 stuff. We're expensing the materials, the direct labor and all the overhead, all the rents and stuff that we applied to this particular job. We're expensing at this point in time in the form of cost of goods sold because that's the point in time that it helped us to generate revenue. And that's the point of time we expense things under the matching principle, which is an accrual principle. So $186,000. So we're going to scroll over here. $186,000. Credit $186,000. Also note that these two things basically happen at the same point in time, but it's a lot easier most of the time to think of them as two separate journal entries. So we're going to think of the sales half cash and sales and then the reduction of inventory and the recording the cost of goods sold as two entries, even though they're happening at the same point of time. So I'm going to make this smaller back down to 80. We're going to post this out. We're going to post cash first, scroll over here a bit. So here's cash. Here's cash on the trial balance. We are in the debit side. So we are in Q13 and point to the cash of the 380 bringing our balance back up to 534. Now we're going to post the sales. So here's sales here. Here's sales way down here. So it's going to be way over here in the dark blue, first dark blue in AD. So it's in AD 13. So I'm going to select equals and go way back over here to the 380. And that's going to hit enter. And what that does is it increase the sales. So notice that increase of sales that's represented by credit. That's not a negative number. Net income is now including just that number. So all the stuff that we've done, we haven't recorded any expenses, even though we've paid the utility bill and we've paid certain salaries and whatnot because all that went into our assets up here. So we only have revenue at this time until of course we report and record the cost of goods sold. So here's the cost of goods sold. Here it is on our income statement. It's going to be over here way over here on the general ledger. It's going to be a debit in AC 18 and equals and we're going to point to that 186 and enter. So note that the net income on this transaction is the revenue we got as 380 minus the cost of goods sold 186. We've got the 194,000. Again, that 186 includes so many things that we've been talking about, right? It's got the direct labor. It's got the direct materials. It's got the overhead. All right. So then we have the finished goods is here. Finished goods is here on the trial balance and finished goods is over here on the general ledger. We are in V 19 equals pointing to the 186,000 brings the finished goods down. So now we have in finished goods just the 314. If we scroll over to our jobs, all that's in the finished goods is the 314. Now we still have an open jobs, just job 16 of the 6, uh, 260. And in the work in progress, we have the 186. Okay. So then we're going to have one more thing happen here. So we're going to make this larger. We're almost done. We're almost half to stop because we have completed this very entertaining problem. So now we're down to adjust for any under appropriated or over appropriate factory overhead. All right. So what are they talking about? So remember, if we, if we look at the factory overhead, then we're done with the period here and we have 3,000 negative in fact, 3,000 credit in factory overhead. What does that mean? Well, if we think of factory overhead kind of like a part of inventory as part of the work in process and the raw materials, the finished goods and overhead are all the things that kind of we're using to record inventory. The work in process is where we put a bunch of stuff, all the stuff we couldn't apply to the job. And then we applied it to the jobs in the using a predetermined rate. Now that predetermined rate is just an estimate. We had to come up with an estimate. An estimate is never going to be perfect. And therefore in this case, we applied out more to the jobs based on the predetermined rate than we actually expensed or included or debited or increased factory overhead by. So we over applied the factory overhead. Now, there's a couple of ways we can treat that. Usually if we say, Hey, that factory overhead is pretty small. We were pretty close 3000 in relation to the rest of the numbers isn't too far off. Then we just want to make that zero so that when we start over next month, it's at zero. We don't want to start off with 3000 in it. So what we're going to do is we're just going to make that go to zero. And we're going to put the difference to cost of good sold. So this is going to look kind of like a funny entry. It could it's going to go the wrong way. I mean, it's going to be a credit to cost a good sold, which is unusual because cost of good sold is an expense basically. And it usually only goes up in the debit direction. But the reasoning behind this is that, you know, it's just an estimate and the related account on the income statement that will then clear out to retained earnings. So we'll never have to look at it again is cost of good sold. And because it's insignificant then in relation to the other numbers, it's immaterial. Let's just clean it out to the income statement, the related account being cost of good sold, close it out to retained earnings. And therefore we won't have to worry about it again when we start the next month over. So idea being that as of the end of the month, 131, we have a credit balance in here because the factory overhead was over replied, we need to make it go down to zero. How do we make something go down? We do the opposite thing to it, which in this case is a debit. So I'm going to copy that we're going to put it on top in. So H 19, right click, paste 123 debit for the 3000. We're going to credit something. And again, what are we going to credit? We're just going to plug it into cost of good sold. Therefore it'll be closed out and we'll never see it again. And so we're going to put it in the cost of good sold. Notice cost of good sold has a debit balance. It usually only goes up. You almost never credit cost of good sold. This is an exception to the rule that we're actually going to credit cost of good sold. So we're going to copy that. We're going to put that in H 20, right click and paste it 123. Going to make this a little smaller back down to 80 scroll back over here. Here's the factory overhead in I 19. Here's the factory overhead down here in you in column you and we're way down here and we're going to we have the credit balance. We have this 3000 in it. I'm down here in v 31. And we're going to say equals and point to that debit. And what we want to happen is for this 3000 to hopefully go down to zero. So we've cleaned that out. We're out of we're out of balance by the 3000, of course. Now here's the cost of goods. That's where we're going to just plug the difference. Here's the cost of goods on the trial balance way over here. Last count over here on the general ledger. So we're going to credit it, which is kind of weird, but it's okay. This is the exception to the rule equals on an AD 19 pointing to that 3000 and enter. So notice that affects net income by by the 3000 there for that adjustment. And so there we have it. And that's it.