 Most of this information comes from the tax guide for small business for individuals who use Schedule C Publication 334 Tax Show 2022. You can find on the IRS website, irs.gov, irs.gov. Looking at the income tax formula we're focused on line one income. Remember in the first half of the income tax formula is in essence an income statement. However, just an outline the scaffolding other forms and schedules flowing into it. For example, the Schedule C, the business income, which has its own income statement in essence income minus expenses or business deductions getting to the net income flows into line one here of income of our income tax formula. This is the first page of the form 1040. The Schedule C would roll into the Schedule one which would roll into line eight of the 1040. This is a Schedule C profit or loss from business in essence income statement with an income and expense part. All right, we're continuing on with our discussions of accounting methods in general. Noting that the two major accounting methods that we may be able to pick are gonna be the cash method, the accrual method. We might be able to do some combination or special method but it's usually gonna be a combination or have cash or accrual components within it. Noting also that we might be restricted to some degree forced possibly to do some more accrual method. One of them betrays the principles. If we have inventory for example and that we wanna make sure we pick the proper method starting out because although we have some flexibility to pick the accounting method, once we have picked the accounting method we're somewhat locked into it and have to ask the IRS for a change if we wanna change the method. Therefore, when doing the first schedule C for the first small business reporting you wanna make sure you've thought about the method you're gonna use and pick the right one because it could lock you into using that method. Continuing on then, we're looking at the uniform capitalization rules now. So under the uniform capitalization rules you must capitalize the direct costs and part of the indirect cost of production or resale activities. Include these costs and the basis of property you produce or acquire for resale rather than claiming them as current deduction. So you recover the costs through depreciation, amortization or cost of goods sold when you use, sell or otherwise dispose of property. So note that when you buy something like equipment for example, then even if you're on a cash based system you're gonna have to put it on the books as an asset typically. And that makes sense and that's basically an accrual thing that we have to do because if you were on a cash based system when you bought like a forklift or a building you would just expense it at the point in time you paid for it even though you're gonna consume it into the future for a long period into the future for like a building it's quite extreme in that there'd be a big difference between when you paid for the building when you got the deduction or then if it was on a cash basis versus when you got the consumption or used the building in order to help generate revenue. And because that's so extreme then even if you're on a cash based method we've gotta kind of deviate from the cash based method and do an accrual thing putting it on the books as an asset and then depreciating it in that case. And the case of inventory we have a similar kind of situation because we wanna try to match up the purchase of the inventory not to the point in time that you paid for the inventory necessarily but expense it at the point in time you consumed or used the inventory matching up the cost of goods sold the expense of consuming inventory to the point in time that just sold the inventory. So activity subject to the uniform capitalization rules you may be subject to the uniform capitalization rules if you do any of the following unless the property is produced for your use other than in a business or an activity carried on for profit. So produce real or tangible personal property for this purpose tangible personal property includes a film sound recording, videotape book or similar property acquire property for resale that would be an inventory situation acquiring for resale typically you bought it to resell it. Thank you.