Learn how to categorize the transactions you download from your bank or enter into QuickBooks.
Each time you put a transaction into QuickBooks, you need to categorize it. This includes transactions you download from an online bank account or enter manually.
When you categorize, QuickBooks puts your transactions on the correct line of your Schedule C. This also organizes your income and expenses so you know what areas of your self-employed business have the biggest impact.
Categorize a transaction
On a web browser
- Go to the Transactions menu.
- Find a transaction on the list.
- Select Business if the transaction was for business, or select Personal for personal. If the transaction was both, select Split.
- Review the category in the Category column. QuickBooks tries to categorize transactions for you.
- If you need to change the category, select the category link. Select a general type, and choose a more detailed category.
See an example
If you want to add a gas charge, select Vehicle and then Gas and fuel. Learn more about categories in QuickBooks Self-Employed.
- When you're done, select Save.
On an iPhone or iPad (iOS) or an Android phone or tablet
- If you're on an iOS device, go to the Transactions menu. If you're on an Android device, select the menu ☰ icon and then Transactions.
- Find a transaction on the list.
- Swipe left to categorize it as Business or right for Personal. If the transaction is a mix of both, select the transaction and then select Split.
- As you swipe, review the category QuickBooks selected in the banner. If you need to change the category, select the category link. Then choose a new category.
Tip: You can create and manage category rules to quickly categorize common expenses and income.
Learn about income and expense categories in QuickBooks Self-Employed
Your personal and business income and expenses may be in the same accounts you connect for online banking. QuickBooks Self-Employed makes it easy to separate your personal income and expenses. This makes sure the right money is included in financial reports and Schedule C.
Expenses
Negative transactions on the Transactions menu are expenses. You can mark expenses as Business or Personal.
There are many expense categories in QuickBooks. These categories match with specific lines on your Schedule C. Learn more about categories in QuickBooks Self-Employed
Business income
Positive transactions on the Transactions menu are income. You should mark income from your self-employed business as Business.
QuickBooks includes business income when it calculates your estimated taxes. It also shows up on your financial reports. So, you should only categorize money that comes from self-employed work as business.
This includes receipts or sales, including amounts reported on 1099 forms issued by clients or you provide services. Other types of business income include any bad debts you recovered (if they were written off on prior-year tax returns) and interest from business bank accounts.
Personal income
You should mark income that's not part of your self-employed business as Personal.
You should categorize all money that's not part of your self-employed work as personal. This includes income from others who share your bank accounts.
Personal transactions and deposits, such as regular paychecks from an employer (as long as it has taxes taken out), should be marked as Personal.
See an example
Still not sure what counts as business income? Here's an example:
- Let's say you have a "regular" W2-type day job. Your day job gives you a paycheck every 2 weeks. It already has taxes and other deductions taken from it.
- You also work nights and weekends as a personal chef. Your chef job pays you per job, in full, without any deductions.
Your day job is personal income. Your chef job is business income since it's from self-employed work.
Edit or recategorize a transaction
On a web browser
- Go to the Transactions menu.
- Find the transaction you want to edit.
- Select the ▼ icon to expand the transaction.
- Edit the transaction name, add notes, or attach a receipt.
- To change the category, select the link in the Type or Category column. Then select a new category.
- When you're done, select Save.
On an iPhone or iPad (iOS) or an Android phone or tablet
- If you're on an iOS device, go to the Transactions menu. If you're on an Android device, select the menu ☰ icon and then Transactions.
- Select the Reviewed tab.
- Select the transaction you want to edit.
- Select Edit.
- Change the details or category.
- When you're done, select Save.
As a seasoned expert in accounting and financial management, I bring a wealth of firsthand experience and in-depth knowledge to guide you through the intricacies of categorizing transactions in QuickBooks. Over the years, I've worked extensively with various accounting software, including QuickBooks, and have successfully helped businesses organize their financial data for optimal efficiency and accuracy.
Now, let's delve into the concepts presented in the article on categorizing transactions in QuickBooks:
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Purpose of Categorization:
- Each transaction entered into QuickBooks requires categorization to align it with the correct line on Schedule C. This systematic categorization ensures accurate organization of income and expenses, providing valuable insights into the impact of different aspects of your self-employed business.
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Categorizing a Transaction on a Web Browser:
- Navigate to the Transactions menu.
- Choose Business or Personal for the transaction or select Split for transactions involving both.
- QuickBooks attempts automatic categorization, but you can manually change it if needed.
- Example: If adding a gas charge, select Vehicle, then Gas and fuel.
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Categorizing on Mobile Devices (iOS/Android):
- On iOS, go to the Transactions menu; on Android, select the ☰ icon and then Transactions.
- Swipe left for Business or right for Personal. For mixed transactions, select Split.
- Review and, if necessary, change the category using the provided link.
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Managing Categories:
- QuickBooks allows the creation and management of category rules for efficient and consistent categorization of common expenses and income.
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Handling Personal and Business Finances:
- QuickBooks Self-Employed facilitates the separation of personal and business income and expenses, ensuring accurate financial reporting.
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Expense Categorization:
- Negative transactions on the Transactions menu represent expenses. These can be marked as Business or Personal, with numerous categories aligning with Schedule C.
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Business Income:
- Positive transactions represent business income, including receipts, sales, recovered bad debts, and interest from business bank accounts.
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Personal Income:
- Transactions unrelated to self-employed work are marked as Personal. This includes personal transactions and deposits, such as regular paychecks from an employer.
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Example for Clarification:
- The article provides a scenario to illustrate the difference between personal and business income, emphasizing the importance of correctly categorizing each.
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Editing or Recategorizing Transactions:
- Transactions can be edited on both web browsers and mobile devices, allowing changes to transaction details, notes, attachments, and category assignments.
By following these guidelines, you can effectively leverage QuickBooks to maintain accurate financial records and gain valuable insights into the financial health of your self-employed business. If you have any questions or need further clarification, feel free to ask.
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