 If I edit it, it will show it in journal entry format. There's the journal entry. I'm going to copy the description here to here. And we can see that prepaid insurance is an asset. We're making the asset go down by doing the opposite thing to it as it's normal balance or credit. And then the insurance expense. Expenses always go up with the debit. So we're increasing the expense, which will decrease net income. All right, let's go ahead and save and close it. Check it out, balance sheet, and run it. And then we can go down to the prepaid insurance. It's at 11,000. Does that make sense? Well, 12,000 is what was paid divided by 12. That's 1,000 a month. One month has passed. And therefore, we have prepaid 12 months. So this times, one month has passed. So we still have prepaid 11 months times 11. And that's the 11,000. So that makes sense, because 11 months are still yet to be consumed as of the cutoff date of 229. So if I go into that, there's our adjusting entry. So we can see clearly it's an adjusting entry. That looks good. So from the bookkeeping standpoint, it's easy. We're just going to be setting up our bank feeds, just like we normally would. And we can memorize the account and just make it, instead of going to the expense, we put it to the prepaid insurance. Just that will work as long as we know that in the adjusting process that we do possibly, or our accountant does, needs to then decrease the insurance and record the proper expense. If they don't do that, then you're going to end up with a problem, because the prepaid insurance is just going to keep on going up forever. And we're not going to get the expense, which means we're missing the deduction, possibly, for income tax purposes. If you don't trust your CPA firm or something like that, then you might just expense it to make sure that you get the expense on there. But you would want to talk and find an accountant that you do trust, so that you can communicate how this whole prepaid insurance process is going to work between the people involved in it. All right, let's go back to the income statement and run that. And then we're going to say that down here, we've got the prepaid insurance. Doneday for crying out loud estah. It's my Spanish, half Spanish, half English. Doneday for crying out loud estah, the prepaid. So here it is. It's under the category of insurance, and then we have the liability insurance. This isn't prepaid. This is the insurance expense, which decreased, of course, the net income. So there is that side of things. If I go back to the balance sheet, I just want to point out that this could happen with anything that you prepay, and this is why the accrual system is thought to be better, both in terms of an internal reporting standpoint for your actual decision making and from an external reporting perspective. Because let's say if you wanted to distort your books, for example, then you can adjust the cash payments. So for taxes, if we didn't have some kind of idea that we had to expense on an accrual basis, I would like to have more deductions for taxes. Well, how can I get more expenses than I can pay my cash sooner if I was on a cash-based system? And the tax code, even if you're on a cash-based system, is going to basically guard against that in some way, shape, or form so that you can't distort and be able to take more of the deductions, which are basically expenses early. And so you can see the same kind of thing if it was rent or something like that. My rent expense is a big expense. What if I wanted to increase that for taxes to lower my net income, possibly paying less taxes? Well, what if I prepay, like, 10 years of rent, like this year? Because I happen to have the money to do it, because it was a good year. So I'm going to pay off. Well, the government's probably not going to like that, because you're trying to distort the books for taxes. From an internal perspective, that wouldn't make any sense, because if I was to do that on my income statement, it would make it hard to compare my two months. But you can see from an external standpoint, if someone's trying to get a loan, they're going to do things possibly to make themselves look better, decreasing expenses, increasing income, to try to look better to the bank, to try to get a loan. And the accrual system is working on kind of like the bank side, in that case, to work against people doing things that are kind of manipulative, even though it distorts the books from an internal perspective. On the tax side of things, the people might try to look worse. You're trying to look bad, increasing expenses, decreasing income. But if you did books just purely for your own benefit and you didn't have these outside influences that cause people to want to distort their books for whatever external reason, taxes or loans and whatnot, or investments and stuff, then you would still gravitate to an accrual system, because it's the best system for comparison, right? You wouldn't distort your books with it. So just a note on that. All right, so if you had like prepaid rent or any other kind of prepayment with a little bit of large payment, you could have a similar kind of thing. Insurance is just the classic example, remembering that the concept is similar, basically the same idea, as with the extreme examples with property plant and equipment. All right, let's go. If I let's look at my journal report over here. We haven't opened a journal report for a while. Let's go to the reports on the left. And if I go into my journal and check it out, here's our journal report. And let's say we run this for the custom date of 022924, 022924. And there's our entries. Now I'm going to filter it by journal entries. So I'm going to say filter by the transaction type, transaction type, which is going to be equal to the journal. Boom. So now this is one way that we can see our journal reports. And we can identify which ones are journal or adjusting entries because we tagged them as adjusting entries. We still have this one that we couldn't quite filter out this way, which we could filter out and will do at the end of the period, exporting it to Excel and removing that. And this is a way of report that we can use to communicate between the adjusting process department possibly by the tax preparer CPA firm and the bookkeepers possibly. All right, let's go back to the trial balance and see where we stand at this point. We're running it. So we haven't done anything to march here. We adjusted just the February numbers, balance sheet on top of the income statement. Assets are from the checking account, on down to the machinery and equipment. That's what the company owns, who has claimed to those assets. The flip side of the coin, liabilities and equity, third party and owners. Starting liability accounts payable, going on through to the unearned revenue. And then the equity portion, starting with the opening balance equity, which shouldn't have anything in it because we closed it out. And then the retained, and then the equity section draws investments, equity similar to retained earnings, and the entire income statement, which is credits minus the debits, income minus expenses resulting in a net credit if there was net income, which rolls in automatically with QuickBooks to the owner's equity account on a yearly basis, which is equivalent to retained earnings, if it was a corporation. We can see that if we adjust our number up top, our date 010125 to 010125, and run it. We can see it rolls in to the owner's equity equivalent of retained earnings.