 in this presentation we will record the sale of our finished goods of our finished jobs we're going to enter the information into our general journal post that to the general ledger use the general ledger to create the trial balance first a word from our sponsor well actually these are just items that we picked from the youtube shopping affiliate program but that's actually good for you because these aren't things that were just given to us from some large corporation which we don't even use in exchange for us selling them to you these are things that we actually researched purchase and use ourselves here we have a western digital wd elements 20 terabyte usb 3.0 desktop external hard drive we use as part of our backup system noting that if you lower the number of terabytes of storage the price will lower dramatically as well when you're thinking about a backup system you're usually thinking about an online system or an external hard drive system like this or ideally some combination 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accountinginstruction.thinkific.com where we have many different courses you can purchase one at a time or have a subscription model given you access to all the courses courses which are well organized have other resources like excel files and pdf files to download and no commercials the trial balance in order assets liabilities equity income and expenses we are in balance debits equaling the credits debits minus the credits equaling zero we currently have net income just a loss at this time of the 380 in the cost of goods sold so our goal this time is going to be to record the sale so we finally have gone through this full process we have the raw materials that we used to create the work in process and then added the direct labor and the overhead to it as well we then finished that moved it to the finished goods and now we're going to sell a couple of jobs finally the jobs are done again if they're custom guitars or if they're custom something then we're selling the products at the end of their construction projects then we're completing the construction projects act this time and we're recording the sale related to that so we're going to say that the jobs that are completed and sold are 15 and 16 so let's go to our job cost sheet over here we're going to go over to the right and look at these two that have been sold so these are all the jobs that we have they all consist of direct materials labor and overhead and we're saying now that these three the blue ones have been completed they're done the green ones are not completed the blue ones support what is in finished goods meaning uh these accounts add up to this uh this number here and that's going to be supported that's going to be what's on the trial balance so in other words this trial balance account in finished goods is supported not only by the finished goods gl but by the jobs that have been completed and then this number here are all the ones that are uncompleted these two and that is also supported on the trial balance by this number so in other words this working process is supported by the working process gl and the jobs what we're saying now is that some of these have been sold and these are the three kind of forms that we can have on a job they can either be open we're working process they can be closed finished goods or they could be sold i'm going to say they're shipped they're gone and that means that they should have gone through cost of goods sold and we can't really track them like a balance sheet account because the income statement accounts roll roll in the retained earnings they're temporary so we're saying this time that two of these jobs are finished these two have been finished so i'm going to make this account then yellow so what i'm going to do is unblue this one by highlighting these two i want to format paint this so i'm going to highlight these go to the paintbrush home tab format painter and then paint brush that and then i'm going to make this one yellow uh i'm going to make yeah the shifting i'm going to make it yellow so right click and make it yellow so the yellows are going to be the shipped one and of course it's on the shipped column and then i'm going to the same thing down here so i'm going to highlight this whole thing home tab format paint and highlight this whole thing so now this one has been shipped so we're saying that these two then are the ones that are being sold job 15 and 16 here's the total for them so i'm going to say this one holding down control and this one add up to 6610 so from a journal entry standpoint we need to take 6610 out of finished goods and record it into cost of goods sold so so that's what we're going to do now i'm going to scroll all the way back to the left now when we think of this the sales journal entry after doing all this stuff of tracking the cost we kind of forget what the sales journal entry is after a while because we haven't really thought about the sales for a while so we've been tracking the cost so this whole thing deals with the cost and the sales journal entry remember has two parts whether it be merchandising sales or for a manufacturing company one is we have the sales half so the sales half would mean that we made a sale we did what we did we did if we were service company we did work for an in for a merchandising company we delivered the goods and for a merchandising company if we make goods we deliver the goods as well it's finally done if it's a construction company we completed the job so what we're going to do here is record the sale and the sale means typically we either got paid or we got a iou that they're going to owe us money we're going to build a client so i'm going to right click on accounts receivable and say that that's going up we're going to say right click and copy put that up top in f10 right click and paste 123 now the problem is based on our information we don't know what the sales price is and that's the problem with these kind of problems because we're only dealing with the cost so we'll get back to the sales price but i just want to post this first half that's normally posted first of the journal entry as we then think about what we're working on which is the second half of the sales journal entry so then the other side of that would be sales or revenue revenue has a credit balance it only goes up in the credit direction we're going to increase it with a credit so j18 i'm going to right click and copy and we'll put that in f11 right click and paste 123 so that's the debit and credit related to the sales again i don't know what the sales price is unless they give it to us and they did hear they're going to say the sales price is a 30 markup so again let's wait on that and let's do the thing that we know first we know that we were sold what we sold inventory so at this point this is the same as like a merchandising company we've got the inventory that's finished we're going to sell it that means it's going to go down because we're now if they're guitars we gave the guitars away and it's going down so this is a debit balance we're going to do the opposite thing to it a credit so i'm going to right click and copy i'm going to make a new journal entry skip a line skip another line i'm in f14 right click and paste 123 and then uh the debit then is going to go to uh the cost of goods sold so that's an expense account it's going to go up in the debit direction i'm going to right click and copy that and put this in f13 right click and paste 123 so without the numbers here this should still kind of look familiar this is our whenever we sell inventory on a perpetual system this is what we have we have the sales half receivables and sales sales go up and people owe us money if we invoice them and then inventory goes down and this tastes finished goods inventory and cost of goods sold uh is the expense which is going to go up so now the inventory is going to go down and the expense is going to go up i'm going to calculate it here we already looked at it it's these two jobs these two completed jobs so within g13 i'm going to say equals i'm going to scroll all the way to the jobs and see if we can recalculate this again it's going to be these two shipped jobs this one plus this one that's going to be the journal entry so the the finished amount of these two jobs and enter so we already calculated it was it was six thousand six hundred ten if i double click on it let's do it again it's this time it's it's equal to ai 12 plus ai 21 and then the credit is going to decrease finished goods inventory negative of this number so we just looked kind of at the at the inventory the the cost of goods sold of course will be the same so now we want to think about well what is what is uh the sales price then well one way that sometimes we think about the sales price and again it doesn't have to be this way the two aren't tied necessarily uh together but we can think of different ways the sales price might be derived from the cost so it's a third we're going to say there's a 30 markup so if i go all the way back over here if we thought about this is kind of like a construction process or something like that or a guitar or anything that we make if it's custom we wouldn't they weigh we might bill our clients one way we might construct the the invoice to say hey look i'm going to i'm going to tell you exactly what the cost is and i'm going to mark it up by something in our case 30 so we're going to say look the materials cost this the direct labor cost this in the overhead i tried to allocate as much as well as i can cost that the total cost is 3820 that's the cost and we're going to have a 30 markup that's my revenue on it and so that could be calculated as 3820 times point times point three and that's the amount of revenue we're making plus the original cost 3820 is the 4966 so that would be for this job what we would charge if we had a 30 markup the other way we can do it is we could say okay if it was 3820 times 100 percent is 1.3 130 percent 1 1.3 130 percent and we'll get to that same 4966 so that's one way we can do it remember that these sheets here could look kind of like invoices if we're thinking about uh billing the client on a construction or a project or any kind of custom project they're not necessarily an invoice because this is tracking the cost this gives us the cost but that could be a starting point on which we derive our invoice we might tell our clients exactly what it cost and then tell them that we're going to have a markup that's a very nice transparent way to to present an invoice but we might not do it that way we might come up with a cost in some other another kind of format an invoice in some other kind of way but a construction job often the invoice will be similar to this in many kind of of custom jobs you might use the actual cost as the jobs and then mark it up and the I think that's as transparent as you can be to basically do that so if we did that for both of them then we'd say well the two jobs add up to 3820 plus the 2790 and between the two of them we're gonna have a 30 markup so times 1.3 130 percent is the 8593 so that's what we're gonna have so another way we can look at it is if we highlight this number and this number 6610 that of course I'm going to scroll all the way to the left scrolling all the way to the left is this number so I can just take that number multiply it times a 30 30 markup so what let's do that here I'll be in G10 equals this 6610 times 1.3 at 30 percent markup so then the sales is going to be 8593 that's what we're going to invoice the client for in a credit of the same so so again this whole problem whenever you work these problems we're always focused on inventory and then this number kind of gets lost even though that's usually the main thing we focus on when we sell merchandise and and and any kind of merchandise and manufacturing or or non manufacturing but it gets lost when we spend the whole time period and focusing on tracking the costs so and it could be derived from the cost but it doesn't necessarily have to all right so let's post this out now so here's going to be our journal and again this journal entry I'm going to make it green uh just so we can focus on one at a time so I'll right click on it make it green let's make it that green so now I know which one I'm working on so I don't get mixed up all right so now we're going to post this out and these two should look familiar now because this is our normal kind of journal entries the new thing is where do we get the numbers from the job cost sheets all right here's the counts receivable here's the counts receivable our second favorite account it's our second account on the gl here it is in o19 we're going to say equals point to that 8593 the 180 goes up by 8593 to 188 593 that then can be found on the trial balance we're out of balance by the 8593 then we're going to go to sales that's going to be way down here on the income statement same order on the general ledger so I'm going to go all the way to the right so we're going to go to the right here sales it's going to be on the credit side so I'm in ab 13 ab 13 equals I'm going to scroll all the way to the left and I'm going to pick up that green one we're working on the sales item and enter so it goes from zero up in the credit direction by 8593 to 8593 and I'm going to and that number of course is found on the trial balance and that brings up net income so we're back in balance net income is increased by that so this isn't a loss this is income credits are beating the debits revenue minus expenses credits minus the debits now we're going to record the other one so I'm going to highlight these I'm going to make them that blue again right click here's the bucket I'm using that blue if you can't find it there it's in this little color wheel and then go to standard and it's that one right there and enter and then this one's the last one so I don't need to make it green because we're working on the last one and then here's the cost of goods sold so that's the first one we'll record cost of goods sold last account second to last account so we're going to go all the way to the right and we're going to be here in AA 19 I'm going to say equals scroll to the left pick up that cost of goods sold and enter so there it goes up from that 380 by 610 to 690 that then is found on the trial balance so now it went up by the 8690 and then and then we had an expense of the inventory bringing the net income now at the 1603 and then we'll record the cost of goods sold so here's I'm sorry we just did that then we'll record the finished inventory so here's inventory here's the finished goods inventory so finished goods inventory is right there so we'll be in cell T 19 within T 19 we're going to say equals point to that 6610 it's going to bring the 8736 down by 6610 to 2126 that then also found on the trial balance here puts us back in balance and there we have it so that should be kind of like our normal kind of sales journal entry whenever we sell merchandise now we need to go back and make sure that these accounts are correct because remember we now did something to the finished goods account so we're going to have to adjust our worksheet to make sure that this number should be supported in other words here's finished goods here it went down it's supported by the gl we need to make sure it's supported by the worksheets our jobs so if we go back to the jobs we're going to say okay these numbers are okay because we didn't do anything to work in process so so the work in process accounts are the open ones are still good the finished goods however are not now because we changed the color but not the formula we're going to say okay these were adding up these three now the working process I'm going to delete that or that I'm sorry that finished goods is only equal to this one that's the only one that's still finished enter these two yellow ones I'm not going to add up I mean we could add them up and say okay those add up to 6610 and if I go to the left that's what that's what's in or that's what we posted to cost a good sold but you'll note it won't always be exact because this is a temporary account and it's going to flow out to retained earnings so of course over time we're going to have they're all going to be shipped at some point in time and but they'll all be closed out to cost to get sold and they'll all be closed out eventually to retained earnings these two of course are on the balance sheet which are permanent and so we'll be able to tie these out so these these two of course are still working process which is supported by by this amount on the trial balance so if we go to the trial balance there's the working process it's supported by the working process gl as well as the jobs as long as we've got them properly allocated and then the closed jobs consist of just this one it's on the it's going to be on the gl so here's the gl and that gl account is supported not only by the uh the i'm sorry here's the trial balance it's supported not only by the gl but it's also supported by the jobs here and that's the one that hasn't been shipped and then these two are shipped and they're basically gone to the temporary count they're now on the income statement in the form of cost of goods sold