 one method or periodic inventory method, in which case we're going to track the units of inventory outside the system, but track the dollar amounts in an asset account in the system and then make a periodic adjustment for the inventory, the second method a perpetual inventory system, the full service kind of system within QuickBooks, which means we're going to track not only dollar amount but unit in the QuickBooks system as we go. So let's give some examples of that. We'll start off with the periodic system. What would we do if we're trying to do a periodic inventory system when we purchase the inventory? Then let me give me an example of a purchased item here. So we'll just use this one and imagine that we're purchasing the inventory with this item. So if I go into this one when I purchase the inventory, I've got the date, notice I have the vendor already set up. So I'll keep the same vendor. We can use the same vendor that we pulled from the memo as we normally do. It's now categorizing to uncategorize because I didn't save the transaction last time or make a rule for it. Last time we recorded it simply to cost a good sold, which is an expense account right off the bat. That's the easiest thing to do. But now we're going to put it on the books as an asset account of inventory. So I'm just going to choose the inventory account. There it is. That was given to us when we first set up the QuickBooks file. We didn't delete that account so we don't have to make another one. Note that I'm going to inventory, but I'm not actually tracking the units of inventory because I didn't set up an item. So it's not going to count the inventory or anything like that. It's just going to record the dollar amount of inventory. With inventory, we have a difference in terms of measurement that is similar to try to measure things in different units, Celsius Fahrenheit, for example. We have measuring it in dollars and measuring it in units, the number of units that we have. Here we're only measuring it in dollars. And so we're going to have to deal with that. And we'll talk more about that shortly. So if I go down here, we could create a rule for it, but I'm not going to create a rule this time because this is just a practice for the inventory. But if this was something or the system we're going to use constantly, then of course we can create a rule. Even if I go to the splits down here, note that I don't have an item. The item is the thing that's missing for us to be able to track the units of inventory. And we will see the item when I record it on the expense form, but it's not on the data input form on these bank feeds. So that gives us a bit of a limitation for the tracking of the inventory using the bank feeds at the purchase point. So let's go ahead and add it. So I'm going to say, let's add it and then we'll check it out. So if I go to the balance sheet, then I run it, run nine, and I can go into my checking account. Of course the checking account is going to go down by that amount. I believe it was this one. The other side's going to inventory in the split account. If I go into the expense form, you'll see that the inventory has been recorded, but it was recorded with a category. It was not recorded with an item, which would generally drive the inventory as well as the sub ledger for the item. So if I go back, closing this out back, and then the other side went to the inventory asset, there's our $50 in the inventory assets. And it's in there from the expense form. There's no inventory sub ledger related to it. So as I do this, in practice, I might have a separate Excel sheet, for example, that's counting the units of inventory that I'm purchasing, not just the dollar amount. And I might be using a flow assumption like first in, first out, LIFO, or FIFO, or weighted average, usually weighted average, or first in, first out. And then periodically at the end of the day, at the end of the week, or at the end of the month, I'll do my cost of goods sold calculation, which is going to be beginning inventory plus purchases, which is basically reflected here in the inventory account. Minus ending inventory gives us the difference that, which is going to be called cost of goods sold. We assume we sold the difference. It wasn't, there could have been spoilage or shrinkage and that kind of stuff, but we assume we sold the difference.