 price. Let's say we sell them for like $50 and it's going to increase the sales account when we do that. That's what we're doing right here. We're selling them. The sales tax is being generated so it's going to be calculating the sales tax. So we'll allow that to add a little complexity and let's say that we purchase them for $35. Let's say $40. We purchase them for $40. So we buy them for $40. We sell them for $50. All right. Save it and close it. And let's say we're going to have, let's say just one, we'll just sell one of these. So there's our thing that we're selling. And so then this is going to be a little bit more complex of a transaction similar to the invoice when we sold inventory because now we're tracking the inventory and we have the sales tax. So what's this going to do? It's going to be an increase not to accounts receivable like the invoice but rather to some kind of cash account. This time, undeposited funds because it's not going directly into the checking account because we have a cash payment. So we want to take it in and out of the clearing account. That's going to be for the 54. The other side then is going to be going to the income account but only for the $50. The amount that we charge, the difference $4. The tax is going to be going to a liability account. And then we're going to also have a decrease to the inventory of I think $40 which isn't on the sales receipt but it's known because the item is telling the system that and cost of goods sold is going to be going up by $40. The net impact on net income being the $50 minus the $40 or $10. And you can have the inventory tracking for the item that has been set up on a sub ledger tracking by item. So it can actually be a fairly complex transaction. Now, you might also ask why don't I record the revenue at $54 instead of a liability of the sales tax. And then when I pay the sales tax, it would be an expense of doing business. That would kind of make sense. The idea is that the tax is imposed on the customer, not on you, the business, even though they're just making you the tax collector. So it's not income to you. The idea is it's going to be off the income statement on the balance sheet increase in the liability and then you decrease the liability again. Your client, a client, if you're a bookkeeper might ask you, why don't I have a sales tax expense as a deduction when I'm doing my taxes? I pay a lot for sales taxes. I should have an expense for it. And the reason is it because if you do it this way, the income of the sales tax also didn't go on the income statement. Both of them are on the balance sheet. Okay, let's let let's record it over here just to check it out this way. If I did, if I did it this way, let's just modify this one. I'm going to say, okay, so now we had what's going to happen here. Well, cash is going. Now it's not cash, but I'll put into cash. It's really going into undeposited funds. But cash. And then we have the sales. And then it was for $50 and then sales tax, sales tax payable is going to be equal to the 50 times .08. I think it was 8% and negative sum of that. So that means we're getting $54 and then the inventory is going down and cost of goods sold is going up for $40. And so cash is going to be going up, although it's going to go into undeposited funds in our practice problem. I'll just, you know, we'll have a different step, but then we're going to say then the income down here is going to go into income and sales tax payables up here on the balance sheet, sales tax payable. And then we're going to have the cost of goods sold is going to go up and inventory is going to go down. Nothing's currently in inventory. So I get a negative inventory impact on net income, the $50 sales price minus the $40. And then we owe the sales tax in the future. All right. So let's check it out. Save it and close it and check that one out. So I'm going to go to the balance sheet and run it to refresh it. And we'll say that this time we put it into undeposited funds. Undeposited funds goes up by the full amount $54 scrolling down. There's the $54 movie B to the NBN closing this out back, going to the income statement, running it to refresh in it. And we can see there's the $50 in the sales, not including the not including the sales tax. And then let's go back on over find the sales tax. Where did that go? Went into the liability on over here to the board of equalization because that's who we owe the sales tax to. There's the $4 on that one. Let's go back. And then we know that the inventory is going down. Let's go into the inventory. We have a decrease of the $40 that $40 is not on the actual sales receipt, but is known by the item because the item set up we said it was $40 for the cost. Closing that back out back to the balance sheet. The other sides on the income statement cost a good sold $40 net impact on the income statement $50 minus $40, $10. Let's go back to the balance sheet and look at that inventory which now would need to be tracked on a perpetual inventory method. If that's what we're using remembering every time you deal with inventory you have to ask how you don't have to do it this way a perpetual inventory method. You might be tracking it outside of QuickBooks using a periodic inventory system within QuickBooks possibly tracking it on your Shopify store or Amazon if you're doing that kind of thing or in a spreadsheet. But we're doing the full service perpetual system here. Therefore we have a sub ledger. Let's right-click on the tab to the right. Duplicate it so that we can look at our sub ledger. Let's go to the reports down below and type in inventory valuation summary. Closing up the hand buggy. Changing the range up top from 0.1 let's let's go to 12, 31, 2, 4. Run it to refresh it. Now when we put the item on the books we said there were 10 of them so that means QuickBooks did a journal entry to record 10 items at the date we said we we purchased them or put them on the books and then we sold one of them resulting in nine remaining so this is the inventory items. There's the 956.25 of all the inventory