 In this presentation, we're going to record the purchase of raw materials on account. In other words, we're going to create a bill which will increase the accounts payable and the raw materials. Let's get into it. We're going to be entering the purchase of raw materials. Let's first consider this in terms of the Excel worksheet. So we're going to go into our Excel worksheet. I'm in Tab, Exercise 1.1. You can go to 1.2 if you want to actually enter the journal entry. We are considering this one up top. That's what it means by this little green thing. That means that's the one like we're looking at right now. And we're going to have the raw materials inventory that's going to be purchased. So in terms of our practice problem detail, purchase raw materials on account. That's what we're going to be doing. Purchase raw materials on account, which means we're not paying cash for it, but rather increasing the accounts payable. So what does that look like in terms of the accounts that are going to be affected on a journal entry type of format? We're going to be increasing the raw materials that we're going to be using in on the jobs. And then the other side is going to go to accounts payable. So in other words, if we were to poach that out then, that would be increasing the raw materials here, raw materials going up. The other side going to accounts payable. This is a liability account, the liability account going up. Now it realized that when we're putting this into raw materials, we're not just putting it directly to the job at this point in time. If you are buying raw materials and applying them directly to the job, I mean, for example, if you're going to like a Home Depot or something and you're buying the raw materials specifically for a job, then you may just skip this step and pay the raw materials and basically put them into the job at the point in time of payment. However, if you're in a situation where you're basically buying raw materials and you're thinking of them having in a separate kind of area, a warehouse or something that you're then going to take from and allocate to the jobs, then you have a situation such as this where we need a raw materials account which is not yet allocated to the jobs, then somehow deviate that or distribute that to the jobs in some way, shape or form. Also note that we're not going to be tracking this information in an inventory format in the job costing, in QuickBooks. You could possibly set that up, but of course it gets a little bit more complicated if you want to actually track the physical inventory units within the QuickBooks system. Either you could do that, you could set them up at the physical QuickBooks units in the system or you can come up with some other type of method of tracking that information and then allocate out in and out of the raw materials account with basically a journal entry as we'll do in our practice problem here. So just a couple things to keep in mind. Once again, it's not actually in the job yet. We're buying it, we're putting it to the holding account until we allocate this raw materials to the job. The raw materials will include those things that we had listed out, you know, the plaster and the stucco and all that kind of stuff. We're going to say it's going to be included here when we apply it from this account to the actual jobs. We will then take it out of this account. Again, if you know when you're buying it, that you know which job it's going to, you may just skip this step and put it directly to the job at the point of purchase. Okay, so let's go ahead and do this then. We're going to go back on over to our reports here. Now, we're going to be doing this with basically a bill. A bill is going to be the type of form that we will typically be used when you haven't yet paid for it, but you're increasing the bill. So we're assuming, you know, that we've purchased it on account. So it's going to increase the accounts payable we owe in essence to vendor. I'm going to be putting this to Home Depot. Now, obviously, if you purchased it from Home Depot, you may you may pay for it or you may put it on a credit card. And we're basically assuming here we have an account with them, right? We're increasing the account and the payable for Home Depot that we're going to be paying at a later point in time. OK, so I'm going to go ahead and save this and we're going to go through and we'll keep we'll say the terms. Let's just say net 15 and we're going to put the date on January 1st, 2020, so that's going to be in the current period. That's important. Make sure it's in the current period that we are working with now. Down below, we're not going to be using items down below. We're going to be using just the normal categorizations up top. So we're just using the normal categorizations and we're going to have raw materials is going to be what we want here. Now, we don't have a raw materials account yet. This is basically kind of like our inventory account. This is where we would put all over, you know, the stucco and all the other stuff that we're going to put into the materials that we're going to use in our system. So I'm going to type in raw materials. And then I'm going to say tab. We're going to set up an account as we go for raw materials. It's not going to be an expense account. However important, not expense account, but it's going to be an asset type of account. I'm just going to put it into another current asset. I'm not going to track it. Therefore, I'm not going to make it like an inventory account in terms of the account type, even though it's kind of like an inventory account, because we're not tracking inventory within the system. We're just putting it. We're just going to we're going to use the account as a holding account. And we're going to have to track in some other way as we discussed before. So I won't go into that again. So I'm going to hit the drop down and you could put basically, it's going to be an inventory type. It's not going to change the functionality of the account here. This account detail doesn't do anything in terms of changing how the account works. It's the main key is this top one. And then it's going to be raw materials description. We don't need anything there. So let's keep it at that. We're going to say save and close. And there we have it. And then description, I could say purchase, purchase, raw materials. And we might have more detail. We might want to put more detail on the types of materials purchased and what not would be nice in the description. But in any case, we're going to say that's going to be the full four hundred thousand four hundred thousand per. Now, we're not going to make this billable or sign it to a customer because again, we don't know which job or project it should be going to yet. We're going to have to allocate that out later. What's going to happen when we record this then? Well, it's going to be increasing the bill or accounts payable, the AP, the liability going up the other side, then going to the asset account because we didn't make it go to an expense, but asset account, which is basically like the raw materials inventory, kind of like the supplies account will be increasing. Let's go ahead and say save and close and then check that out. So we'll say save and close. We're going to go down to our financial statements now. Let's go to our reports and open up our favorite report, which is the balance sheet. We don't really even need the income statement yet. We just need that balance sheet. So let's open up the balance sheet and we'll make the balance sheet for the current period, 2020, January. That's fine. That's fine because we're working in January. So I'll keep it there as long as you're in 2020. It should be OK. And then I'm going to go back down and we're going to say that the checking account not affected because it went into accounts payable. There's our raw material. So there it is. I'm going to close the hamburger just to see if it makes this a little bit larger. Notice you can also zoom in by holding down control and zooming in. So I'll try to zoom in when I remember to do so to make it as easy on the eyes as possible. My eyes are not great, but I have a huge screen, though. So anyway, we're going to go into the 400,000 and there it is. There's going to be our bill. And if we were then to go further into the bill, go into the bill, then that's going to take us back to our source document, which, of course, is that bill. So then I'm going to close this back out. Also note that if you're if you're scrolled in, if you use that scrolling, if you're anything other than 100 percent, when you get to the data input screens, it could mess things up. It could it could kind of tweak up QuickBooks Online's mind. So what you want to do is it works fine on the reports. But when you go back into the data input to input forms like invoices and bills that you probably want to get back to 100 percent, just so QuickBooks doesn't get all get kind of freaked out over there. And then the other side is going to go into the accounts payable. So if we go into the accounts payable, then we'll see the other side. There's the 400,000 in the accounts payable. Once again, it's going to be a bill type of account. And there's the other side. I won't go into it. If we did it, we'd go back to like that bill that we looked at a couple of times and there's no effect on the income statement at this point in time. That's going to be it for now. Let's get out of here.