 I'm going to paste it one, two, three, and then I'm going to indent those. So I'm on the cell. I'm going to go to the home tab, I'm going to go to the alignment group, going to increase the indentation like so. And then we're going to go into the inner column of these two. The inner column does not mean debit or credit. The inner column just means that we're going to subcategorize indicated by the title, the colon, the indentation, then putting the numbers on the inside. Once again, I want to flip the sign. I want to make that a positive number. I do not want to have negative numbers on my financial statements. One way to do that is to just, instead of hitting equals, just hit negative. And that will take whatever number I put in there and flip the sign. So negative of a negative 780 is a positive 780. So we're going to do that same thing down here. I'm going to say negative of the 200. Negative of a negative 200 is a positive 200. And negative of the 1, 5, negative of a negative is going to be a positive 1, 5. So now we found a home for these now, just keep with the green. We just found a home for all of them. And then we're going to subcategorize those outside. But instead of calling them total current liabilities, I'm just going to call them total liabilities. And enter, and then I'm going to go back on that cell and indent it one more time. So I'm in the home tab, alignment, indent one more time, and I'm going to put that on the outside. So we're going to put this on the outside at this time now. Why is it total liabilities and not total current liabilities? Because the total liabilities, there are no other liabilities. So we're going to do this with the sum function. So I'm going to say equals SUM shift 9 and then highlight this area. So we've got L5 colon L7 and enter. And if we want to double check that, we can highlight these and say this should be summed up. And if we just highlight them in the task bar, it sums it up for us. We can also sum them up over here and the 9-5 sums up over here as well. We know that this now ties out to that even though these are credits, these are positive numbers. We're not dealing with debits and credits in this section. Now the next section that we're going to have is going to be called owner's equity. And so we're going to be in owner's equity. Now owner's equity is going to be one of the more confusing sections for this reason. But we see that this whole thing is blue down here, but it's a slightly different blue we have over here. And there's only going to be one owner's equity type account on the balance sheet. That type account will be called owner capital. So I'm going to take the capital account and copy that. That's going to be the amount on the balance sheet here. And note though, I'm going to do this incorrectly and then show you why, that if I take the balance from this owner's equity section, I'm going to flip the sign again by saying negative of this 42, 300. So enter and that flips the sign to a positive. So now we've got liabilities and equity. And if we take total liabilities and equity down here, I'm going to use the sum function to add those two up equals SUM colon and shift and highlight from the 95 to the 42, 3 and enter. And then again, if I highlight these cells, I get 51, 8, 51, 8. So that added up correctly. And if I highlight these, I can see that I found all those 51, 8. The problem is though, that my total assets do not match my total liabilities and my owner's equity. So the question is why is that? If this is the only account here, how is it that we are not in balance? And the reason for that is that all of these are blue because basically all of this is part of owner's equity. So we need to crunch all this into basically one number. If we crunch all this into one number, that should make it work. Because what we have here are assets here and up to 66, 440 liabilities and owner's equity, 66, 440. So it has to work, but we're missing in the balance sheet all of this. And why is all of this going to be included as part of equity? Because at the end of the day, it is part of equity. This is basically the beginning equity. This is the story of what has happened in the last month. So at the point in time, as of this point in time, we need to squish all this into one number. This account, although it doesn't say so, is really owner's equity as of the beginning plus any investments. Not including any draws, not including any income or expenses. But over here, although it doesn't say the date on the capital account, it does say the date up here. This capital account means as of May 31st. Therefore, we're going to have to sum up the entire blue section over here. And then it should work. So let's try that. I'm going to delete this and put negative SUM and sum up from the 42.3 down to the miscellaneous expense of the 9.50. And when we hit Enter, see if that puts us in balance and it does. So that's what we want to show you. So now we found a home for all of this, right? By highlight all of this, we found a home. It's all going the right way. Why? How do we know? Because we're in balance. So we're in balance. It went the right way. But we want to have more about this. We want to know more about that number right there. We want to know how we did last year. Note what this or last month in this case. Note what this number means. Assets 66,440 minus liabilities 9.5 gives us the book value of 56,940. So this could be thought of as kind of the amount that we could walk away from if we sold the assets, got cash, then paid off the liabilities and then walked away from it. Of course it wouldn't work perfectly that way in a perfect world, but in a perfect world that's how it would work. So that's kind of the book value of the company. We want to know how we did basically last year. So that's why these accounts are going to be yellow because we're going to see them in multiple places on the financial statements. We're going to see this on another area in the financial statements that will be coming from the statement of owner's equity. So I want to tell this story again. I want to find a home for all these accounts again in the form of timing. And our timing statements are called the income statement and the statement of owner's equity. Once we do those timing statements, we will then come up with the same end result number being this 56,940. And let's see how that will work. Now our timing statements are going to be called not just the end date. The income statement will be for the month ended in this case of May 31st. I'm going to say 20X1. So it's for the month ended in this case, meaning it has a beginning and an end. If we talk about revenue, if I ask you how much money you make, you can't answer that by saying just pulling a number out without assuming. What do you mean a month? Do you mean a year? An hour? Well, you need a time frame. So in this case, it's going to be the month. So we're going to have revenue and expenses. The only two accounts on the income statement, we're going to start off with revenue. So the first account, it's just going to be revenue. So I'm going to copy this. I'm going to paste it right here. Paste it one, two, three. And there's no subcategory because we only have one type of revenue. We do one thing. Therefore, we're not going to bring it to the inside and then subtotal it on the outside. We only have one revenue account. We're just going to put it on the outside. Once again, these two do not mean debits and credits. So this isn't a credit over here. This just means that we don't need a subgroup in the terms of revenue because there's only one revenue account. So once again, it's a credit here. I don't want a credit over here, so I'm going to put a negative and then click on this 36.8 to flip the sign. Now, all the other accounts on the income statement are expenses. So we're going to go over here and I'm going to make a subcategory because we have a lot of expenses and put a colon like we traditionally do when we have a subcategory. And then we're going to put all these expenses underneath. Now, note that in a lot of companies, we're going to have more accounts on the trial balance than we may have over on the financial statements. And it's our job to group those in a logical way on the financial statements. In this case, of course, there's so few accounts, we're just going to copy them all over onto the financial statement. So I'm just going to highlight all these, salaries expense, rents expense, buy expense, depreciation expense, insurance expense, miscellaneous expense, let go, right click and copy. Then you're going to put that right underneath the expenses here, right click, going to paste it one, two, three once again. And you'll note that the indentation is already there because the sales were formatted already. That happened because if we do that, we would decrease the indentation and then increase the indentation like so. So we're indicating that there's a subcategory by the colon and then by the indentation and then by bringing them to the inside column. This is not the debit side of the column. This just means that it's a subcategory and we're going to say this equals this 8800 for salaries equals the 16 for the rent equals the 81 for supplies equals the 330 for depreciation equals the 300 and equals the 950. Could we have done that in a more quick way using Excel? We could have. I'm going to delete these. We're going to say use the old auto fill. We're just going to copy and paste the formula. So I'm going to auto fill it down by putting our cursor right there. So it looks like that. And then auto fill down, auto drags it down. Dr. Phil does calculations and we have the numbers here. So and once again, it does that because of the relational formula of the sales. And so you want to get used to that in Excel. It takes a little while, but very handy to have that. So then we're going to say that total expenses are going to be on the outside. And once again, it already indented for us over here. That's going to be in the home tab alignment. These are the indentation groups. And we're going to sum that up on the outside now. Once again, we only do things on one column at a time. So we're not going to jump from here to here. We're only going to sum up this column on this cell with equals SUM. And we're going to take the 880 down to the 950 and enter. So there we have it. If I highlight again, I can see it's the 12160 in the taskbar. We could highlight here and see it's the 12160 here. We have now found a home for all of these. And so now the bottom line on the income statement is called net income. And we calculate net income as revenue minus expenses, which should be this 24640. And so let's do that. Equals the 368, which is going to point to J20 minus the 12160 and enter. We get the 24640 equaling this number here. If I highlight these, that's the 24640. Now you can see it's yellow because we're going to take that and we're going to use that in our statement of owner's equity. The only two accounts that we haven't yet found a home for other than grouping it into this number here are the capital and the draws. So now we're going to take that into consideration. And we're just going to use this number to recalculate this whole number here being the 56940 that we have in the capital count on the balance sheet. So the statement of owner's equity is also a timing statement. So I'm going to just copy this, paste it down here. It's going to be for the month ended, May 31st. And what we're going to have here is we're going to have the capital accounts. We're going to copy the capital account, paste it one, two, three. But we're going to show the timing of the capital accounts. Remember, this capital account represents the beginning capital account. This is the capital account before we plug all this stuff into it before we close out the temporary accounts to this account. So I'm going to put this on the outside or we're going to call this the capital account as of the beginning of the period May 1st. 42OX1. And we'll put that outside and I'm going to put negative to flip the sign, point to that 42-3 and enter. Now, our capital account is going to increase by the bulk of the stuff, the whole income statement, which we already calculated and crunched it down to one number, that one number, 24640 being on the income statement in the form of net income. So we're going to increase this by net income. And that's going to equal, I'm just going to point to this 24640 and enter. So that's where the income is. Now all of this is included in our statement of owner's equity in the form of one number, 24640 as net income. Then the only account we have an account for, we account for this now, is draws. So now we've got to take that draws. Notice it's a debit balance and the credits win here. If I highlight all these, credits win, 56940 on the credit side. That 10,000 then is decreasing the winning credit side. So it needs to be a decrease. That also makes sense, of course, because this represents the amount of money owed to the owner and the draws represent the owner taking money out. Therefore, this number needs to go down by draws. So I'm going to represent it going down by saying less draws. And so I'm going to say equals and point to that 10. And I'm not going to put a negative number there. I'm just going to call it less draws to show that it's a subtraction problem. And then we have an increase in owner's equity. And it kind of should be called the net increase, but oftentimes it's just called an increase. Why is it a net increase? Because we're going to take this subcategory, these two numbers, and pull it out to this side. And this number is increasing equity. This number is decreasing equity. Therefore, there's basically a net increase over the time period of equals the 24640 minus the 10 here and enter. All right. And that accounts, of course, for this, all this information, 14640. There it is there. And then we're going to add these up to come up with the owner capital account. I'm just going to delete this. We're going to take the capital account again. But now the capital account is going to be as of the end of the period, which is May 31st, 20x1. And so now we're going to go ahead and add these up. I'm going to use the sum function to do so equals the sum of the 42,3 plus the 14640 gives us the 56940. If I highlight these two, taskbar 56940, we highlight all the blue. We see that we get a credit of 56940. So this is correct. We've just flipped the sign now to be in a plus and minus format. And we see it's yellow, so we should be able to see that somewhere else. That somewhere else is here. So that 56940 needs to match here. We could tie it out for sure by deleting it there. And so notice where that number is coming from. It's there. It's coming from the blue area. And you can also see that from these little guys up here. And those are located in the formula group, in the formula tab. Formula auditing group. And here they are. And then we can also delete that. And if we wanted to show that in this format, say that this should be equal to this number here and enter. And once again, that'll make us in balance. So now, just to sum this up, the assets, of course, should equal the liabilities plus equity. The equity here should be coming from the statement of owner's equity or tie out to the statement of owner's equity. And the statement of owner's equity includes the income statement, which is calculated, I'm sorry, includes net income, which is calculated on the income statement here. And that's how the financial statements will be tied out. The actual accounting equation is, of course, the balance sheet.