 Now we're gonna go to another transaction that isn't normally a day-to-day type of transaction and one which, therefore, there's not a standard form for. So in other words, remember the general process whenever doing a data entry type of activity, we're gonna look through our forms up top and the day-to-day forms are gonna be in this plus button and under the cycle, customer cycle, vendor cycle and employee cycle. But sometimes we might have a transaction that doesn't happen on a day-to-day basis and therefore there might not be a form for it. What do we do then? We fall back to the question of generally, is cash affected? If cash is going up, we might use a deposit form. If cash is going down, we might use an expense or a check form. If there's no cash impacted and it's not a day-to-day transaction, then and only then, generally, do we go to the general, the journal entry, entering debits and credits. That's difficult for somebody that learned accounting in a textbook to do because when you learn in a textbook, all you learn is debits and credits and you wanna do everything with a journal entry. But if you try to do everything with a journal entry, you don't get that nice linkages between the forms that you can be tracking such as an invoice, a received payment, such as a bill and a pay bill form, such as the purchase order and the bill forms and whatnot that you get when you use the forms in the system. So that everything has a journal entry, but we wanna use the forms that are designed in the system because that helps us better track and communicate with informations, not just create the end result in the financial statements balance sheet and the income statement, which are constructed with the journal entries. This time, we're thinking about the purchase of equipment, but we're gonna finance it. So you would think, okay, purchase of equipment. Well, it's a purchase, so maybe that would be like in the vendor cycle here, but it's not a day-to-day purchase. It's not like a utility bill or a telephone bill or something that happens on a monthly basis. We only purchase large pieces of equipment from time to time. And so you don't have a form designated just for that. And so you might think, well, then if cash is affected, then I can use an expense form or a check form, even though it's gonna be for an asset account. But if we financed the purchase of equipment, took a loan out for it, in other words, then now I can't use the cash form and now I have to default basically to the journal entry to enter that transaction as the general idea. So one more recap on the purchase of equipment and how it differs from other purchases. Normally, if we have normal transactions for the phone bill, the utility bills, supplies and whatnot, usually we just pay for those with cash or we enter a bill into the system, cash goes down or accounts payable goes up. And then the other side is gonna go to the income statement, which is gonna be an expense because we incurred the expense we used it at that point in time. Now, if you're on a cash-based system, then you're gonna try to have everything on a cash-based system to the point that you can. But some things you're gonna have to steal, even if you're on a cash-based system as the point, move away from a cash-based system. If there's an extreme difference between the time that you actually use whatever you're purchasing to generate revenue in the business, which is the goal of the business, versus when you paid for it. That means if we're going to these fixed assets, which are gonna be here, property, plants and equipment, building, machinery and equipment, then you're gonna have to then put it on the books as an asset when you buy it, which is an accrual thing. And the tax code, if nothing else, will force you to do that. So even a cash-based system will typically still be forced to kind of do that. Whenever we record something in the fixed assets, we wanna make sure that we track all the data to the best of our ability so that we can give that information to the tax preparer at the end of the day. So we're gonna give them possibly the detail in these accounts to see what was purchased, what was disposed of, so that they can create the sub ledger with it, which is often done in the tax software, rather than in QuickBooks, so we can get the depreciation schedules. So in other words, it's kind of like inventory here that we put the inventory on the books when we buy it, and then we expense it when we consume it. Same concepts here, we're gonna put the equipment on the books when we buy it, and then we're gonna allocate the cost over the useful life, the theory being when we consume it. However, because that's just an estimate, that's why we use this separate account, instead of decreasing the account directly as we do with inventory, we're gonna make this other account, which is a contra asset account, so that we can see how much has been allocated, and we can see the book value, which is the difference between the two. Also, just realize that whenever we're dealing with the fixed assets, you wanna be able to line up to whatever you're gonna use for the sub ledger that's gonna be calculating the accumulated depreciation often done with tax software. You might wanna talk to your accountant to see what format or categories their tax software uses for property, plants, and equipment, so that you can name yours in a similar fashion, making it easy to do adjusting entries at the end of a month or a year. So for example, this is kind of a quick little look at a depreciation schedule, showing all the things that were purchased, the date of the purchase and how much it costs, and then a depreciation calculation. Now, the other problem is you've got differences between tax depreciation and book depreciation. Tax software can usually calculate both of those things, so you might wanna discuss how exactly you're gonna deal with fixed assets and recording the depreciation, book basis, tax basis, adjusting entries. Are you gonna do it? Are your accountant gonna do it? How are you gonna deal with those things? You probably wanna talk those over with your accountant. So, given that then, we're gonna enter this into the system. Now, even if you paid cash for it, you'd still have to put it on the books as a fixed asset, but in this case, we're not paying cash for it, which means we're gonna finance the equipment, so that's why we have to enter a journal entry. Because there's only two accounts impacted, then we might be able to not just go directly to the journal form here, but use the registers to enter the journal entry, which is kind of nice system. You don't have to use that system, you can just enter a journal entry, but I'm gonna use the registers, because QuickBooks is kind of designed to use the registers when you can, and I think it's a useful tool for some people. And then down here, I just note that we have a liabilities down here, is gonna be our loan, so we're gonna have another loan that we're gonna be putting on the books that also causes us some issues. Do we want the loan in one account, having two loans then in one account, or do we wanna break out the loan in two accounts? What about whether it's a short-term loan or a long-term loan? And my general policy on that would be, I would rather have like a parent account called Loan Payable, that I can collapse to one account if necessary, and then break out each loan into its own account so I can tie out to the amortization table related to it, and then collapse it into one account if I want external reporting. And I'm not gonna break out between short-term and long-term portion because I wanna do that periodically at the end of the month or year for financial reporting purposes, which we will talk more about in the adjusting entry process in a future course or section.