 Here we are in our QuickBooks Online Test Company file using the Accountant view as opposed to the Business view. You can toggle between the two views by going to the cog up top, switch the view down below. Duplicating some tabs to put reports in like we're going to do every time. Right-clicking the tab up top to duplicate it. I'm going to right-click the tab up top to duplicate it again. I'm going to do it one more time so we can open up our Inventory report as well. Right-clicking the tab up top and duplicating. Going back to the middle tab, which was duplicated. Reports on the left-hand side. Let's open up the balance sheet reports as it's thinking. Tab into the right. Reports on the left. This time the profit and loss, the P&L, the income statement. Tab into the right. Reports on the left. This time I'm going to type in inventory because I want an inventory report. Inventory. Let's do the inventory valuation summary. And then let's go back to this balance sheet tab and do our date ranges. I'm going to close the hand boogie and let's do 120125 to 123125 and I will run that one. And then tab into the right. Closing the hand boogie. Range to the change from 010, not 01, 120125 to 123125 and run that one. Nothing's in it thus far. Tabbing to the right. One more time. Closing the hand boogie. And let's put this up to 123125 and run it. So in a prior presentation we talked about we've been following the flow of the inventory cycle in a normal kind of on-ground type of situation. Managing the inventory with QuickBooks using a perpetual inventory system. So we can then compare the differences of that situation to an e-commerce type of situation. The last time we talked about the vendor side of the purchasing cycle we bought the inventory in other words. And you could do so with a purchase order and then a bill and then the paying of the bill. Or you might just have an electronic transfer that's going to hit the bank feeds for the purchase of the inventory. When we purchase the inventory traditionally we want to be putting it on the books as an asset because we haven't yet consumed it in order to generate revenue. And then when we sell the inventory if we have a perpetual inventory system we're going to be decreasing the inventory at the same point in time that we record the sales. You can imagine if it was an on-ground situation that happening at like a cash register or you can imagine an invoicing situation. But let's imagine like a cash register because that's similar to an e-commerce type of situation. So at this point in time now for following the inventory we've got the inventory on the books on the balance sheet in the account of inventory. It's recorded at the cost of the inventory and then we have the inventory over here in our inventory valuation summary broken out by item of inventory. Units of items of inventory as well as the total cost value of the inventory which matches what's on the balance sheet. To do that if I tap to the left we have to add the inventory items. So if I go back down to the sales and to the right to the products and services we added our inventory items in here in order to populate the bill and the purchase order and the payment. So now we're going to make a sale. So let's imagine we're at the cash register on our store and we're going to someone comes up with products that they want to be purchasing. Right. So we're going to say right not an invoice because we're at the store. So it's going to be a sales receipt type of transaction. So we'll enter the sales receipts starting out with the customer. I'm picking generic customer number one as we do note that some businesses it's quite important to get a lot of information about the customer to facilitate whatever work that you've been contracted to do. And in other businesses it's not quite so important when we're looking at something analogous to a Shopify store which is usually geared towards selling high volumes of products and inventory. Then we usually aren't looking to get a whole lot of information about any particular customer other than the email address to try to get them on our email marketing list or something like that. So when we go into the Shopify as opposed to imagining an on ground situation selling at a cash register that information is probably going to be given to us through the Shopify platform. And then we have the question of when we pull it into QuickBooks do we need to repeat that information over here in QuickBooks. That's one of the issues that will come up when we do this through like a Shopify store instead of actually within the QuickBooks. So let's tap through this. I'm going to say the date of this is going to be 12 let's say 1525 and payment method. I'll just leave it blank. We're going to go down to the items that have been sold. Let's say that we sold product product or produce to let's do some produce to let's sell five of those at 200. Notice that this is pulling in automatically for us because we entered the items and so let's sell another one at the same time. They also are coming up to the cash register with their produce as well as product number one and let's say we sold seven of those. So they got seven product number one and five produce in their hand and that is geared for a 1000. OK, so let's keep it there. What's this going to do when we record it? This is analogous to if you are in an actual store and actually doing a self checkout. You could just scan your items and say, yeah, I got five produce to and seven product ones and the total then is going to be 1700. Note that we're not dealing with sales tax. We might turn on sales tax to add that level of complication into the factor. But without sales tax, it's still a fairly complex transaction. When I actually record it, even though the data input is fairly easy and straightforward that transaction being because it's a sales receipt. It's going to be increasing either the checking account or you might put it into a clear and account, which is often the case. QuickBooks Online calls it payments to deposit. Let's do that so we can kind of see why that is an issue because that will be an issue with the Shopify situation as well. So it's going to be increasing, in essence, a cash account, but not the checking account yet. The payments to deposit, which is similar to undeposited funds and QuickBooks desktop. That's what it used to be called. And then the other side is going to go to revenue for the full amount, 1700. And because we have a perpetual inventory system, inventory is going to go down by the cost of these items, which isn't actually on the sales receipt. But the system knows about it because we put the products in place and the related cost of goods sold. The expense related to us selling the inventory is going to go up. So the net impact on net income will be the increase of 1700 minus the cost of goods sold on the income statement. And we're going to have our sub ledger, our inventory tracked not only by dollar amount, but also by units. So all that's taking place here. So let's check it out. I'll save and close, save and close it. And then if I go to my balance sheet and run it, now we've put this amount in payments to deposit. There it is here and the others and then the other side is going to the revenue account. So if I go to revenue, I could run revenue. So there's the 1700 in the revenue account. And if I go back to the tab to the left inventory is going to go down. So here's our inventory account. If I go into it and then it's going down and it went down by these two amounts to line items because they put in there by line item, even though it's the same sales receipt. And if I if I go into it, there's no 750 for example on this form because that's the cost. It's going down by the cost, not the sales price. So we don't actually see that. You don't see the cost of the things when you check something out at the grocery store, for example. So I'm going to close that back out and scroll back and exit this. And then I'm going to go to the tab to the right and cost of goods sold is right there. So there's the cost of goods sold. And so notice that expense our inventory at the point in time that we sold it. It expense the inventory. So the impact on the income statement is sales minus the cost of goods sold is net income.