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Here we are in our custom zero homepage going into the company file we set up in a prior presentation get great guitars duplicating some tabs to put reports in like we do every time right click in the tab up top to do so duplicate that is right click in the tab up top to do so duplicate that is back to the tab to the middle we're going to the accounting drop down taking a look at the balance sheet report then we'll tab to the right accounting drop down this time the income statement going back to the tab to the left as the one to the right is thinking accounting drop not accounting drop down as to the date drop down and do a custom date range if we may and two thousand twenty three the end of it updated now we're going to do something a little bit different on the income statement because we're on the second month of operations so we might want to see what's happening in the month we're working in as well as the prior month so I would like to do a side by side comparison so I'm going to hit the drop down and let's say we want to do a custom date and I'll start with January the beginning of January to the end of January as the first column and then I'd like to put another column over here with February so I might then go to the edit layout and say I'd like to add a column please let's go to the column up top and I want to have basically a date oriented column so I'm going to go then into that second column and I'd like to see then the month of February notice it's already broken out by month here it's given me the month if I wanted to change you know everything I can go to the custom here but it's broken out by month I'm going to use these to bring us to February so now we have February January and February we might want to see the difference between January and February as well so I could add another one and do like a formula and say this is going to be the difference between the two so I'm going to say I want to take January minus February and we could take January minus February and do something like that to take the difference between the two now notes sometimes with these types of reports you might put like the current month up front and the second month next to it or something like that but we'll keep this for now and then we're going to say this is the change let's call it change on the column header and let's update that layout and take a look at it see how it looks how it feels so now we don't have anything in February yet we just have the January numbers let's save this I'm going to customize it save the customization and I'm going to say it's going to be a comparative comparative comparative income statement let's call it and save it so open that going forward so now we can see what we're doing in January and February okay let's go back to the first tab now last time we did our amortization table so now we're going to imagine we got our loan outstanding that's on the balance sheet just a quick look at that just so we could check it out there's the 72,000 loan we're now going to make a payment according to the amortization table our first payment payment number one we're going to say and it's a little bit more complex than just normal transactions where money is going out because there's going to be three accounts affected usually when we record the payment because we're going to have to record a decrease to cash for this amount let's make this green so I could see which one we're working on we'll make it green we're going to so decrease for this amount we're going to show interest expense for this amount and the loan reduction will be this amount which will take the loan balance down to here so we you might think well that's not too bad I can I could do that and I can start to memorize the transaction going forward but notice you can't really use the bank feeds to make a nice neat rule to memorize the transaction because in payment two for the second month which we'll take a look at as well there's a different breakout between interest and principal so really even if you have bank feeds on and you're trying to make everything automated you still have to do something with the loan payments to properly break out interest in principal so that means even with bank feeds you got to go in there and kind of fix it or you could try to do an adjusting entry process so you might say if you are working with a CPA firm or if you just want to do periodic adjustments at the end of the year and try to automate all your data input you might just not record the interest and wait till the end of the year or the end of the month or the end of the year in order to break out the interest so in other words if you have your bank feeds on you might just say I'm going to reduce the cash by the payment the other side's going to reduce the loan account only two accounts affected I can make a bank rule for it so it happens automatically and then at the end of the year in this case after 12 payments I can make a periodic adjustment which will adjust the proper amount of the loan balance to tie into the amortization table and the other side recording the interest for the entire year so that's a that's a method you might want to keep in mind if you're trying to automate everything that could work okay as well but we're gonna we're gonna record each payment with the interest and principle broken out here let's go back on over and make a payment so I'm gonna say it's gonna be a money out we're gonna be spending money so spend money on the loan it's gonna come out of the checking account we're gonna say checking account going down we're gonna say it's going to let's say Chase is our bank let's say Chase Bank will say it's gonna be a new contact and we're gonna put one in there for the beginning of we're gonna pretend it's at the beginning of the year so I'll put one in there at at February 1st and then we'll put one in there at the end of February just so we could see the two payments even though they're a month apart so then we've got the reference I'm gonna make it a check this time because I think I made it a check on the bank statements so we'll see that I might have to change the check number because I think I skipped a couple checks and then I'm gonna go down here and say the description this is gonna be let's say first loan payment payment and so now we're gonna say we're gonna pay I'm gonna put the interest first 300 300 is gonna go to interest now I'm gonna see if they have an interest account for me here interest they don't have one so I'm gonna set up an account I'm gonna say it needs to be an expense account so I'll put it somewhere in the expense range so let's put it down I'll put it I'll kind of name it down here closer to the other expenses because I might move it down to other expenses cuz sometimes you might want it down in other expenses which I'll talk about more later but let's make it 7125 let's say 7125 add I'm gonna type 7125 and first it's gonna be an expense type of account expense and the name is gonna be interest expense I like to put the name expense even though that's redundant cuz it's already an expense because you might have interest payable or accrued interest so that's why sometimes you have that redundancy of an expense even though it's in the expense category alright let's save it and 300 there and then the other side is gonna go for the amount of the loan reduction 1 0 5 8 7 3 so 1 0 5 8 point 7 3 which should give us a total of the 1 3 5 8 7 3 a total 1 3 5 8 7 3 so that looks good and this is gonna go to the loan balance okay so what's gonna happen here cash is going down by the total amount we're gonna pay 1 3 5 8 7 3 that's gonna come out of our bank account 300 is basically rent it's gonna go away it's us renting the money that we that we've been using to buy our fixed assets and whatnot so it goes away we're just gonna expense it just like if we were renting an office building and then this amount is the amount that's gonna reduce the loan reduction from 72,000 down to 70,941 so after we record this the loan balance should be at that amount if it's not we probably did something wrong so let's go ahead and save it I'm gonna save it and it's gonna try to allocate a number now I skipped a couple of these which is gonna mess us up on our banks rec so I'm gonna change the number on the check to 1016 because that's what it should be on the bank rec that we'll do in a future section or course so if you don't do that that's okay it's not a big deal and then we'll say save it and go to the balance sheet let's update the balance sheet and then of course if I drill down on the checking account we should have a decrease to the checking so I'm gonna scroll down and we've got a decrease to the checking of the full amount the 135873 the full amount 135873 scrolling back up and back to the balance sheet the other side on the income statement update the income statement we should now have interest interest expense at the 300 for month number two in our comparative income statement which is totally cool back to the first tab and then we want to then where my balance should go we're gonna then go down to the loan payable so the loan payable is now down to the 70,941 27 does that match what's on our amortization table it does that's great now we're gonna imagine a month goes by and I'm just gonna make this one like let's say this one I'll ungreenify it and I'll make this one greenified so now this one's the same except that there's a difference between the interest and the loan balance that's the issue that's the problem it's not just that there's three accounts affected that throws off our whole automation kind of system it's the fact that the principal and interest will differ so we're gonna imagine a month has passed just so we can see the difference in the data input and how that might impact the way we might use like bank feeds so if I go back on over and I do the second the second transaction or payment let's hit the plus button up top and say we're going to spend money again we're spending money like crazy people like the government or something just going crazy all right so then we're gonna say this is this is gonna be the chase again chase chase and I'm gonna say that it's going out at the end of February this time so I'm gonna say this is the end of Feb Feb 28 so a month has passed but it's not quite the next month so we can have both payments in the same month but it's basically a month away we're gonna stay here and then the description loan payment number two numero dose and then now the interest that we're gonna break out has now changed to 295 59 so to 95.59 is that right did I dyslexify one of those two nine five five nine there's a lot of fives and nines in there so little sketchy so anyways this is gonna go into the interest expense and then the other side the other side is gonna be the loan reduction one zero six three fourteen one oh six three point one four and that's gonna go into the loan payable and that means that the total is gonna be the one three five eight seven three one three five eight seven three so what's gonna happen here decrease the checking account one three five eight seven three then the rent amount has gone down instead of three hundred which was you know this number was the same as before this number is different now it's less and that means that this number is more so that that's the problem because it's gonna make it difficult for us to memorize these type of transactions even with basically bank rules and again one way around that might be that I'm just gonna record everything to the loan payable not breaking out the interest and planning to make periodic adjustments at the end of month or possibly a year if you're talking about a small business tying it out to the amortization table on a yearly basis either myself or possibly with the help or assistance of a CPA firm or accountant and that way you can kind of automate everything and still be in a cash-based system possibly using the bank feeds so let's do this once this is recorded it should bring the loan bounce down to the 69 878 13 so let's check it out and see if that is indeed what happens I should have assigned a check number again I didn't assign a check number that's okay it's too late now man it's too late now updated the bank rec will have some missing check numbers but we'll deal with it when we get there let's go into the checking account let's go into the checking account I'm not even worried about it it'll be okay we'll still be able to figure stuff out so we're gonna say if I scroll down there's the second payment we made at the end of February so we're imagining a month has passed same amount in here that went down because the payments the same on a normal installment type of loan let's go back to the balance sheet and then on the income statement side go into the income statement updating the income statement we then have the interest but if I go into the interest for the second month we recorded both payments in the second month here February but they're different for the two payments that are a month apart that's the that's the snag in the that's the the fly in the soup or the ointment that that gets all messed up when you're trying to get a suntan there's fly in the ointment in your suntan ointment or something and then you get a little fly dot instead of a tan spot right where the fly was what was I talking anyways if I go back to the balance sheet then on the loan payable if we go into the loan payable we're down to 69 8 7 8 13 which does tie out here 69 8 7 8 13 but if I go into that amount so it looks like we did it correctly which is nice that's good to know but if I go into that amount then these two amounts are different as well the amount of the loan reduction so one more time the last payment the second way you can do this is just say I'm just gonna record all of the payments decreased to cash the whole other amount going to loan reduction not breaking out the interest which means your loan reduction will be too low and then at the end of the year then have your CPA or yourself take the amortization table and say this is what it should be the difference is the interest for the year and make an adjusting entry by doing so being able to automate the transactions for the cash payments without having to break out and make them manual or whatever and that's one method you can use all right let's let's open up the trustee trial balance and see where we stand I'm gonna tab to the right gonna go to the accounts and go into our reports and open up the trustee trial trustee trial balance and now the trial balance is usually best run for like a year long period so we'll run it from the year to date not breaking out the the second month of February which we are on which we did kind of for the income statement because that's the timing statement which is a great statement to be breaking out and comparing what you did in month one versus month two period one period two and so on let's go ahead and update this one if your numbers tie out to our numbers then that's good unless we're both wrong right if there's we that's so and if not then try changing the date range and see if it's a date issue likely if you were correct last time then and something's wrong this time it would be we changed the bank account and we changed the loan payable account down here and we changed the interest expense account so you would think that those would be the ones that would be off if you were on last time