 Zero Accounting Software, bill with inventory connected to purchase order PO, get ready to be in office, hero with zero. Here we are in our custom zero homepage. We started up in a prior presentation. I'm going to zoom in a bit by holding down control, scrolling up on the mouse wheel currently at one seven five percent zoom in support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. We will be opening the demo file, but before we do, I'm just going to reset the data so we're all at the same point starting out that should reset the data open up the company file. I'm then going to close out this item. We're going to open up the major two financial statement reports in new tabs as we do every time right clicking on the tab up top duplicating it. I'm going to right click on the tab up top again duplicate eight again go to the middle tab which should be done thinking now in the accounting drop down in the reports. We want to see the balance sheet report. And then as that's opening, I'm going to go to the tab to the right and go to the accounting drop down again reports again, but this time we want the income statement, the PNL, the profit and the loss. And then I'm going to go back to the balance sheet. I'm just going to change the date and bring this up on a custom date to 2022. And the end of 2022, I'm going to update that run it. There we go. So now let's go back to the first tab. We're going to enter a bill form. So if I hit the drop down, we have a bill, but specifically we want to enter the bill related to the purchase order. So we talked about the purchase order in a prior presentation that would only be used in the event that you're tracking inventory and you have the capacity to order the inventory before paying it. So just a quick recap on that if I go to the flow chart note that we're talking about basically the purchasing side of things. At the end of the process, we expect money to be going out in this case for the purchase of physical things for the purchase of the inventory. So we're going to then have the purchase order at the start of the process, noting that that's different than when we purchase things individually online. For example, from Amazon or something like that, where we pay for something when we buy it. That's not the case here because we're saying that we have the leverage in order to order it before we actually pay for it. That's what the purchase order does. Therefore, there's no financial transaction with regards to the purchase order. We're ordering like a thousand goods of whatever we imagine then they're shipped to us with a bill, then we're going to enter the bill, which will record the inventory and the accounts payable at that point in time. So let's go back on over and see what that looks like. I'm just going to recreate a purchase order for our so we can track this again. So I'm going to say, let's make a purchase order just to track this ourselves. I'm going to make it for AA. So it's up top for the vendor or supplier December 1st. I'll just keep that as the date. Keep that the same reference standard. That's good. US dollars looks good. I'm not going to have any tax applied to it. The item, remember that they have a couple different items here. If I choose the first one here, it's going to the cost of goods sold. I want one that's going to inventory. So because that'll be a little bit more complex, I believe. So I'm going to choose this item, which has inventory related to it. And then we've got the amount down here. It looks like this should have an impact on the financial statements, balance sheet income statement, but it does not because it's just a request. It's kind of like an estimate that you do before an invoice, right? Once we follow through with it with a bill and we get the stuff and a bill, then we possibly will use the purchase order to construct the bill. So let's go ahead and approve it. So I'm not going to go through it. You've got the options. We went through the options last time. I'm going to go right to the approval button here and let's see what that did. Now let's imagine that we've got the item that we ordered here. I can't, these t-shirts. We got the t-shirt, the one t-shirt that we ordered. Probably wouldn't be able to order one with a purchase order, you know? But in any case, we got the one t-shirt in a box that came with a bill attached to it. So if that happened, we could do a couple of different ways to go through the next process. We could go to the business dropdown and go to the purchase orders, tracking our purchase orders. So we've got the all, we've got the drafts, our waiting approval. We put ours right to the approved area. So there we have our approved purchase order. We could go in here and check it off and then possibly copy to a bill. So I could copy it to a bill this way. If I purchased it for a specific person, I might also copy it to an invoice because maybe I purchased a custom t-shirt that I want to turn around and sell at this point in time. But typically you'd be purchasing it and connecting it to the bill this way or I could just select that first item here, go into it. And then in the option up top, we also have the same thing, copy to a bill, right? I can copy to the bill here. Or the next option is you could go to the dropdown and create a bill and then just type in the vendor or supplier of AAA, whatever. And it'll give you the pop-up saying, hey, there's a PO related to this copy line. So I'm going to say, yeah, let's do it. Mark as billed. So now once I populate the bill with the purchase order, you would expect we would want to mark the purchase order as having been billed because it's been completed unless there's something weird going on. You're making a bill even though you haven't completed the purchase order. So the purchase order will not stay and remain open. So I'm going to say, OK. So now it's populating our bill with the information from the purchase order. So just pulled it over, AAA, there's the due date of the bill that we might have to, that's when we're going to have to pay the bill. And then the total US dollars, we're going to say no tax on it. Pulled in the items and that looks good. Now this is actually going to record a transaction when we make the bill. What's it going to do? Well, it's a bill. We've talked about a bill before. It's going to increase the accounts payable. That's what a bill does. And the other side is going to go and be driven by the item. Notice the item is the thing that's driving the fact that it's going to go to this inventory account. Note that I can't even change this inventory account. I can change these other fields if I want to. But I can't change the inventory account. In part, you would think the system is set up that way so that the item can be tracked on a perpetual inventory system within the system. So you have to set up the items in order to do that. We'll talk more about items in future presentations, but just be aware that that's an underlying thing that needs to be set up in order to track the inventory that we want to mention here. So it's also going to track the sub ledger for the item. So let's go ahead and approve it and see what that does. So we'll go ahead and approve it. So then it's been approved. So now let's just double check the purchase order side of things. If I go into the purchase orders, I can say, okay, the approved purchase orders, it's been moved from there to the build items, meaning it's now been built. The purchase order has not created any financial transaction to the financial statements, but the bill we created from the purchase order has. So now, of course, if we were to track the bill, we can go into the business dropdown and we can go into the bill information. And we can say the waiting payment bills is going to include that bill that we talked about. Now it's in the same kind of section we've been looking at in prior presentations and we can go from here and pay the bill like we normally would at that point. Let's see what the bill did to the financial statements. If I go to the balance sheet, update the balance sheet, then we're going to stroll down and say, okay, we should have an inventory. Inventory has been added. There's the $20. Let's go into the inventory. Note that the inventory was not added with the purchase order. As we can see in the detail down here, it was added with, what's this other detail? We've got this 20 right here. This is it. It was added with the bill, which they're calling here a payable invoice, which is a little confusing, but once you get used to the terminology, you'll understand what that means because we're in the payable. So an invoice in this case means we were billed from the vendor or supplier. Okay, so then if I go into that, it'll drill down on the bill. If we needed to edit it for whatever reason, you can hit the dropdown and edit and that looks like the same data input screen that we just filled out. Going back and I'm going to go back again and go back again. And so now let's look at the other side of things, which should be in the A to the P accounts payable. So here's the accounts payable going in there. It was a bill, so we should have the bill in there. And so we're going to say, let's go all the way to the bottom because we're in December here. It should be way down, down, down. And so the bill, there it is. So there's the other side. The other side's going to inventory. No impact on the cost of goods sold because this particular bill we used to purchase inventory, there will be an impact on the income statement in the form of cost of goods sold when we sell the inventory. And if we're using a perpetual inventory system, you would think that would be when we create, for example, an invoice, for example. So let's go or possibly receive money when we make a sale. Those are sales type transactions. Let's go back to the balance sheet. So I'm going to go back and so that looks good. Now we also have a subsidiary report. So I'm going to click on the tab to the right, right click on it, duplicate it and open up an inventory report, which will give us the added level of detail we're getting when we track inventory on a perpetual inventory system within the zero system. So I'm going to go down and say that we want to go to reports. And let's just let's just take a look at this. This one has a inventory detail. Let's just take a look at the inventory item summary. So I'm going to go into that as of December. That looks good. And you can see here's the $20 of the purchase of inventory that we had. And we've got a total then of the $340 in inventory at this time. Now it looks like those opening balances here have not been included in the balance sheets. Only the $20 here that we have recorded is being reflected on the inventory. But the general point we want to make here is that if you're tracking the inventory on a perpetual inventory system, then we're going to have to be tracking not only the inventory in terms of dollar amounts at the point of purchase and the point of sale, but we're also going to be having to track the actual units of inventory that we have as well. And that adds a level of complexity in the zero system. Your other option is to track the actual units of inventory that we have as well. So that when you make the purchase of inventory, you might still record it as inventory, but you might not track the inventory in terms of inventory items within the zero system, but rather track it in an external system and do periodic adjustments with relation to a physical count you have for the inventory that you do at the end of the day, not only for the inventory, but also for the inventory items within the zero system. You have for the inventory that you do at the end of the day, night or months and do the equation of, you know, a beginning inventory plus purchases minus the ending inventory to get the cost of good sold adjustment. So you want to make sure that when you're looking at your inventory, we'll talk more about inventory when we get to the practice problem. But just remember that it does add a level of complexity and you want to get the kind of system you have right up front so that it'll run smooth going forward. So if I go to the first tab, just to take a look at the inventory items, if I go then to the business dropdown and we look at the products and services, these are going to be the items that will be set up that help us. I'm going to hide this to, to populate the bills when purchasing inventory and invoices and I'm sorry, bills and POs when we're purchasing the inventory purchase orders, as well as the invoices and the sales transactions when we record like an invoice. So, and notice we use these items down below. So if I go into this t-shirt, it gives us the quantity on hand, the average costs and then the total value and so on for tracking the inventory. And then this was put in place just with that opening balance that was put on, on the books here for the inventory. So it gives us a little rundown of the activity on down below for it. So we'll dive more into setting up these items a lot more in the second half of the course. We'll talk more about them in the future in the first half, too. But you really get a feel for this when you have to set them up from scratch starting a new company file. That's when you really get a good feel of how this whole thing works and we'll do a new company file in the second half of the course.