Great, thanks for having me here. My name is Tim Hsu. I'm a network sales engineer slash project manager for Dorado software. So a lot like Beyond Edge and a couple of the other partners here today. We have a set of software around management and everything else. I'm going to hit a little bit on it at the end of the slide at the end of my slides just so you kind of know what we do. But my main purpose is actually to go through with you guys and talk about the customer experiences that I've had and and the customers that I've interacted with, how they're using Sonic today in real enterprise environments, not necessarily kind of in the Microsoft, you know, initial use case scenario of a cloud and in the traditional sense, at least from that. So that's my plan. Take you guys through here. Got a couple of slides to just the first one, kind of just key up kind of what the enterprise typical customer expectations are for you guys and then talk about how that expectation and that environment and all that flows into the data center and telco customer examples that I have. And then last, I'm going to end on the edge in in campus style use cases, which as Beyond Edge was just saying, is definitely a very big game changer for Sonic, I think. But I definitely see that feature gap closing very quickly. And then last, I'll talk a little bit about our solution to it and have some Q&A. So these enterprise customers or telco, large telco customers that I've been interacting with have a lot of these kind of built in legacy kind of mentality. So you have a lot of these kind of ideas where they think they're buying monolithic tools or buying a set of things that they expect to just work, right? They expect these components of what makes up their data center or their environments that are, you know, spread across multiple data centers in many cases, the tooling and then the applications that they're buying or the operating systems that they're running in the case of like VMware, they want high integration and things like that, right? So these are kind of the expectation world that these customers are coming from when they start to look at trying to use Sonic. So the data center and telco customers, this is the easy kind of use case for Sonic today. I think this one really is pretty well met. We can meet pretty much all these needs with customers.  So I feel like this is the easy spot for going into Sonic and these enterprises. Most of the time with these customers, the conversations that we have are around, you know, they want a protocol that maybe is vendor specific or they want a specific thing to integrate with something else because that's what they're used to. And a lot of times this conversation turns into what is it that you need from the network? Like what is the problem you're solving by protocol XYZ, right? So a lot of those conversations really change the operational mindset of these customers. It makes them start to think about solving the problem and less about the protocols and the technologies and the RFP checkpoints for lack of a better term if you've been doing this for a little while. That really does force a bit of a game changer. And for me, this is what I think makes Sonic a lot of fun for these customers. I can go into these customers and say, you know, you don't have to worry about the protocol, but what problem are you solving with your customers. And a lot of this turns into that automation and tooling that we talk about we've talked about even in the first slide today, it really becomes very interesting of how you can use a tool like Sonic, how easily you can take a container, add a container, change something. You go to put it on the edge, you can you can slim down some of the containers that maybe you don't need that sort of stuff, right? So it definitely becomes very interesting here. I've seen quite a few of these go to deployment. These are the easiest ones. Like I said, scale is almost never a problem. All of these are smaller than where Sonic came from, right? A lot of these are data centers of, you know, a few hundred racks at most, right? Any questions on this kind of customer? You guys feel like this is an enterprise customer. What am I missing? Nobody got any thoughts? It's the easy one, right? We do a lot of this integration, by the way, with more than one software vendor. So a lot of times we're putting Sonic in here as the spine and something else as the leaf. That was the first way I did a lot of Sonic stuff. And we'll also be doing where like you was talking about maybe a customer wants to do a migration and some sort of like brownfield flashed greenfield environment. They might prove this out in greenfield, do a whole pot of Sonic, and then they'll look at this old environment and he's not in his head, you get this too. You want to do this old environment and they want to replace something with, hey, we're now into Sonic, can we replace this? So this becomes a lot of fun. You can get these customers to make these changes. They will do it. This is very doable. So the next one, and what I think is the most interesting one lately is moving Sonic onto these edge use cases. These are the customers. These are the environments for the customers that a lot of times if they're a retail customer, which I've dealt with a couple of these, or a customer that looks like retail, they have a lot of remote locations. This is where Sonic is an interesting mix because it came from a layer three world. It came from that sort of stuff. The platforms and expectations that customers had in the past around this, around what a layer two campus should look like, whether it's a traditional campus, even in some cases, I've dealt with universities and schools trying to do this. Their expectations of how it should interact, what protocols it needs, does it do NAC, does it do these sort of things? These are things that we do need to invest in and get the rest of the way there. Some of this is working today, depending upon the particular distribution or vendor platforms that we're on. But like you were saying, we see a lot of need for Sonic is CPU hungry. It's very resource intensive from an operating system and network operating system platform. The good part is it empowers the customers to see the value in what they're getting out of that. The bad part, of course, is that means that that same switch they used to buy for a smaller amount of money now might cost a little bit more. It's investment in hardware versus other things.  But here, the other thing that I find very interesting is customers are coming up with very innovative ways, at least with me, to use the overlay and the underlay idea. They're building non-traditional spine and leaves. So they'll be going from what would be in the campus called a core network, which you could read as a spine. And then they will build an IDF or an MDF, and then from there they might attach another whole set of leaf switches. These customers, the big thing for me has always been abandoning stacking. And that's where the automation and tooling come in for us. So if you can prove to the customer that stacking doesn't solve a problem anymore because I can automate you around that problem, that's a huge thing. Not in your head. You've seen it. Yep. Exactly. So this is where I think a bit of a change in the hardware platform is going to come. And I think you're not in your head the same. You think the same thing. I think we're going to end up with some sort of intermediate device that would be a potentially more powerful leaf slash extension spine, something like that. So whatever that's going to be where you're building, I wouldn't call it a three tier, but a multi-tier. When you move to a, certainly like universities, I've had this, where they put in on that edge, they'll put in a larger pair of switches at a break point where they might have another 10 switches below it or something like that. They'll want to use those ports to put end users on, but they'll also want to use those ports to aggregate the switches that connect upstream. They're also building HA within this company. So these customers are doing this today. I mean, I have done deployments with universities. I've done deployments with retailers and with very traditional kind of campus mentality where they have a need to do something. I've done distributed HPCs, which are actually really fun. So those are good examples of this. But this is where I think Sonic is looking at kind of a bit of a break point. I don't know if you're looking at saying, do we need to create another version of it? I think that's probably a bit overkill, but I definitely think potentially looking at how do we make it fit within a tighter CPU boundary or maybe there's some recommendations we can help customers with of, hey, these containers may not be needed or trimmed down something like that. I think that's something we could definitely do some time and effort on. And then the kind of last spectrum, the kind of last spectrum I had here was just to kind of contrast the customers that I interacted with between that build versus buy continuum that I talked about in the kind of the first slide. And this is what I see a big difference between customers. There's a lot of the customers that are kind of on the extreme end of wanting to build it themselves and those customers might be all the way to the end of, hey, I want to go get my own, build my own distribution of Sonic for in-house use and everything else. And then you kind of have the other extreme that just want to buy something off the shelf that just works. And I don't want to worry about what build of Sonic on. I don't want to go look at the list of bugs and make sure I pull in the ones that I want. They don't understand that mentality. So I think there's a huge space for us as partners to fill these voids and to help these customers and kind of help them understand to the point of the guy presenting earlier. I don't think Sonic's all necessarily about saving money. I think this is very much a game changer from the standpoint of a customer owning this and taking responsibility for it. So I like the customers that, and I think most customers like anything, you're to build a spectrum of left to right. Most people land somewhere in the middle. Most of my customers are landing somewhere in the middle. So we need to fill in that that perspective from the middle. I think the two ends have been pretty well captured. Right? So that's kind of the last slide I have on my own product. That's where I think we fit in really well. The automation and tooling product that we have allows the customer to kind of do both sides of that game and complete that full cycle for them. They can be as independent as they want and they can go and use our product like an out of the box kind of vendor agnostic management platform. So make sense? Everybody's been quiet all day. So any questions? Yes. Yes. So you mentioned that you would like to see the trimming of the distribution, right? To fit into smaller CPU or maybe hardware boxes, right? When you talk about this slide. Edge, do you have an idea of what is the hardware size that you need to fit into? Hopefully you're not looking for some super small ones, but just trying to get a sense of where are you targeting for, right? Or what is the distribution? Let's see. If you get down to this size, you get to open up this much market. If you further cut down, you get to that much market. You do have it. I guess, and I'm looking at my peer here slash competitor at times. Yeah. So it ends up being a combination of the chips that you need to support Sonic. So the more cost effective chips, I'll say, aren't always included in the side today. So that's one factor. And then the other factor is the CPU kind of hungry side of it, which is being addressed. It's not as bad, but it still has a little CPU and memory hungry. So I think those, but combination to his point, and they need to switch hardware platforms. I mean, I would say, although I don't sell hardware anymore in heaven for a little while, I would say there needs to be some less expensive hardware in the market. Yeah, it needs to be, I think port density is another equation, but most of my customers today wanting to do this on the edge are okay with 48 port switches or whatever. But if you, if we really wanted to penetrate this market, you're going to have customers that want 24 or less port options. Because this is where, yeah. And, and that's essentially my experience as well. I don't think I don't think you're going to have a lot of customers wanting to do Sonic on really, really low density cheap switches. I don't think you're going to see a lot of customers wanting a 10 or 12 port switch doing Sonic. They just go buy something and plug it into their network. But exactly at that point. Yeah, price is almost the single driving factor at that point. But, and they view those as disposable largely. So, but I do think there's a need here for some lower end. And to his point, I think the chips at family matters too. So today, when you're looking at the chips, you know, supporting the EVPN and all that other stuff, they're usually pretty expensive chips. So even within the market, we have chips, you know, that we can get a little bit cheaper that do support Sonic, but then we lose the EVPN support. And I know about you, but a lot of my customers are like, no, no, we want to use that on the edge. So then it becomes, how do we get that in there for that price point? Yes. That's a good point. Yeah. So the campuses that I did recently were large enough, they weren't using SD WAN. So yeah, but if you're doing an SD WAN to it, then you could do a strictly layer too. Correct. Anybody else? I mean, these things, these things already have pretty underpowered processes in them.  I mean, in the big scheme of things. And so we talk about trying to carve all this stuff down. The amount of engineering costs dissociated with sitting here trying to squeeze this thing into a $600 box far outweighs the cost associated with, you know, spending another 300 bucks a box. I mean, this is, I've been involved in this conversation over and over and over through the years.  Now, this is not dash. Dash is a whole different thing altogether. It's like, yeah, but if I do that, and now I've got three different types of nicks and five different types of servers and all these different use cases, the amount of incremental engineering costs are going to go to manjulist stuff. It's ridiculous. And this is the same argument. I think that in this, we do ourselves a disservice by putting insufficiently powerful processors in our switches. No, understood. Yeah. And in coming from a past life where I was at a hardware vendor for a while, I can tell you that your argument is not necessarily unfounded. They, you know, they would choose to put, you know, it literally cost them a few hundred dollars difference between the chip that they would put in, and they would choose to put in the smaller chip because they could dictate the OS to fit within that chip. I think moving to Sonic is a bit of a game changer for customers knowing that they actually are going to use more of that CPU. I mean, we were having that conversation on one of the breaks earlier of how do we use the, you know, how do we make use of the CPU? Do we make this service go up? And then what's the, you know, how much before we tip over the CPU, right? I do think there's going to be, and customers want the streaming telemetry and they want this other data off the edge. So those same customers are going to end up, you know, wanting the CPU to be bigger anyway at the end of the day. So to your point, I think maybe it is a bit of a learning curve for our customers to realize that there is something in value to have a little more expensive switch. I just think from my experience, my customers, you know, what they've said to me is the ones that are coming back for these edge use cases are saying they need a little bit more cost effective. Should it be at the cost of the CPU? Maybe not. Maybe we could look at some chips from, you know, some of the, from the, that could be onboarded by Broadcom or some of the other partners in this community that would be more cost effective and still have the features that they need. And to your point, they don't all need VXLAN, right? Yeah. And I go, why is this one the same price as that one? And they're like, what are you talking about, Adam? It's got, this has got 48 ports of this and 57 ports of that and blah, blah, blah. And I said, do you guys know anything about Sirties? Do you know what a Sirties is? And they look at me and they go, I don't know what you're talking about, Adam.  And so this switch ought to be far less money than this one if we were getting the same discount across them. And guess what? We got the same discount across them and the price of that one went down. And so I think when I talk about procurement, I talk about how we manage the supply chain of how we buy things and the understanding level of buying things. But I think we do ourselves a real disservice trying to squeeze into these, into these very small processes. It's always been a continuing problem.  Yeah. And those of you online, he was just saying that we just need more choice in the market, which I do think is where I'm going here to. What's that? It's handy for you at home. It's handy for you at home to do. Yeah. Yeah. Yeah. And I do think there is a sweet spot here where the customers looking to do Sonic on the edge are willing to buy into the idea, like Kei and I were both saying. We don't see them asking us for small density, very, very cheap switches, but they are asking us for something more cost effective than what's in the market today. At the cost of the main CPU, I think that as a community, like I think that's a decision that the technical leaders need to make. I'm not in that position and I'm okay with that decision. I just think we got to figure out how to onboard something. Well, I guess my point is from a Sonic decision makes probably the wrong word, but a Sonic community, I think that was the heart of your question is, how small do you expect the OS to go? And the answer is, I don't know that I have the answer, right? The answer is, I think it comes down to can we onboard? I mean, personally, I would say, can we look at the market, see what's in there? And maybe it isn't the CPU and memory that's the problem. Maybe we just need to onboard some other couple of chips in the PSI. And to your point, I don't know that a smaller CPU and memory is necessarily the right answer. I do get the feedback from customers that a more cost effective box is needed, or is wanted, maybe needed, strong or wanted. So, yeah, thank you guys. It was a good debate. Hopefully it made you all think. But yeah, like he was saying, there's a lot of progress here.  I really do believe in Sonic. I've seen it make a lot of progress since I first learned about it several years ago. I've been in a couple of different jobs advocating for it now. But yeah, I really do think this is going to be a very popular winner in this open network operating space. So, thanks. Appreciate your time.


Good morning, great pleasure to be here. Always great to come back to Brussels So all the lights are pretty intense as I can't see you. That's I guess that's an advantage or disadvantage I've been how you look at it. I live in Switzerland a neutral country and I'm a futurist so I talk about future trends and I'm trying to share with you a couple things I am not going to give your predictions. You know, that's what fortune cookies are for As was said earlier, I think the best way to predict the future is to invent it As Alan Kay has said and I hope that you guys can invent the future today One of the things that I will mention, I think what's happening is that traditional television as we know it is kind of Getting dark in the sense of what it does You know, we're moving to a new definition of television and the great thing about television is that it's converging with the internet Unlike the music business, which has been trying to diverge from the internet I think television industry and the public service industry for television is already moving in this direction I think what we need to face is when disruption is ubiquitous, which it is every day now Transformation becomes everyone's job So I would propose to you to use the Google paradigm 10% of your time spent on Transformation think about that for a second if you spend 10% of your time thinking about the future and transforming How would that change your reality apart from being completely overloaded with work? Of course, you'd have to figure out what to do about this I think what we're seeing here is that this cause of disruption was seeing the old order the way things used to be and then there's a new order and Very often this new order is associated with piracy with illegal activities You know remember that YouTube the biggest broadcaster in the world basically Was illegal or more or less illegal and still is in many countries not entirely legal And all the stuff that came from YouTube has really changed the world And most disruptive innovation does not come from the current players who invented the self-driving car Not Audi or BMW or Volvo Google is Google planning to be a car company? No They're looking to disrupt and move things forward. So that's what we have to watch out for it will come from the outside all the key changes a couple examples in the book business It's easily possible to scan every single book and bookmates.ru have done this It's it's available for you to download any book you want I think something like 50 million if you speak Russian you can do that and Why has the book industry evolved from this rather than the music industry which has not evolved from this because Clearly there's a better offer and here the transformation in this case was the Kindle There's more Kindle books electronic books being sold than printed books Transformation here was key because why would people buy a book for real money? The Kindle books are not much cheaper than the print books. The answer is You have to be better than just free the Kindle is better than free and When the Kindle price drops to two dollars a book, why would she ever try to download it for free without paying the authors? So better than free is possible. It's not a mission impossible As had always been said about the music of the film industry and as Jeff Bezos says the sea of Amazon He is all about proactively the lighting customers This could be a first thing on your table this morning. How can you proactively delight your viewers? Use the Amazon paradigm. That's all he cares about the innovation that comes from this now television Google research says the television no longer commands a full attention People are doing other things and the stats show that for example people are more and more Fragmented so less and less people watching the same show worldwide. That's kind of true. I think so Transformation is to use that social medium along with television as I'm sure you talked about in the last few days Social TV you've seen the grace note app I think already and the fact that people are using second-screen devices. This is a lifesaver for television clearly Converge those two things So learning from this is follow the convergence Media is converging offline online is converging Industries are converging follow the convergence Third point telecom. You've seen this chart here. Maybe O2T is called over-the-top people are using Mobile broadband to make phone calls on Viber and what's up many of you. I'm sure have this So what is happening the talk hose are providing internet connectivity and in return we stop using them We stop using SMS This is the cash cow of three hundred seventy five million dollars every single day worldwide and we're going to stop using it So what are the telcos doing about this they're bundling it tell you as bundling music It's what to find this say in this case reliance in India's bundling That those kind of services into the bundle and telecom Indonesia one of my clients is going out to empower the customer They're going with what is inevitable anyway. So learning from this is We have to leave the silos behind Telcos are no longer in the business of providing phone calls or data there in the business of lifestyle There are platform providing services and added values Think of yourself in the same way. You're not a broadcaster Not just the broadcaster you're providing a lot more than that and there's a lot more to it The cable industry we've seen disruption there you see on this chart in America Is the cable industry is selling less and less of TV bundles, you know cable television bundles and more and more internet access So lucky for them. They're actually in both businesses, you know, I have television programs and internet access And transforming essentially by creating bundles So another good example for this basically is That taking leaps is a requirement you have to go out and do something that you haven't done before And I think this is fundamental, you know, I'm originally from Germany and and still I would say to you that it's probably better that we're looking at speed over perfection It's a very un-German thing to say But we have to take a leap. It's a requirement We cannot just go and say let's avoid risk at all costs because if we do that we have risk Very big problem Advertising You've seen the shifts and this is the latest stats from America on the right-hand side All of the big brands are trying to are going to get out of newspaper advertising and consumer magazines radio trade and television On the left is what they're going to do in the future mobile social media marketing automation and so on and so on So what are newspapers and publishers doing about this? Well They're discovering in this transformation That they have more to offer Added values like these and this chart you can see relevance filtering community reputation and so on this is very very important To publish this to discover a great example is the economist Which is allowing me to listen to the magazine an audio version So when I'm driving my car, I can listen to the economist. That's why I subscribe So the answer of the columnist is not to say no you should pay us But their answer is we'll provide more value and you will pay us. There's quite a difference Pay will pay wall.  And what do they do? Well, they use technology. They're going to use the Watson computer to have access to a huge database They're going to use iPads and of course medical robots Sounds like science fiction already here learning from this reduce control Will lie on trust and add value At this point, I think we've seen an aptly demonstrated in very other industries that Increasing control by the customer gets more control and the user is mission impossible I'll show you some more examples in that shortly. So the other learning I think that we can take from this is That the future is not a zero-sum game Just because people are on Facebook or looking at social media or YouTube doesn't mean they're going to like you less It doesn't mean they're going to ignore television just because they have Facebook. There's a bridge between the two I think this idea of a zero-sum pie. We have to put away This pie is growing and it's going to be available to all of us. I Worked in the music business for a long time. Many of you may know my book the future of music 2005 Whatever you're going to do don't mirror the music business This is the easiest, you know anti paradigm I know this intimately because I've worked with them for 15 years and they recently stopped doing it for obvious reason Okay, this is what they do right they try to lock up with copy protection They complain about people not paying they try to pass legislation to protect their business model They're talking about piracy and they're talking about how dopey in France passing laws that prevent this They're killing innovation with bad licensing rules like Spotify Basically music business has made mission impossible out of digital media what they should do is Accept that everything is moving into the cloud and that people are using cloud computing Change usage rights come up with standards For this become indispensable and be liked Did you know that last year two years ago the music companies were the most hated companies in the world right? After the guys that make the bombs for Iraq Halliburton That's quite an achievement for an industry. So whatever you do don't do that Okay Because in the end it's all about this as a public broadcaster as a public media It's about trust and relevance and what is called like a comics. It's a great book with that title.  Okay. Yes. I love Arte and I love that and this is why I'm happy to pay my taxes Because I like them and I see the value so trust social capital and I think the License to operate in the future will not be the political license to get your public broadcasting funds It'll be purely based on a license to operate a social license to operate If you see for example on the left the music business Recorded music declining half of the American kids saying they spend zero dollars on music How is there possible when you see transformation like this Netflix you guys know Netflix, I'm sure 42 million subscribers paying $10. What in the world is wrong with the music people? If 42 million people are paying $10, what's wrong with these guys? Transformation so learning from this is Embrace what customers? Consumers users viewers actually want and don't re-educate three billion people on their media behavior Embrace what they actually want. It's not rocket science. Ask your kids. They know The app economy so all of you guys have mobile phones You see what's happening here is that the mobile app economy is exploding more and more people using mobile apps and Over here app stores are exploding Apple makes more money selling apps and selling music Why in the world are we paying $2 for a divorce app or something? Which exists actually there's a hundred of them if we're not going to pay a dollar for music because we see value The app economy offers some great learnings So I want to find rather than say yes, I think it is possible for public broadcasters to Transform into the digital age by using this very simple Paradigm to start a new order and parallel to the old order Thanks very much for your time. You can download my slides at future was good calm or my dropbox site Which is good cloud calm. Thanks very much


In this presentation, we will discuss notes receivable, giving some examples of journal entries related to notes receivable and a trial balance so we can see the effect and impact on the accounts as well as the effect on net income of these transactions. First transaction, we're going to have a 120-day 7% note giving the company MI and extension on past due AR or accounts receivable of $6,200. When considering book problems and real-life problems, one of our challenges is to interpret what is actually happening, what is going on, which party are we in this transaction and therefore how are we going to record this transaction. When we're looking at notes receivable, a common problem with notes receivable is the conversion of an accounts receivable to a notes receivable. So in this case, that's what we have. We have an accounts receivable here that includes an amount due to us by this particular company MI. So these are our books. We have a receivable, people owing us money for prior transactions, goods or services provided in the past and they owe us in total, all customers owe us $41,521. This customer in particular owes us $6,200 of this amount in the receivable. That could be found not in the general ledger, which would give backup of transactions by date, but in the subsidiary ledger, supporting this amount, giving us this number broken out by customer, in this case showing that this company MI, our customer, owes us $6,200. If we were adding up all the customer accounts in the subsidiary ledger, which we only see the one here, all of them would add up to the total accounts receivable. Now the accounts receivable represents sales that are made that are typically due in say 30 days and a note receivable on the other hand, typically has a longer time period, interest rate involved often has a higher dollar amount and therefore interest will be charged and want to have that in writing. So in this case, we're going to say, okay, it was in accounts receivable, but now we're going to give an extension and because of the extension and the days being greater than say 30 days, we don't want to track it in accounts receivable and in the subsidiary ledger, but create another account and track it in a note receivable and then charge interest on it. So we can imagine a formal document being made here for a note receivable, and we then now having to record this. So to record this note, we don't, we don't really need to know the 7% or the 120. All we need to know at this point in time is that it was in accounts receivable, and we're transferring it to notes receivable. So accounts receivable has a debit balance, we need to make it to go down. So we're going to do the opposite thing to it, which is a credit decrease in their receivable. And then we'll put it into notes receivable, which is another asset account very similar to accounts receivable. And we it has a debit balance, and it's going to go up by doing the same thing, another debit. Now note here that we're recording the note receivable, a different note receivable for each customer. So in other words, the accounts receivable we're tracking in one account here, supporting that account with a subsidiary ledger, which then will track each customer that owes us the money. With the notes receivable in this example, we have a different note receivable for each note outstanding, and we'll track the amount owed, the principal amount owed here, as well as supporting documentation to be able to track the principal and interest that is owed. It is possible, however, for us to track this with just one account on the trial balance as well, and then have supporting documentation in a similar way as the subsidiary ledger for the notes receivable, which would calculate both the notes receivable due to us and the interest that would be due on those notes receivable. I kind of like to see it if we don't have too many notes receivable in this format, so that we can check each note receivable. When we make the financial statements, then of course, we're not going to list out a bunch of different notes receivable with different customer names. We're just going to put it together in one account called notes receivable. If we record this out, then we can see the accounts receivable started at $41521. It's going to go down by this $6200. We're recording this accounts receivable, making it go down to $35321. $41521 minus the credit $6200 given us the $35321. Notice here, we're representing the debits with non-bracketed numbers, the credits with bracketed numbers, and therefore, if we do sum this up, debits minus the credits equals zero, debits minus the credits equaling zero, meaning debits equal the credits, and we are in balance. Net income is calculated as the revenue minus the expenses. We're not showing any right here because we're simplifying the chart of accounts. So all we have are revenue accounts, revenue, interest revenue, and a gain here to get to the revenue not a loss revenue or net income $38,245. The second component, notes receivable, started at zero. It's now going to go up in the debit direction by $6,202, $6,200. We also need to track this account. This gives us total accounts receivable owed to us by all customers. We're going to track the activity in the subsidiary ledger for MI Company, a particular customer who owed us $6,200. We credit the same credit here, similar to as we would do for the general ledger, but now breaking it out by customer, saying that they no longer owe us any money. So this $35,223.21 is all made up of customers other than the MI Company customer. If we look at the full transaction of all of our accounts at the end of the day, here's where we started. Here's our adjustments. Here's the ending trial balance. All that happened, one asset account goes down, one asset account goes up, no effect on the accounting equation in essence. Assets went up, assets went down, no effect on equity, no effect on liabilities. You can see down here in the income statement accounts, nothing happened. No revenue went up, no expenses, net income is the same after this transaction, just transferring from one account to the other account, one asset account to another asset account. Why? Because this asset account will allow us to track not only what is owed to us, but then we'll want to calculate the interest on it and the longer term of days. Then we're going to say, okay, what happens at the end of this time period, we're going to get paid both the principal and the interest, and therefore we need to calculate what that interest will be. So the principal of that amount is 6200. The interest rate is 7%, 6200 times 7% is 434 or 6200 times 0.07, 7% 0.07 is 434. Then that would be remember for an entire year, and we're going to need to break this down to the time period we're talking about, which is only 120 days. There's a few ways to do this, we'll talk more about different ways to do this in a later presentation, but here what we're going to do is break it out into an amount per day and then multiply times 120 days, which I think is one of the most intuitive ways to do this and make sense to many people. So we're going to say that 434 divided by 360 days gives $1.21. So what does that mean? Where did we get the number of days at 360? We're going to say 12 months times 30 is 360. There's really 365, but we're going to round it for simplification purposes for simple interest calculations. We're going to take the 434 divided by the 360, meaning 434 interest for an entire year divided by 360 days is about $1.21. We have to deal with rounding, that's okay, for each day. So then we're going to take that $1.21 multiplied by the number of days in the loan, 120 days, to give us the $1.45. Now again remember that if we take the $1.21 times 120, we get something slightly different here. Then if we took the rounded number, 434 divided by 360 gives us really 120.555 times 120 and that gives us still something else slightly different. We're rounding to the nearest dollar. So just be careful of rounding. It's always going to be an issue. Even if we go to the penny, it's still going to have rounding issues because we're off by less than a penny. So always going to be an issue and we'll have to deal with it no matter how we structure the information. So here we go. We're going to say that the interest was $1.45. What happens when we get paid then at the end of the loan period? So now we're at the point where they're going to pay us. We loaned originally $6,200. We're going to get that back plus interest of $1.45. So the note receivable is going to have to go off the books. Here's the note receivable. It's easiest to see this when we have a trial balance because we can see, hey, there's the note receivable. We got paid on it now. That needs to go to zero. It has a debit balance. We need to make it go down. Therefore we'll do the opposite thing to it, a credit to make it go down. We're also going to have the interest revenue, that's this revenue that we generated. It's not included here. We're going to get cash not of $6,200 but $6,200 plus the $1.45 because of the time value of money, the interest that we've earned. That's going to be interest revenue. It's an income account. Income is going up. Revenue has a credit balance. We're going to increase it by doing the same thing to it, another credit. So we'll increase revenue, increase the net income. Note that this revenue is not going up because we made a sale but because we loaned money. We loaned money and time value passed. Therefore we generate revenue from it. The debit to cash then will be the $6,200 plus the $1.45 or the $6,345. If we post this out then we're going to say that cash went up. So here's cash here. We're going to post that here. It started at $39,429. It's going to go up in the debit direction by $6,345 to $39,429. Accounts receivable started at this $6,200. It's going off the books now and this is a check figure that we should have. It should go to zero and that should be intuitively the case that it should go to zero because they no longer owe us money. If we have the trial balance this becomes much easier for us to think through construct the journal entry and then post it and see if it does what we think it should do. A nice worksheet format is a good way to see this rather than having the GL and post into the GL because this gives us a quick view of these accounts allows us to stay in balance after we record it and see what happened here very quickly and easily. Then the interest revenue we're going to say interest revenue is a revenue account. It was at $146 prior to this. It's going to go up in the credit direction where we're posting this $145 interest revenue by $145 to $291. If we take a look at all the accounts then we can see that the cash is going to end up here. We got the notes receivable is down and the effect on net income then is going up by that $145. We're recording this entire $145 at the point in time we received the cash because we earned revenue not at that point in time but throughout the time period throughout the 120 days. So instead of us recording the revenue that we're earning for loaning money out for the interest each day as it accumulates we're waiting until the end of the term and then we're recording this at one time at the point in time that we received the money at the end. So just be aware that under the accrual method this revenue didn't happen at one point in time. It happened over 120 days. It's just easy for us to record it at the end of the term when we get paid. Now if the term goes over the the adjusting entry date the end of the month or year we may have to then do an adjusting entry to recognize the fact that we did earn revenue over time not at this one point in time at the end of the time period and we'll see an example of that shortly. What would happen if at the end of the time period they dishonored the note? We didn't get paid. We'd have a similar journal entry but of course we wouldn't get cash then. We're saying they didn't they didn't pay us so we would say that the notes receivable is still going down we still have to take it off the books so it's at $6,200 we didn't get paid it needs to go down to zero this is a debit we'll do the opposite credit to make it go down we're still going to earn the interest revenue it's not like we didn't earn the money even though we haven't gotten paid on it we haven't given up on it yet we're not going to debit cash yet we're going to debit instead accounts receivable representing the fact that they owe us the money putting it back into account that we can then track them and be able to see if we can have collection action on it within accounts receivable so this the only difference here of course being not cash but accounts receivable accounts receivable being up going up it started at $35,345 it's going up by $6,345 to $41,688 the note receivable started at $6,200 it's going down by $6,200 to zero and then the income would still be going up it had revenue of $146 it's going up by $145,2 that's $291 we also need to record down here in the subsidiary ledger we increased the receivable we need to record that here in mi company on the subsidiary ledger increasing the fact that it's not at the principal now $6,200 but the principal plus the interest that is owed to us back in receivable now this is an area that we can further track how much is owed further go through a collection process and see if we can collect on the amount owed once again if we if we see all of the accounts we can see that there is an effect on net income even though we didn't get paid cash it's going up by the interest revenue recorded here remember this is the income statement part so we had $20,000 revenue plus this 145 increasing and this gain down here for revenue we're not showing any expenses right now because it's a simplified financial statement so we don't have any expenses at this time now what would happen if we had an adjusting entry note that we recorded this 145 as of the end of the time period what if we had an adjusting entry for example what if we made this loan term as of the middle of the month there's 15 days left in the month let's say the month of December there's 15 days left in the month and we need to record then the fact that we generated revenue over that 15 days interest revenue even though we're not going to get the money till next year next month after the cutoff date so we'll have to do an adjusting entry in that case so we'll have the the principal amount we're going to calculate the interest now for that 15 day time period so we can do the adjusting entry principal 6200 interest is the 7% the same 434 we did prior to this calculation but now we're going to divide it once again by the number of days in a year 360 12 months times 30 days that'll give us about one dollar and 21 cents interest per day and now we just need to multiply times the number of days that this is where we differ rather than having 120 days we're just going to multiply times the 10 the 15 days that have passed for this current month that we're in so 15 days which will give us $18 and 8 cents and we're going to round it to $18 so if we did this with a calculator we'd say okay there's 6200 times 0.07 7% that gives us the 434 interest if it was for an entire year we only have 15 days that we're looking for so we'll break it out into a daily total dividing by the number of days in a year rounding not 365 but we're going to use 360 12 times 30 divided by 360 gives us 1.2 0.5 1.2 0 5 5 5 about 1.2 1 we'll take this number the unrounded number times 15 and that'll give us 1808 we're going to round it to $18 for our calculator for our journal entry so then we'll do the journal entry here and we'd have to say okay well as of the end of the cutoff date for our adjusting entry we've got interest receivable of 18 we're not going to put it into the loan amount we've got 6200 we could you could think well why don't we debit the loan they owe us now not 6200 but they owe us 6218 but typically we'll record it separately and say hey this is the principal and then we'll record all the interest that we've generated in the receivable amount here and then the credit's going to go to interest revenue so even though we have not yet gotten paid we have been generating revenue note under a perfect accrual system you might be saying well we should be recording revenue each day each second each minute the time passes because that's when we earn it but clearly that that's that's not practical that's why we're only going to record the revenue that happened over this 120 days at the end of the loan date typically or we'll record it at the end of the financial statement date at the point in time that we make the financial statements and therefore want them to be as correct as possible for presentation purposes so recording this out we've had interest receivable an asset accounts going up in the debit direction started at zero by 18 debit to 18 debit then we've got the interest revenue starting at 146 here it's going up by the 18 to 164 okay and then if we see all the accounts then of course revenue is increasing even though we haven't received the money we do not we do need to recognize revenue and this may look in material right now it's not very material meaning it's not going to affect decision making too much in this example but if there are a lot of notes receivables or if the dollar amount was larger this could be something that would affect decision making and be material to financial statements so we're going to recognize the revenue that has been earned during that time period on the income statement side increasing net income even though we have not yet generated the cash because we have earned revenue over that 15-day time period and we're going to recognize the receivable that is owed to us as of the cutoff date that $18 we're not going to get paid until the end of the time period the 120 days and we are going to accumulate more receivable as that time passes for the days that pass but at this point in time we've accumulated 18 more dollars on the original 6200 that is due to us