Like that we didn't pay cash, we have an IOU in the future. If you see the terminology of on account, it's probably going to mean accounts receivable or accounts payable. And obviously, in real life, we would know these things. But when we work a problem, we got to kind of know the terminology and put ourself in the shoes of the problem and know what those accounts mean. So the cash is not affected, we pay for something other than cash. Now, the account that we're going to use as the IOU that we owe somebody else, is called accounts payable.

But in this case, I often think it might be easier to think about what we got rather than the IOU because we've been working with assets more than liabilities and if we're trying to see if we should debit or credit a particular account, it might be easier to think about the asset side of it. So in this case, we bought supplies. So supplies is up here we can see supplies right there. And we can see that it's an asset just like all these other assets, cash and receive Trouble, and we got more of it, therefore it's going to go up. How do we make something go up, we do the same thing to it. That's a debit.

Therefore, we're going to debit it in order to make it go up. So even though we know that the other half is the payable, we might want to think of the asset because we've worked with cash the most. And we know which way cache we're going to go, I'm going to right click on the copy that going to put my cursor in C 23, right click and paste it 123. And that's going to go up then. And so d 23, the amount being this seven, five. So we're going to credit something by the same amount, seven flats or negative seven, five, we need to have an equal number of debits and credits in each transaction.

And now we already know that we're going to credit the accounts payable. And we can now think that through does it make sense that we're going to credit the accounts payable? Well, accounts payable is a liability. Liabilities have credit balances represented by the brackets. In order to make it go up, we would do the same thing to it which would be another credit which makes sense Because we owe more money now after this purchase, so it does make sense that we would credit the liability. I'm going to right click here, I'm going to copy that.

I'm going to go down here to sell, see 24, right click and paste it 123 All right, so now let's post this out. This is called the general the journal entry that we are going to post to the general ledger. So I'm going to make this a little bit smaller, like so. And then we're going to look this over and we're gonna look for the supplies. By the way you might be thinking why is supplies an asset and not an expense. Many people might be expensing their supplies and there's nothing wrong with that.

But in this case, if the supplies were large, and material to our decision making, then we should put the supplies on as an asset and then count them at the end of the time period and then expense them as we go. If on the other hand supplies is in materials say we bought like a five year supply of paperclips for like $25 you know we're not even though the paper clips are going to last a long period of time. We are not going Going to go through the trouble of counting the paper clips and expensing them. As we use the paper clips, we're just going to go ahead and expense them. So the other reason we put supplies up here is because although we're not talking about inventory yet, we can account for supplies in a similar fashion that we will account for inventory. So we'll have an adjusting entry for supplies that will mirror the adjusting entry for inventory, meaning we're going to buy stuff, we're going to compile it, I think of it as like paper being in attack and tax office, we buy a lot of paper and ink, we put that in the corner, then we use it and we're going to go ahead and count it expense it as we use it.

Alright, so here's the supplies account over here, and it's in s 20. So we're going to go ahead and say equals, and I'm gonna point to that seven, five in cell D 23. And enter, and that makes the supplies go up to eight, five, we can see that eight five there as well. We're out of balance by the seven, five and now we're going to go to the accounts payable, so accounts payable, we can just barely see it over here. Not quite the whole thing. So we're over here in a b 10.

And once again, it goes from v up to a b, and we have a negative 300. in there, so far a credit of 300, let's say equals, I'm going to hold down the left arrow, so I hit the wall, go down to the payable of seven, five, and enter. So what happened, the three out of 300 goes up by seven, five to seven, eight. We can also see that seven, eight over here on the trial balance, of course, so there's the seven eight, we can see that we are back in balance down here, we can see that there's no effect on the income statement from that transaction because we have no income or expense accounts that were affected from that transaction. Alright, let's go down to the next one. Let's make our screen a little bit larger back to 100%. Up in the taskbar over here and scroll back to the left.

And we are now on 521 521 says record service is provided but for which cash has not yet been received. Alright, so we did services, but we have not yet received cash. So is cash affected? And no, we did service but we didn't get cash. So what did we get? instead?

If we did work, we're gonna assume we got something we're assuming we got an IOU called accounts receivable. So if we did work, we're still gonna say, yeah, we received something we received a promise to be paid. And therefore this is an asset. It's not our favorite asset. It's our second favorite asset because we're it's going to be converted into cash, hopefully within like 30 days. So it's a debit, we're gonna make it go up by doing the same thing to it because people owe us more money.

Therefore, we're going to go ahead and debit accounts receivable. So I'm going to scroll down here, I'm going to put that on the top I'm in cell C 26, right click, paste it 123 again, you could type it in there, but I'm just think that the copying and pasting is faster in my opinion. And then we're gonna go over here and that's gonna be $808,000 and we're going to Credits something every transaction has to have an equal number of debits credits. So then over here in the 27, I'm gonna put a negative 8000. When we hit enter, we'll see those brackets appear, then the only question is, what will that credit account be? Why are people going to pay us 8000?

Because we did work and in doing work, we earned revenue. So revenue is down here. Remember, it's always going to be in order, meaning assets, liabilities, equity, and then revenue and expenses. Sometimes people get the assets and revenue a little bit mixed up in terms of they're both kind of like good things are both things that we like. Notice we like both sides of this transaction. We'd like the receivable go like that people owe us more money.

We also like the revenue which is the income half of it, meaning that means we earned the revenue so we earned the revenue. We're getting paid in an IOU at this time. That IOU will hopefully be converted to cash at a later time. So notice that the revenue account has a credit balance, and we need to make it go up. So we're gonna do the same thing, which is another credit. Note that revenue always gets credited.

So I'm going to copy that, and paste it 123 revenue just doesn't normally go down, we don't do work and earn negative revenue, although we do have expenses that bring net income down. Alright, so then let's post this out, I'm gonna make this a little bit smaller. Let's go down to about 80 on the taskbar down here, so we can see our general ledger. And then we're going to scroll up to accounts receivable, and I'm in cell s 11. We're gonna say equals and then point to that 8000. And we got the seven, eight going up by 8000 to 15, eight, we can see that here on the 15, eight on the trial balance, then I'm going to go to the to the revenue account, that's going to be a little over to the right over here.

So we have the revenue account down here and notice it only has credit balances, we don't ever debit revenue for the most part, because it just goes up I mean, so af 20 in this case, a f 20. I'm going to say equals and I'm going to hold down the left arrow And I could use my mouse, but I think it's a little bit easier to hold down the arrow till I hit the wall. I'm going down to the last journal entry we did. And I'm looking for that revenue account that 8000 revenue, and I'm going to say Enter. And we can see that that goes up. So notice they should all be credited here, if you see a debit and the revenue account probably went the wrong way.

It went up from 14 six to 22 six. And what does that do to our trial balance, put back in balance down here and our net income goes up to 22 to being the 22 six minus that 400 miscellaneous expense, and we're very short on expenses right now we're gonna have some expenses most likely coming up as of the end of the month, because that's when we pay our bills. All right, so then we're gonna go down here to five. Squeeze one more in here 525 where we have cash received from clients for revenue earned during this month. Okay, so now we received cash for work we did in the same time period. So therefore is cash affected?

I'm going to say, Yes, we received it. I'm going to go ahead and make this a little bit larger. We're going to say, yeah, we received cash, and therefore cash has a debit balance, we're going to make it go up. How do we make something go up, we do the same thing to it as what it is, which in this case would be another debit, right click Copy the cash cow. Scrolling down to see 29, right click Paste it 123 the amount that we received was 4002. So 4002 on the debit side, we're gonna have to credit something for that same amount being a credit represented by negative 4002.

When we hit enter, we'll see those brackets up here. So there's the brackets. Now we're gonna have to say what will that account be? And we're going to say we got paid cash because we earned it, we earned revenue, and we earned it in the same time period, in this case in the same month. And so we can see our revenue account once again is down here. It has a credit balance.

It only goes up for the most part and it has a credit Balance represented by the brackets. Therefore, we're going to make it go up by doing the same thing to it, which is another credit, we're going to copy that. And we already knew that because we've debited cash and we can already we already have that credit over here, I'm going to right click, I'm going to paste that 123 There's our journal entry, and make this a little bit smaller again, back down at on the taskbar. Let's post this out. So here's our cash account. going to scroll down and we're going to go to the next line, it's going to go up with a debit so I'm in Oh 14 cell Oh 14 equals and point to that 4002 and Enter.

And that makes the cash go in 35 for 239 six, then we're looking for that revenue account over here. So revenues over here, so I'm gonna go to revenue, it's a blue account. Notice it's an order the green accounts are assets. Orange accounts are liabilities, then equity, then revenue, here's revenue and only has a credit balance. I'm going to put equals in cell A f 22 and a hold down the left arrow go down Last transaction, there it is there's that 4002 going to say Enter. And the revenue goes up once again from 22, six to 26, eight.

And what happens to the net income, it goes up to 26 four. So that's the 26 eight and minus two 400. And we're running out of room on the journal entries, what we're going to do at this time, is unhide, those cells that we hid earlier so that we can work on those cells. So we can see up here we got ABCD ek, and so there's some missing cells in there. So I'm going to unhide the cells between E and K by clicking on the cell II when it has an arrow such as this, and then holding down the left click and dragging to the right, so I'll get to cell L, letting go and then I'm going to right click on that selected area and unhide so there's that information. Now we're going to start I'm going to put the date here which is going to be the next transaction on 526.

Seven. And then I'm going to go ahead and hide the sales I don't need to see these sales at this time. Now if there's a problem, I'm gonna have to go ahead and unhide it and find it and whatnot. But right now I just want to hide the sale. So I'm going to put my cursor on. Let's go to column B, and I'm going to click on that and then highlight and hold down to column F. Let go that I'm going to right click on the selected area and hide that information.

So it's still there. It's still all posted. It's going from eight to G. We didn't delete it. But we are now able to see what we want to see only. Alright, so now we're down here on 527 says cash received from clients for revenue earned in prior month and recorded in accounts receivable. Alright, so is cash affected and says cash is received.

So yes, cash is affected cash is a debit balance, we're going to make it go up by doing the same thing to it, which in this case would be another debit. So I'm going to right click on that. Copy, I'm going to put my cursor in h5, right click and paste it 123. But the amount that we received on the 27th is 12,000. We're going to credit something for that same 12,000. So I'm going to credit column and j six, negative 12,000.

And what are we going to credit? Well, we received cash from clients for revenue earned in the prior month that was recorded in accounts receivable. So why do people pay us money because we did work, but we didn't do work this time period we did it last time period. Therefore, we have already recorded the fact that we are owed the money in the receivable account. So that receivable account now needs to go down and it has a debit balance, we need to make it go down by doing the opposite thing to it, which is a credit which we already knew because we debited cash. So we're going to credit accounts receivable reducing that asset because we got the better asset and we're going to increase the cash in this case.

So And notice that there's no effect on the income statement on net income for this transaction, copy and paste it 123. And that's because even though we got cash, we recorded the revenue when we earned it. And that was last month. Alright, so now we're going to post this out. So we're going to go into the cash count over here in cell Oh 15 and say, equals point two that 12,000 up here, and when we hit it turned the 39 six will go up to 51, six, then we're going to look for the receivable that's right over here right next to it, and we're going to, I'm in cell t 12. And we're gonna say equals, and point to that 12,000.

This is a debit, that's a credit that's going to make the account go down. I think I missed it, let's say equals and point to that 12,000 makes it go down. There it goes. All right down to 3008. We also see that 3008 over here, and we can see that we are back in balance by the Greensboro meeting. That the debits minus the credits equals zero and we are good back and balance ready to go to next transaction being on 528 All right, so it says we paid employee for salaries incurred.

Alright, so we paid our employee for a salary that was incurred.