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Invoice deposit for Purchasing

QuickBooks desktop 2024 accounts receivable customer prepayment deposit purchase order Bill invoice and receive payment get ready and some coffee because we're locking into some nonstop QuickBooks desktop 2024 first a word from our sponsor yeah actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us but but that's okay whatever because our merchandise is is better than their stupid stuff anyways like our trust me I'm an accountant product line yeah it's Paramount that you let people know that you're an accountant because apparently we're among the only ones equipped with the number crunching skills to answer society's current deep complex and nuanced questions if you would like a commercial free experience consider subscribing to our our website at accounting inruffcompany file we set up in a prior presentation using the Enterprise version of QuickBooks desktop so we can focus in on the new feature of unearned Revenue if we look at the view drop down we have the I hide icon bar selected as well as the open windows open Windows open on the leftand side under the company drop down we have the homepage open we're now going to open up our major Financial reports like we do every time reports drop down company and financial starting out with the balance sheet standard balance sheet standard I'm going to go to the customize first this time changing the range so I can get that beginning range from 01127 tab 12 3127 tab fonts and numbers I'm going to bring the font up to 14 so we can see it yes yes and okay then reports drop down again company and financial this time the p and the L the profit and loss the income statement changing the range from 01127 tab tab 12 3127 Tab and then customizing the reports actually before I do that I want to change it to just two months this time to 02 2827 so I could see two months on a side by side and then go to my customize reports fonts and numbers changing the font bringing it up to 14 okay yes please okay and then I want to change the totals only to look at a month by month side by side so last time we ran the normal process for January now we're working the second process for February what is that process let's give a recap of it we're going to the homepage to do that because it's got this beautiful flowchart so the normal process was would be that we have the estimate you might not always have an estimate in your process and then we went to the sales order which if you haven't used Enterprise version is kind of a new document that kind of solidifies the estimate but you can think of both of these as non-posting transactions and then uh we we at the sales order point we would if we had to order the inventory order the inventory and then from there create the invoice and then receive the payment the problem we have here is that we want to get a payment before we want to receive the payment before we do the work and so we started to practice problem last time imagining we're selling inventory such as a psychedelic surfboard someone comes in that wants a surfboard with a special airbrush or something we have to order it from our vendor to get that and therefore we would like to get a deposit down on it so we're not stuck with the Psychedelic surfboard because they ordered it and they didn't complete the order right so we're going to to say we last time had an estimate for it and they're like and the guy was like okay I'm good with that I'm I want to buy the surfboard so then we made a sales order which is another non-posting transaction and then from there we said we would like you to pay us a down payment a prepayment an unearned Revenue so that then is what where we then went to the receive payment and this method we're going to be using a negative receivable which is the method that you would use before this new feature was in place and still might use because it's still a little bit more simplified and has less working parts going in on the bookkeeping side it's pretty easy to follow and then we're going to compare and contrast it to the new method next time so that's where we left off if we jump on over to the journal entry we put some journal entries over here in Excel we can see we entered the estimate no transaction no impact on the financial statement we enter the sales order no transaction on the financial statements we then entered uh the sales receipt which is the form that we used to get the deposit which resulted in this negative receivable not exactly proper for reporting purposes but easy to track on the subledger so let's see that over here if I go to my balance sheet we then in the accounts receivable we have the amount that was posted in accounts receivable if I go to the reports dropdown and we go to the customers and receivables and we want to look at our customer balance detail we've got this customer with a negative receivable let's make it large again customiz in the reports fonts and numbers let's bring it up to four just do 12 this time not as large let's not go crazy or anything okay let's not go crazy so now we've got the negative receivable but this is still works well because the whole subledger even though it's it's now understated because it has that negative receivable in it 92 957 still ties out beautifully to what is on the balance sheet 92 957 and if I go into the Internal Documentation I can go into my customer dropdown and I can go into my customer center and I can go into that customer we set up as 2 AR prepayment customer and I can see exactly what's happening we made an estimate and they're like we we'll accept the estimate so we did the sales order and then we collected the prepayment on the sales order what we would expect next to happen from the customer side of things is that we would then uh have an invoice but before we do that we have to get the custom surfboard the Psychedelic surfboard so if I go to the Home tab over here we went from uh we went from the estimate to the sales order got the down payment we're going to take that down payment helping us to actually purchase the uh the surfboard so I'm going to make a purchase order from the sales order you might not always do this uh in this prepayment kind of situation this is just one situation where we have a customer order that we're making where you might have to do the purchase order from it so I'm going to go okay let's make a purchase order uh hold on a second I'm going to do that by going to my customer customer center and I'm going to go into the sales order and and create the purchase order from it so I'm in the sales order and then up here I've got the create purchase order so I'm going to connect it to the purchase order making the purchase order from it says specify what includes create the purchase order for all allowed items that's the one we want let's do that one so there's our purchase order so this would be the request for inventory another document that has no actual financial statement reporting within it but uh is an internal document so I'm going to say this is going to be two uh negative AR negative AR uh deposit or customer deposit vendor I'm naming it this funny name just so we can remember that this is the method number two that we're working on I'm going to do a quick add for the vendor and this is going to be uh as of 02 let's say 0327 tab tab tab tab tab so our item pulled in looks great it's on there for $100 not $175 no sales tax involved because we're in our practice problem looking at a tax that's being applied on the purchasing side uh I'm sorry on our sales side not when we purchase so we're purchasing our psychedelic surfboard it costs us $100 we're going to sell it for $ 175 what's this going to do when we record it nothing to the financial statements although we do want to track it internally so I'm going to say save it and close it so if I go back on over to my worksheet over here sales I can kind of compare this to what we did on the prior one purchase order no transaction no transaction again so if I go back back on over what did it do well I'll tell you what it did if we close this up it went if we go into like the vendor drop down we can see that for this new vendor here uh normal process vendor no we have the negative AR vendor there's our purchase order and we could track the open purchase orders with a report that's not really our point of Focus right now but now the next thing we would do is hopefully get the the information from the purchase order let's go back to the homepage follow our float chart so we got the sales order we went up to the vendor side made a purchase order which is just a request doesn't impact the financial statements let's imagine then that we got the box with the custom psychedelic surfboard crazy airbrush on it with a bill inside it and we're going to enter the bill into the system now so we're going to enter the bill and this is going to be for 2 AR custom deposit vendor uh there's an open purchase order so we're going to say yes please pull that in that's the one we want that's what we're looking for and this is going to be as of 02 0527 tab tab tab and tab tab tab tab it's on the items side so that looks good instead of the expense side here's the item that we're purchasing which we're imagine is that surfboard even though we named it that funny name just to see that we're on the second of our projects and I'm going to make it non-billable billable would mean that I can pull this information into the invoice from the bill but I don't really need to do that because I can kind of Pull It in from the purchase order and that might be a a system you might use even if you didn't have to buy a custom surfboard from the vendor like if you already had the surfboard on hand or whatever reason and then you're going to give it to them at some future point for whatever reason so I'm going to pull in the invoice from uh uh from the sales order not from from the sales order not from the bill not the purchase order of the sales okay so I'm not going to check that off all right so then uh then what do we have here well let's think about what this is going to do it's a bill it's going to increase the accounts payable then and then the other side is going to be going to uh is going to be going to the inventory increase in the inventory the accounts payable has a subledger tracking by vendor and then the inventory has a subledger tracking by item if I look at the journal entry related to this we could say okay what's going to happen here it's similar to what we did in our our prior practice problem we could just copy this we have a bill same thing nothing's different uh on this part of the process so it's going to except these are the wrong accounts the bill is going to increase inventory and then we're going to be increasing the uh the the accounts payable AP is not what happened over here yeah inventory and accounts payable okay so let's post that out and just check it out so what's going to happen when I do that inventory is going to go up and then the AP is also going to go up in the credit direction we're out of balance I'm going to put it back in Balance AP is going to be equal to that 100 Back in Balance now in debits and credits that's easy to do because I'm not really backing this inventory up with a Perpetual inventory Ledger item which we need to do in QuickBooks so that adds a level of complication Beyond just debits and credits and then the accounts payable needs to be backed up by the subledger tracking by vendor from a bookkeeping standpoint which adds another level of complication than just the debits and credits to like a trial balance there so I'm going to minimize this a little bit so I can because I'm so zoomed in I can't see the bottom of it it won't let me do that so I'm going to make the screen a little a little bit smaller just for the time being the time being and then I'll maximize this so I can go to my save and close just to show you the button there's the save and close button back to the super zoom in if I go to the uh balance sheet over here the big balance sheet and we scroll down to the AP there's the AP if I go into the AP and so now we have the Bill here's the second Bill $100 similar kind of process now in month number two closing this out the other side went to the inventory so if I go up to the inventory inventory asset right there boom now we have this bill similar process that happened in January now happening in February if we had a subledger for inventory reports drop down we're going to go into the inventory we've got the inventory let's just do the the the valuation summary report as of 12 3127 let's say and now we have this one piece of inventory for that second project which we're imagining is a psychedelic surfboard even though we didn't call that because we wanted to just label it for the project that we're working on which is the second of two of these projects but the point is that the sum of all the inventory items 3,783 38 ties out to what's on the balance sheet hopefully 3,783 38 when we look at the a to the P the accounts payable it also has that important subledger reports drop down we go to the vendors and payables vendor aging let's go to the vendor sum vendor balance detail let's do that one and so if I so there it is there's the 100 and if I sum up everything that's happening there the details really long then I'm at 26 8 3692 which ties up to the balance sheet 268 3692 if I I go to my vendor balance detail open on the left no that's not it let's go to my vendor Center that's what I was looking for now we have the purchase order and now we have the bill and the next thing we would end up doing is paying the bill but I'm not really worried about that right now because we're we're really worried on the customer side of things so if I go back to my homepage now we did the estimate we did the sales order we got a deposit which was we put as a negative AR we got the inventory so the inventory is on hand so I'm going to turn around now and now I've got the Psychedelic surfboard I'm going to be like hey dude we've got your surfboard and so you you and now we'll invoice the client and then we'll collect the balance uh after after that so we can we can invoice the client now we could create an invoice from here we might though it might be easier to go to the customer center and then say there's our there's our AR and I could go into the sales order the original sales order here and say now we're going to create uh an invoice from it from from the sales order so I'm going to create an invoice from the sales order specify what to include on the invoice I'm going to have all of the items down here on the invoice so I'm going to pull in everything and so it's going to go boom and so there it is so now my customer up top let's say this happens on 02 0627 tab tab tab tab tab there's no purchase order terms so items everything's pulling in perfectly pulling in perfect so so now we're invoicing the client so what's this do well it's an invoice invoice is going to increase the accounts receivable by the full $188 56 the other side's going to go to income but only for the amount we charged 175 not including the sales tax the sales tax of 1356 in this case is going to go to a liability account and we're going to have the inventory decreased not by this 175 but by the 100 that we put it on the books for because QuickBooks knows about it because we're doing a Perpetual inventory system from this item and the other side's going to be cost of good sold which will be an expense account of $100 the net impact on net income the 175 increase in sales minus the $100 of the of of the cost of good so plus we have a subledger related to the accounts receivable for the customer tracking which customer owes us the money and we have a subledger for the inventory tracking the fact that we sold the inventory so let's just look at that by journal entry because that's kind of a lot that's kind of a lot you know that's what I feel like so what would this do well this is an this is accounts receivables going to go up so let's start there and then we know that sales is going to go or income let's call it is going to go up so if I say income is going up we sell the thing for I'm going to say - 175 because it's a credit we sell it for 175 and then we have to charge sales tax because the government is like this you you better pay your protection money if you want to work in this town you know how it works so 0775 so we're like okay whatever this equals this times 0077 five so 1356 for the protection money just to get them off our back they don't protect us from nothing I had to pay Joey Joey two times just like right after I paid the government crying out loud anyways so there it is we'll say there's that one let's add that and then okay so then we also have the cost of goods sold and then the inventory and so inventory is going to go down by $100 and cost to good sold so let's record this I'll I'll highlight this one first I'm going to make it green so we can record it just to see what's happening here not that that's too dark you're too dark let's go up and in the accounts receivable something's in it now now so I'm going to say uh f4 on the keyboard f4 on the keyboard and by the way this is a key component here because notice that negative receivable is negative right now but now when I record the actual receivable to it on the invoice the full amount on the invoice it will net out against that which will give us the proper amount that is still due after the invoice has been put in place and we net it out against the deposit right so if I say this is going to be plus that well now they still owe us 13856 so now the incorrectness has reversed itself it's just a timing difference now everything is correct on the financial statements because we no longer have a negative receivable right so any case so then the other side is going to the income so the other side's going to the income and then we've got the sales tax payable sales tax payable is going to be here boom there's that and let's make that blue blue and then this one down here is going to be the cost of goods sold this equals the cost of goods sold is also impacted and the inventory double clicking on the inventory it's going to go back down to zero because we bought it and now we're selling it back down to zero on the inventory so we can see what happens now that on the income side of things we had sales of 17 75 it's a it's a negative because it's a credit but minus the debit of the cost to get sold gives us 75 of the net income just like we ended up with the first method over here the 75 of net income and then uh and then the accounts receivable is currently at 138 because we netted out the negative receivable that we put in place with that first sales order to to the invoice that we now put in place here so that Nets out and puts us into the correct position you know at this point in time so that's going to be the general idea also just realized that the key points here are the inventory subledger that we have to keep track of which adds more difficulty than just the debits debits and credits and the inventory the inventory subledger the AR accounts receivable and inventory subledgers all right so if I go back on over here and record that let's check it out let's save it and close it and see it in quick QuickBooks format we're going to go to the balance sheet and we're going to say that the a to the r went up double clicking on the a checking it out and we're going to say AR went up by the invoice of that 18856 notice that that invoice went on there for the full amount which is nice to be able to see the detail for the full amount of the invoice but it Nets out against that 50 so it Nets out to the proper amount that is still due from that payment that was put in place the other side is going to the profit and loss uh on the income so now we've got the income here month number two I put it into a separate income account just so we can see it in a separate account but there's the 175 for just the amount that we charged not including the sales tax the sales tax back on the balance sheet back to the balance sheet back to balance it's like a Buddhist yoga thing or something we're back to balance I don't what where did that come from I don't know so we're on sales tax that's going to be down here and double clicking the sales tax there's the 1356 so that's that first journal entry that we've looked at now AR income sales tax then we have the inventory that went down so let's go to the inventory up top that's an asset on the balance sheet inventory asset it went down it's going down so there's the sale there 100 inventory is going down and we know that the uh profit and loss had the $100 cost of good sold cost of good sold expense went up so so that means net income 175 sales minus the cost of grid sold $75 that's what we have over here on our worksheet as well we also have the subledgers going back to the balance sheet for the accounts receivable here's our accounts receivable if I go to my subledger customer balance detail report we can see that uh up top we've got our where was here's our number two AR customer we had the $50 deposit that went in there first now look how nice this is from a bookkeeping standpoint we've got everything happening on one report right this happened first not exactly right for financial per reporting purposes until the invoice happened and then they net out beautifully and now you you have you could see exactly what's happening on this one report and now you're you're fine you don't have any reporting problem because you don't have a negative receivable anymore now you have a positive amount due of the $138 56 if I look at the balance sheet over here and we look at the inventory inventory is now at 30,000 uh 638 if I look at the subledger for inventory uh we could see that this is the summary report but that inventory is back down to zero it's no longer on the report because we purchased it and then we sold it if we go to the customer center over here here we are in our QuickBooks desktop sample company file we set up in a prior presentation using the Enterprise version of QuickBooks desktop so we can focus in on the new feature of unearned Revenue if we look at the view drop down we have the I hide icon bar selected as well as the open windows open Windows open on the leftand side under the company dropdown we have the homepage open we're now going to open up our major Financial reports like we do every time reports drop down company and financial starting out with the balance sheet standard balance sheet standard I'm going to go to the customize first this time changing the range so I can get that beginning range from 01127 tab 12 3127 tab fonts and numbers I'm going to bring the font up to 14 so we can see it yes yes and okay then reports drop down again company and financial this time the p and the L the profit and loss the income statement changing the range from 01127 tab tab 12 3127 Tab and then customizing the reports actually before I do that I want to change it to just two months this time to 0228 27 so I could see two months on a side by side and then go to my customized reports fonts and numbers changing the font bringing it up to 14 okay yes please okay and then I want to change the totals only to look at a month by month side by side so last time we ran the normal process for January now we're working the second process for February what is that process let's give a recap of it we're going to the homepage to do that because it's got this beautiful flowchart so the normal process was would be that we have the estimate you might not always have an estimate in your process and then we went to the sales order which if you haven't used Enterprise version is kind of a new document that kind of solidifies the estimate but you can think of both of these as non-posting transactions and then uh we we at the sales order point we would if we had to order the inventory order the inventory and then from there create the invoice and then receive the payment the problem we have here is that we want to get a payment before we want to receive the payment before we do the work and so we started a practice problem last time imagining we're selling inventory such as a psychedelic surfboard someone comes in that wants a surfboard with a special airbrush or something we have to order it from our vendor to get that and therefore we would like to get a deposit down on it so we're not stuck with the Cy PS adelic surfboard because they ordered it and they didn't complete the order right so we're going to say we last time had an estimate for it and they're like and the guy was like okay I'm good with that I'm I want to buy the surfboard so then we made a sales order which is another non-posting transaction and then from there we said we would like you to pay us a down payment a prepayment an unearned Revenue so that then is what where we then went to the receive payment and this method we're going to be using a negative receivable which is the method that you would use before this new feature was in place and still might use because it's still a little bit more simplified and has less working parts going in on the bookkeeping side it's pretty easy to follow and then we're going to compare and contrast it to the new method next time so that's what we left off if we jump on over to the journal entry we put some journal entries over here in Excel we can see we entered the estimate no transaction no impact on the financial statement we entered the sales order no transaction on the financial statements we then entered uh the sales receipt which is the form that we Ed to get the deposit which resulted in this negative receivable not exactly proper for reporting purposes but easy to track on the subledger so let's see that over here if I go to my balance sheet within in the accounts receivable we have the amount that was posted in accounts receivable if I go to the reports dropped down and we go to the customers and receivables and we want to look at our customer balance detail we've got this customer with a negative receivable let's make it large again customiz in the reports fonts and numbers let's bring it up to four just do 12 this time not as large let's not go crazy or anything okay let's not go crazy so now we've got the negative receivable but this is still works well because the whole subledger even though it's it's now understated because it has that negative receivable in it 92955 still ties out beautifully to what is on the balance sheet 929 57 and if I go into the Internal Documentation I can go into my customer dropdown and I can go into my customer center and I can go into that customer we set up as 2 AR prepayment customer and I can see exactly what's happening we made an estimate and they're like we we'll accept the estimate so we did the sales order and then we collected the prepayment on the sales order what we would expect next to happen from the customer side of things is that we would then uh have an invoice but before we do that we have to get the custom surfboard the Psychedelic surfboard so if I go to the Home tab over here we went from uh we went from the estimate to the sales order got the down payment we're going to take that down payment helping us to actually purchase the uh the surfboard so I'm going to make a purchase order from the sales order you might not always do this uh in this prepayment kind of situation this is just one situation where we have a custom order that we're making where you might have to do the purchase order from it so I'm going to go okay let's make a purchase order uh hold on a second I'm going to do that by going to my customer customer center and I'm going to go into the sales order and and create the purchase order from it so I'm in the sales order and then up here I've got the create purchase order so I'm going to connect it to the purchase order making the purchase order from it says specify what includes create the purchase order for all allowed items that's the one we want let's do that one so there's our purchase order so this would be the request for inventory another document that has no actual financial statement reporting within it but uh is an internal document so I'm going to say this is going to be 2 uh negative AR negative AR uh deposit or customer deposit deposit vendor I'm naming it this funny name just so we can remember that this is the method number two that we're working on I'm going to do a quick add for the vendor and this is going to be uh as of 02 let's say 0327 tab tab tab tab tab so our item pulled in looks great it's on there for $100 not $175 no sales tax involved because we're in our practice problem looking at a tax that's being applied on the purchasing side uh I'm sorry on our sales side not when we purchase so we're purchasing our psychedelic surfboard it costs us $100 we're going to sell it for 175 what's this going to do when we record it nothing to the financial statements although we do want to track it internally so I'm going to say save it and close it so if I go back on over to my worksheet over here sales I can kind of compare this to what we did on the prior one purchase order no transaction no transaction again so if I go back on over what did it do well I'll tell you what it did if we close this up it went if we go into like the vendor dropdown we can see that for this new vendor here uh normal process vendor no we have the negative AR vendor there's our purchase order and we could track the open purchase orders with a report that's not really our point of Focus right now but now the next thing we would do is hopefully get the the information from the purchase order let's go back to the homepage follow our flow chart so we got the sales order we went up to the vendor side made a purchase order which is just a request doesn't impact the financial statements let's imagine then that we got the box with the custom psychedelic surfboard crazy airbrush on it with a bill inside it and we're going to enter the bill into the system now so we're going to enter the bill and this is going to be for two a custom deposit vendor uh there's an open purchase order so we're going to say yes please pull that in that's the one we want that's what we're looking for and this is going to be as of 02 0527 tab tab tab and tab tab tab tab it's on the items side so that looks good instead of the expense side here's the item that we're purchasing which we're imagine is that surfboard even though we named it that funny name just to see that we're on the second of our projects and I'm going to make it non-billable billable would mean that I can pull this information into the invoice from the bill but I don't really need to do that because I can kind of Pull It in from the purchase order and that might be a a system you might use even if you didn't have to buy a custom surfboard from the vendor like if you already had the surfboard on hand or whatever reason and then you're going to give it to them at some future point for whatever reason so I'm going to pull in the invoice from uh uh from the sales order not from from the sales order not from the bill not the purchase order of the sales okay so I'm not going to check that off all right so then uh then what do we have here well let's think about what this is going to do it's a bill it's going to increase the accounts payable then and then the other side is going to be going to uh is going to be going to the inventory increase in the inventory the accounts payable has a subledger tracking by vendor and then the inventory has a subledger tracking by item if I look at the journal entry related to this we could say okay what's going to happen here it's similar to what we did in our our prior practice problem we could just copy this we have a bill same thing nothing's different uh on this part of the process so it's going to except these are the wrong accounts the bill is going to increase inventory and then we're going to be increasing the uh the the accounts payable AP is that what happened over here yeah inventory and accounts payable okay so let's post that out and just check it out so what's going to happen when I do that inventory is going to go up and then the AP is also going to go up in the credit direction we're out of balance I'm going to put it back in Balance AP is going to be equal to that 100 Back in Balance now in debits and credits that's easy to do because I'm not really backing this inventory up with a Perpetual inventory Ledger by item which we need to do in QuickBooks so that adds a level of complication Beyond just debits and credits and then the accounts payable needs to be backed up by the subledger tracking by vender from a bookkeeping standpoint which adds another level of complication than just the debits and credits to like a trial balance there so I'm going to minimize this a little bit so I can because I'm so zoomed in I can't see the B bottom of it it won't let me do that so I'm going to make the screen a little bit smaller just for the time being the time being and then I'll maximize this so I can go to my save and close just to show you the button there's the save and close button back to the super zoom in and if I go to the uh balance sheet over here the big balance sheet and we scroll down to the AP there's the AP if I go into the AP and so now we have the Bill here's the second Bill $100 similar kind of process now in month number two closing this out the other side went to the inventory so if I go up to the inventory inventory asset right there boom now we have this bill similar process that happened in January now happening in February if we had a subledger for inventory reports drop down we're going to go into the inventory we've got the inventory let's just do the the the valuation summary report as of 12 3127 let's say and now we have this one piece of inventory for that second project which we're imagining is a psychedelic surfboard even though we didn't call that because we wanted to just label it for the project that we're working on which is the second of two of these projects but the point is that the sum of all the inventory items 3,783 38 ties out to what's on the balance sheet sheet hopefully 3,783 38 when we look at the a to the P the accounts payable it also has that important subledger reports drop down we go to the vendors and payables vendor aging no let's go to the vendor sum vendor balance detail let's do that one and so if I so there it is there's the 100 and if I sum up everything that's happening there the details really long then I'm at 268 3692 which ties up to the balance sheet 268 3692 if I go to my vendor balance detail open on the left no that's not it let's go to my vendor Center that's what I was looking for now we have the purchase order and now we have the bill and the next thing we would end up doing is paying the bill but I'm not really worried about that right now because we're we're really worried on the customer side of things so if I go back to my homepage now we did the estimate we did the sales order we got a deposit which was we put as a negative AR we got the inventory so the inventory is on hand so I'm going to turn around now and now I've got the Psychedelic surfboard I'm going to be like hey dude we've got your surfboard and so you you and now we'll invoice the client and then we'll collect the balance uh after after that so we can we can invoice the client now we could create an invoice from here we might though it might be easier to go to the customer center and then say there's our there's our AR and I could go into the sales order the original sales order here and say now we're going to create uh an invoice from it from from the sales order so I'm going to create an invoice from the sales order specify what to include on the invoice I'm going to have all of the items down here on the invoice so I'm going to pull in everything and so it's going to go boom and so there it is so now my customer up top let's say this happens on 02 0627 tab tab tab tab tab there's no purchase order terms so items du everything's pulling in perfectly pulling in perfect so so now we're invoicing the client so what's this do well it's an invoice invoice is going to increase the accounts receivable by the full $188 56 the other side's going to go to income but only for the amount we charged 175 not including the sales tax the sales tax of 1356 in this case is going to go to a liability account and we're going to have the inventory decreased not by this 175 but by the 100 that we put it on the books for because QuickBooks knows about it because we're doing a Perpetual inventory system from this item and the other side's going to be cost of goods sold which will be an expense account of $100 the net impact on net income the 175 increase in sales minus the $100 of the of of the cost of goods sold plus we have a subledger related to the accounts receivable for the customer tracking which customer owes us the money and we have a subledger for the inventory tracking the fact that we sold the inventory so let's just look at that by journal entry because that's kind of a lot that's kind of a lot you know that's what I feel like so what would this do well this is an this is accounts receivables going to go up so let's start there and then we know that sales is going to go or income let's call it is going to go up so if I say income is going up we sell the thing for I'm going to say negative 175 because it's a credit we sell it for 175 and then we have to charge sales tax because the government is like this you you better pay your protection money if you want to work in this town you know how it works so 0775 so we're like okay whatever this equals this times 0775 so 1356 for the protection money just to get them off our back they don't protect us from nothing I had to pay Joey Joey two times just like right after I paid the government crying out loud anyways so there it is we'll say there's that one let's add that and then okay so then we also have the cost of goods sold and then the inventory and so inventory is going to go down by $100 and cost a good sold so let's record this I'll I'll highlight this one first I'm going to make it green so we can record it just to see what's happening here not that that's too dark you're too dark let's go up and in the accounts receivable something's in it now so I'm going to say uh f4 on the keyboard f4 on the keyboard and by the way this is a key component here because notice that negative receivable is negative right now but now when I record the actual receivable to it on the invoice the full amount on the invoice it will net out against that which will give us the proper amount that is still due at after the invoice has been put in place and we net it out against the deposit right so if I say this is going to be plus that well now they still owe us 13856 so now the incorrectness has reversed itself it's just a timing difference now everything is correct on the financial statements because we no longer have a negative receivable right so any case so then the other side is going to the income so the other side's going to the income and then we've got the sales tax pay pble sales tax payable is going to be here boom there's that and let's make that blue blue and then this one down here is going to be the cost of goods sold this equals the cost to get sold is also impacted and the inventory double clicking on the inventory it's going to go back down to zero because we bought it and now we're selling it back down to zero on the inventory so we can see what happens now that on the income side of things we had sales of 175 it's a it's a negative because it's a credit but minus the debit of the cost to get sold gives us 75 of the net income just like we ended up with the first method over here the 75 of net income and then uh and then the accounts receivable is currently at 138 because we netted out the negative receivable that we put in place with that first sales order to to the invoice that we now put in place here so that Nets out and puts us into the correct position you know at this point in time so that's going to be the general idea also just realized that the key points here are the inventory subledger that we have to keep track of which adds more difficulty than just the debits debits and credits and the inventory the inventory subledger the AR accounts receivable and inventory subledgers all right so if I go back on over here and record that let's check it out let's save it and close it and see it in QuickBooks format we're going to go to the balance sheet and we're going to say that the a to the r went up double clicking on the AR checking it out and we're going to say AR went up by the invoice of that 18856 notice that that invoice went on there for the full amount which is nice to be able to see the detail for the full amount of the invoice but it Nets out against that 50 so it Nets out to the proper amount that is still due from that payment that was put in place the other side is going to the the profit and loss uh on the income so now we've got the income here month number two I put it into a separate income account just so we can see it in a separate account but there's the 175 for just the amount that we charged not including the sales tax the sales tax back on the balance sheet back to the balance sheet back to balance balance it's like a Buddhist yoga thing or something we're back to balance I don't what where did that come from I don't know so we're on sales tax that's going to be down here and double clicking the sales tax there's the 1356 so that's that first journal entry that we've looked at now AR income sales tax then we have the inventory that went down so let's go to the inventory up top that's an asset on the balance sheet inventory asset it went down it's going down so there's the sale there's the 100 inventory is going down and we know that the uh profit and loss had the $100 cost a good sold cost of good sold expense went up so so that means net income 175 sales minus the cost of good sold $75 that's what we have over here on our worksheet as well we also have the subledgers going back back to the balance sheet for the accounts receivable here's our accounts receivable if I go to my subledger customer balance detail report we can see that uh up top we've got our where was here's our number two a customer we had the $50 deposit that went in there first now look how nice this is from a bookkeeping standpoint we've got everything happening on one report right this happened first not exactly right for financial per reporting purposes until the invoice happened and then they net out beautifully and now you you have you can see exactly what's happening on this one report and now you're you're fine you don't have any reporting problem because you don't have a negative receivable anymore now you have a positive amount due of the $138 56 if I look at the balance sheet over here and we look at the inventory inventory is now at 30, 638 if I look at the subledger for inventory uh we could see that this is the summary report but that inventory is back down to zero it's no longer on the report because we purchased it and then we sold it if we go to the customer center over here now we could see again very nicely from a bookkeeping standpoint exactly what is happening right because now we have I can see I could see okay well what happened here we had an estimate that happened and then from the estimate we had uh the payment that happened I probably should have changed the date a little bit or the sales order and then the payment and now we have the invoice that was put in place if I double click on the invoice it's it's now showing it gives me the full you know balance for uh the invoice 188 and then if I wanted to show the amount that's actually due 13856 I can print reports right I can give uh reports that will show that will show the detail of the amount that's going to be do to the customer if that's the way I wanted to present it to the customer uh and so that's so that actually works you know fairly well uh The Next Step that of course would happen if I go back to the homepage is that we would say now now I'm in the normal position I already I already collected some of the money before but now there's still some amount due so now I would expect to get the rest of the money for the Psychedelic surfboard so if I go back to the customer balance we would probably do it from the customer center we'd say okay here's your surfboard give us the rest of the money you owe us uh what 138 uh 56 13856 and so we're going to say okay let's say they that they uh pay us that amount which which we might do by going to the invoice I can go to the invoice and then say that we're going to have uh a receive payment we might connect it to the invoice here and have a receive payment say Okay boom and then here's the amount