Categorizing Transactions in Quickbooks & other bookkeeping software

Categorizing transactions in Quickbooks & other bookkeeping software is typically left for your Bookkeeper and Accountant to code.   Bad categorization will lead to a heap of trouble down the line and you may be paying the IRS more than necessary.  Think of the transactions on your bank statement as something set in stone.  Where you, your booker, or your account decide to code varies a lot.  The coding of expense categories and COGS below is with the understanding that the business entity is an LLC acting as S-Corp.  Categorizing transactions in Quickbooks will differ significantly from one entity to another and the type of products or services you provide.   We placed every expense category in BOLD and followed it with COGS in BOLD.  Again, the categorizing transactions or also known as coding is an example of an LLC but will be different for other entities.

Cool.  Why is a tech company discussing the categorizing transaction in Quickbooks?

www.getdivvy.com  is free software for managing your expenses more effectively than the old school credit card and debit transactions.  Bonus, they create virtual and physical cards for protecting against fraud and controlling costs when issuing cards to employees.  Check out our Divvy blog post to see how to use it effectively.

 

Expense Categories:

  • Advertising
  • Assets

NOTE:  Talk to your accountant as to what is an asset.  Example:  One computer purchase is not an asset.  However, a large amount of computers is.  This would be considered an asset.

  • “Automobile” AKA “Car & Truck”
    • Parking & Tolls
      • NOTE: Do I use standard mile deduction?
      • NOTE: Does that mean I don’t need to track my miles?
    • Bank Service Charges
      • NOTE: Not interest from credit cards

 

  • Insurance
    • Note: Errors & Omissions
  • “Finance Charges” AKA “Interest Fees”
    • NOTE: Should this all be roll into one category or subcategories?  What’s the category name?
    • NOTE: Who is doing the calculating of interest?  Accountant or bookkeeper?
      • Ie Maintenance Fee from Chase and Comerica
      • Ie CC fees
        • Send Alicia YTD Statement and create user account
  • Meals & Entertainment
    These are ordinary and necessary meals during travel for your self-employment work. They can also be meals you pay for when meeting clients or business associates. The meals and related trips must have a clear business purpose. Costs must be reasonable. Always refer to the IRS website for the latest rules on meal deductions.

          • Why is Uber under this category?
            • UberEats is not Uber Drivers
  • Msc 

    Usually the bookkeeper doesn’t know what the item should be coded as and therefore, it’s temporarily coded as misc.

  • Office Expenses – IT Supplies
    • Hardware – NFR
    • Domain & Hosting
    • Postage & Delivery
  • Dues & Subscriptions (SaaS)
    • NOTE: Renewing software licensing
    • NOTE: Can payroll fees go here?
      • No, leave as Payroll fees
  • Payroll Fees
  • Payroll Taxes
  • Professional Services & Legal Fees

    Bookkeeper – Accountant – CPA (The bookkeeper may not be incorporated)
    Sales and Marketing Consultant

    • Because NetworkAntics is incorporated, we don’t get a 1099 issue from other businesses
    • Are freelance LLC categorized differently?

      Important note regarding 1099/subcontractors.   Anyone who provides you a service is 1099.  DON’T CONFUSE THE ABOVE WITH COGS – CONTRACT LABOR.  Professional Services are advertising or marketing for your business.  They don’t conduct any NA business.

  • Rent & Lease
    • NOTE: Expensed through business when Business Related
      • Equipment rent and lease
      • Building rent and lease
      • Portable storage units
      • Small machinery and appliance rentals for business
      • Warehouse space
      • Showroom space
      • Office buildings
      • Retail shops
    • NOTE:  Not expensed through business
      • House rental
  • Repair & Maintenance
    • NOTE: Expensed through business when Business Related
      • Plumbing repairs
      • Routine servicing for heating or air conditioning
      • Painting
      • Cleaning gutters
      • Light fixture repairs
      • Costs for repairs and maintenance, but for office or property that’s not your home. This doesn’t include renovations or improvements.
      • Minor roofing, HVAC upgrades for a business space
      • Computer repair and upgrade visits from technical specialists
      • Floor refinishing for a business space
      • Carpet and furniture cleaning in a business space
      • Janitorial services for a business space
      • Paint, spackle, and electrical work

 

  • NOTE: Not expensed through business (using mileage calculator)
  • Oil Change
  • Car repair
  • Car Wash

 

  • Taxes & Licenses
    • NOTE:
      • Any time I renew my Business license
      • Any time I renew software
      • Any business taxes
  • Telephone
      • Cell phone
  • Travel
      • Uber is business travel
      • Lyft is for personal shenanigans
  • Utilities
  • Wages

 

 (COGS)

  • “Subcontracted Services” AKA “Contract Labor”
    • NOTE:
      • 1099/Subcontractor
      • Freelance LLC
    • “Materials & Hardware”
      • NOTE:
        • Items purchase for use in a client or customer project
      • “Software for Resale – SaaS Stack”
        • NOTE:
          • Items white labeled for use in supporting client or customer
            • THIS IS A BIG ONE FOR MANAGED IT SERVICES

 

Expense for (Not LLC) Self Employed

https://quickbooks.intuit.com/learn-support/en-us/business-assets/quickbooks-self-employed-schedule-c-categories-breakdown/00/369505

 

Categorizing Transactions in QuickBooks & other bookkeeping software Summary

Categorizing transaction gets a little easier if you have a frame of reference to build off of and the right software to learn from.  Use Divvy in conjunction with your bookkeeping software to optimize your books.

 

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