiple line items tracking the inventory for three oh oh one it's going down by amounts here three thousand two hundred three oh four that aren't actually on the invoice but driven by the items the system knows what they are just like when you check out something on the grocery store and you don't know how much they paid for it but the system doesn't records it in a perpetual inventory system even though you just simply running the thing across scanner and then the other side is going to the income statement and the cost of the goods that are sold expensing them as we're selling them matching in accordance with the accrual matching principle at the same time so there we have it so let's close that out also that's not all that's not all the net impact on net income is the income minus the cost of goods sold if I go back to the balance sheet we've got to the A to the R needs to be broken out also by by customer which we could see in report form on the sub ledger updating the sub ledger we ran last time it's now at twenty eight seven twenty one we owe we are owed money by Anderson Jones and Smith guitars for that twenty eight seven twenty one that should tie out to the balance sheet twenty eight seven twenty one also if I go to the tab to the left and track this internally I can look at my sales items I now have five open invoices that I can expect to receive payment on in the future if I look at this in terms of customers sales tab customers then I can look for the open invoices by customer and so now we've got that way to that way to see it as well and so I could go into Jones guitars and say I expect payments from Jones guitars here we can send them statements and whatnot if we so choose let's also look at the inventory this inventory should have a sub ledger breaking out by unit let's go to the tab to the right right click on it duplicate that tab and then go to the reports on the left hand side the reports and then we're going to go into let's just type in inventory inventory valuation summary change the date to twelve thirty one two three run it and so now we've got the unit item the items and the quantity and then the dollar amount forty thousand six seven six that should tile to what's on the balance sheet and their forty thousand six seven six looks good now obviously the invoice would be a lot more simplistic if you just had a service item and no sales tax right but when you get into the tracking inventory perpetually and have the sales tax then there's quite a lot of action going on with the invoices actually a lot a lot happened you got to make sure it's set up properly to have it all working systematically.