The Joys of QuickBooks:
Understanding QuickBooks expense accounts.
It seems every year I get a lot of questions concerning working with the expense accounts section of QuickBooks. Here’s a good way to look at this.
QuickBooks uses ‘accounts’ to manage expense information about your company. One transaction can affect multiple types of accounts. QuickBooks uses expense accounts, and you can think of these as ‘folders’, to categorize the money going OUT of your company. The why of this is … by managing your finances with the right accounts, you can prepare detailed and accurate reports about your business. These reports let you see how…and why… you are spending money. It gives you insight into potential ways to decrease your expenses and increase your profits. Something we all want to do.
Here’s the important part. Categorizing expenses correctly helps you get every tax deduction that you are entitled to. When it’s time to do you taxes, QuickBooks shows you what your total expenses were for… for expenses that are tax deductible, like mortgage interest or state taxes paid. To allocate expenses to the correct accounts, each time you enter or import a bill, you will be prompted to associate the charge with an expense account. After you create ‘expense accounts’, each time you receive a bill or other type of expense, you can either import it electronically or enter in manually into QuickBooks. When you enter a bill or other expense, you can associate it with an expense ‘account’ to categorize the type of expense that it is.
This is an excellent way to get a clear picture of what you are spending money on. This is especially helpful at tax time to so you can claim the correct amount of deductions. It’s simple , it’s easy and it’s accurate.
Posted by Kevin Beatty, Rochester Tax Service.