 In this presentation, we're going to enter another advanced customer payment or a deposit or a prepayment from the customer. In other words, we're going to be selling a guitar, they're going to give us a prepayment on the guitar so that we can then order that guitar for them and then give the invoice at a later point in time once we deliver the guitar. So we're going to get the money in other words before we complete the sale. Time to engage with Sage, 50 Cloud Accounting. Here we are in our Get Great Guitars file. We're currently in the Customer and Sales section. We're going to be going on down to our Flowcharts. And recall that we saw an advanced payment before, so I won't go into as much of a description. But just remember that typically the typical flow will be one of two things. Either we do the work, invoice the client, then get paid in the future or we get paid at the same point in time. That's going to be the typical kind of workflow. In this case, we're getting paid before we do the work. So that's going to be backwards. We're going like the backwards way to the arrows are going here. So we're going to be receiving the payment because we've got a deposit on the guitar. And then we're going to have an invoice that we're going to have to record to that received payment at a later point. So we're going to go to the received payment here, even though we don't have an invoice to apply it to. And we're not making a sale at this point in time. We're getting the money before the sale. So then I'm going to go and say this is going to be for string music string. I'm going to put a ticket in here. It's for the ticket. And then I'm going to say string music is who we're going to get the deposit from. String music. All right, there we go. Now I'm going to just put in a reference numbers here for our practice problem purposes. I'm going to bring this back to, let's say, the 23rd. Let's bring this on the 23rd and say that we got $300. So we're going to say 300. And it's going to be the key point here being a prepayment. So watch what happens when I hit the prepayment. Now, before I do it, know what didn't happen. It didn't jump over to the invoice. We're not getting a payment for an invoice. We have applied to revenue, which is what we would do if we were to create like a sales receipts type of transaction if we were to make the sale at this point. But the prepayment is what's happening here. So I'm going to use the same kind of data input, but instead hit the prepayment. Watch what happens. It's going to be graying out then at this point in time. So there it goes. I grade it out here. But it deleted my amounts. So I'm going to put the amounts back in for 300. So it's going to be the 300 is going to be the amount. So I can't enter any item or quantity or anything at this point. I only have the 300 because it is a prepayment. Then we might want to put in the description or something like that, the prepayment, prepayment on guitar or something like that. So what's going to happen when we do this? It's going to be increasing the cash again because we got the cash into our clearing accounts. But the other side is going to be going to not like a revenue account, but to a negative receivable account, which is unusual because you would think from financial accounts and it would go into a liability account for prepayment or deposits or unearned revenue. But it's easier to track that. Remember, as we discussed last time, we did this one, this type of transaction in the receivable. So we're going to logistically do that and then do an adjusting entry at the end of the time period, which we'll see what that adjusting entry is. But this will work logistically to make the negative receivable, tying out all the information for a particular customer in supporting the receivable account. And then when we need to make an adjusting entry at the end of the time period, we will do so. So let's record that. We'll discuss that a bit further. I'm going to say save. We're going to record this and then let's take a look at our financial statements. So I'm going to go to the reports dropdown up top. We're going to go down to the financial statements. We're going to go into the balance sheet. Opening up the balance sheet is going to be for the February. That's what we want. So I'll say OK. Now, as I look at this, Sage has done something a little bit unexpected, a little bit different than the last time we entered a similar transaction. Let me kind of explain why this is happening. Basically, this is kind of like the default settings that are set up for Sage. So if we go then into the cash on hand, if I double click on the cash on hand, we see that we have the 300. So there's the 300 increasing. That's as expected. The other side notes you would think would go into the accounts receivable. That's what happened last time. It's not going to be there this time. The accounts receivable is here. If I double click on it, you'll note the 300 is not here. So it's not in the receivable. Where did Sage put it? Because last time when we did this, we did a prepayment. If I double click on this, it did put it into the receivables. It made it basically kind of like a negative receivable that wasn't applied out to the invoice. That was the 250. This is the last time we made a prepayment. Why didn't it do it this time? Well, to consider that, let's first think about, well, where did it go? It went to the income statement. They actually put it in as incomes. Let's check that out. If I go back over here and I open up the income statement, and I'm going to go to the reports, financial statements, income statement, and we're going to say that I don't want to see the zero balances. I don't need these two check marks. I'm going to say okay. And then within the sales income, if I double click on that, there's the 300. So they put the prepayment into the income. Now, we would expect if it was a prepayment, it would either make a negative receivable or it goes into a liability account. I'm not sure why the default settings, when you would say a prepayment would go into here, but what the default settings are basically doing are saying, hey, I can't have a negative balance in the receivable on the subledger. They won't allow a subledger report to have a negative balance. So they actually put it to somewhere else you would think would be to a liability, but they put it into the income statement. So in other words, let's take a look at another report. We go back on over to the reports and if we go up to the accounts receivable and if we look at the customer ledger, this is the customer detail report and we double click on that and we go down to the string music, we see that we have this negative amount, this negative amount for string music. It's a negative receivable. So the reporting it here as a negative receivable, which basically means that we owe string music money, which is what you would expect. That's proper, but that brings down the balance to 184805. And when I go back over to the accounts receivable account, this is what's a little bit unusual. Again, this is kind of the default setting. If I go to the receivables, it's at 2148. So in other words, in the accounts receivable up top, it's not including that $300. It's not including, and I think the system is basically saying, hey, I'm not gonna include it because it's a negative receivable. It doesn't make sense. It's saying that that customer owes us money, which isn't a receivable. So you'll note that this amount, which should tie out to the ledger, the 214805 is different than the receivable ledger, the receivable ledger over here, which adds up to the 1848, those two amounts are gonna be different by this negative receivable for the customer of string music, which is being posted on the income statement, on the income statement as revenue. So note, when we did this up top, we had the same kind of issue with this 250, but because there was an invoice outstanding, even though we didn't apply them out, it didn't result in Anderson showing a negative receivable. Therefore, the system still put it in here as a receivable, recorded it on the receivable here and on the balance sheet here. It's saying, hey, there's a negative receivable. I'm gonna show you that negative receivable on this report, but I'm not gonna include it in the accounts receivable balance, resulting in the fact that this sub ledger report doesn't match the accounts receivable balance, the difference being this $300. So that's gonna be, that's the difference in this. So we're gonna have a same kind of adjusting entry process, but it'll be different than what would be expected. What's gonna happen in the adjusting entry? Well, at the end, this will still wash out if we were to have an invoice came in at a later point in time that we can match out the invoice and we would match it out in the same process. We would enter the invoice and match this amount to it, resulting in this balance for string music flipping to a positive again, them owing us money. And that would result in everything being fine at that point in time. However, if we go to the cutoff date and that hasn't happened yet, we haven't yet issued the invoice because we haven't received the guitar yet and shipped the guitar, then we're gonna have to do an adjusting entry at the end of the time period. The adjusting entry at the end of the time period is gonna result in the fact that the system put this into the income account and we'll see this in our adjusting entries. It put it into income, which is overstated by 300 because we haven't yet earned that income. So I'm gonna reverse, we're gonna reduce the income and we're gonna record the other side not to accounts receivable, but to a liability account. So we put it into a liability account. So the default settings here are a little bit unusual to me. It would make sense that it would say, this item would make sense that we have a negative receivable here because that's what we told it, but you would think it would match that out to the accounts receivable in the balance sheet. Or you would think the balance sheet amount would be correct if the balance sheet's saying, hey, we're not gonna record a negative receivable so it's not including this 300 in it, but you would think you would have to put it somewhere else and where would it should be somewhere else that shouldn't be going to income. It should be in a liability account called prepaid. So there may be a way to kind of adjust the default settings to make that the standard process when you hit the prepayment to make a liability account, but I'm just using the default settings here and so that's what's happening on the default settings. So in other words, if the default settings look to me like if the accounts receivable flips negative due to the prepayment, then you're not gonna have it tying out in terms of the balance sheet account versus the customer ledger account and it'll be different by the negative account balances, the 300 in this case, that then is being pushed over to income on the income statement instead of going to like a liability account. It will still reverse out once we have the invoice, if it doesn't reverse out then again we just do the adjusting entry at the end of the time period to make it correct on an accrual basis at period end, which we will do in our practice problem. So that's gonna be it for now. Let's get out of here.