 QuickBooks Online 2024, adjusting entry for prepaid insurance. Get ready and some coffee because we're making our books divine with QuickBooks Online 2024. Okay, maybe the books aren't exactly divine, but they're still pretty darn nice. Here we are in our gig, Great Guitars 2024. QuickBooks Online Sample Company 5, we set up in a prior presentation, opening the major financial statement reports as done every time. The reports on the left in the favorites were right-clicking on that balance sheet to open a link in a new tab, right-clicking the P&L to open a link in a new tab. The trustee TB, same thing. Tabbing to the right, closing the hamburger, change the range, going from 010124 to 022924. Let's do dropping it down to see month-by-month and a side-by-side run it. Tabbing to the right, closing the hamburger again, changing the range, 010124 tab, 022924 tab. Drop down month-by-month, side-by-side, refreshing the reports. Tabbing to the right-right, repeating the process one more time. 010124 tab, 022924 tab. Drop down month-by-month, run it to refresh it. Let's go back to the balance sheet. We're now doing another adjusting entry. Those entries done at the end of the period, typically month or year to make the financials correct as of whatever accounting basis we're using, typically in a cruel basis, but could be for a cash basis or possibly a tax basis if you're doing this for tax purposes. We're now looking at the prepaid insurance. Prepaid insurance being the classic type of prepaid type of adjusting entry, noting that anything else that's prepaid, you'll have a similar kind of question. In other words, you could imagine prepaid rent or prepaid expenses of any kind, prepaid telephone bill or utility bill or so on and so forth. The concept is actually the same as we will see when we get to the fixed assets. I just want to touch on that because many times with the fixed assets, we intuitively do the accrual thing, whereas with the prepayments, it's still something we have to kind of think about as to why we would do it this way. It's a little bit more complicated. Note with the furniture and fixture, if I was, for example, to buy a building for, let's say, a million dollars, and we had the cash. We had the cash to do it. We had about a million dollars for our building. If we were on a cash-based system, you would think, okay, well, I'll just write it off as a building expense, one million dollars. What is that going to do? That's going to cause a comparison problem in the month that we purchased the building to the following month or the year we purchased the building to the following year. It's going to look like we had a huge loss in the year of the purchase of the building, which isn't exactly correct because, of course, the building is more of an investment. It would throw off our comparison of performance. That's why we have the accrual type of system. Note that that would be the easy thing to do because then it would roll through the income statement into retained earnings, and we wouldn't have to depreciate it or do any of that kind of stuff, but we intuitively know that I can't do that. We're going to have to put it on the books as an asset. That just makes sense. The building is an asset. We're investing in the building to help generate revenue into the future, and we should be allocating the cost over the useful life to try to match, to be consistent with our matching principle. That's what depreciation is. The prepaid insurance has a similar kind of scenario, except we don't have to break out a separate account of accumulated depreciation with the prepaid insurance. Why? Because the prepaid insurance is not an estimate. We basically know how much we have consumed over time, whereas the building, when we allocate the cost over time, is an estimate of how much has been consumed. There's still one building. So how do I know how much it went down in value by? That's kind of why we break out this separate account. So with the insurance, how does that work? Well, when we pay for the insurance, by definition, insurance is normally different than other types of things that we pay for in the normal course of the business, because most stuff, we get the use of it and then pay for it, such as the phone bill, the other utility bills, the electric bill, the water bill, and that kind of thing. We get the use of the service, they see how much we used, and then they build us for how much has been used. Therefore, we're entering the bill for work that was done already in the past or close to the current month is the idea. So we're just going to expense it as we get the bill. But with insurance, by definition, we have to pay for it before we actually get the coverage, unless you have some new wacky government insurance that doesn't make any sense, right? They're going to insure people after you get in an accident or something for a car, and so that's not going to work too well, but that's something the government might think of because they don't think of things that work too well. But in any case, so that means that we have to pay for the coverage before something happens. If you're thinking about liability insurance, for example, then we're going to have to pay for the liability insurance before some crazy person comes in and claims that they stubbed their toe on a tile or something and sues you for $2 billion or something like that. You're going to have to have the coverage before the lawsuit happens or else they'll just sue you. Actually, it's probably more dangerous to have the coverage. They won't even bother to sue you if you didn't have the insurance and didn't have any money. But us, we're trying to do well here. We want to have the money, and so then we're going to insure ourselves against the crazies that are going to try to sue us for stubbing their toe and whatnot. So here we go. So how can we account for the insurance in that case? Well, the easy thing to do, just like with the building example, is when we pay for the insurance, we just expense it. We just put it over here as an expense. And if you're paying insurance on a month-by-month basis, you might be able to basically get away with that because it's close enough to when the actual coverage was done and it might be an immaterial amount, meaning it's not going to be a big impact on your decision-making process. So maybe that's something that you can do. But when you start to prepay the insurance for more of a longer time period, say you pay for an entire six months or a year, then you're going to run into the same problem we had with the building because if we expense an entire year's worth of insurance in, say, January and then I compare January to February, then it's going to look a little bit messy because January will look worse because I actually paid for insurance which, like the building, will benefit future time periods. So the concept would be we'll do a similar thing as with the building, we'll have...