The terms “bill” and “expense” are often used interchangeably by business owners when recording financial transactions. Many business owners assume that all instances in which they owe money — either to a vendor or anyone else — is a bill or expense. However, this isn’t necessarily true. If you use Quickbooks to keep track of your business’s finances, you should familiarize yourself with the differences between bills and expenses. Only then will you be able to properly record your business’s financial transactions.
Overview of Expenses
In Quickbooks, an expense is money paid by your business for a product or service that’s related to its operations. If you run a retail store, for example, you may have to purchase inventory. When you buy inventory for your store, you’ll incur the cost of inventory as an expense.
Recording expenses in Quickbooks is a relatively simple process. After logging in to your account, click the (+) icon at the top of the page, followed by “Expense” and then “Suppliers.” From here, select the payee’s name and click “Add.” While optional, you can include more information about the payee by clicking the “Details” button. Next, select the account from which the money came. To finish up, select the payment date for the expense, payment method, category, description and amount, after which you can click “Save and Close” to complete the process.
Overview of Bills
In Quickbooks, a bill is money owed by your business that’s due at a later time. It’s similar to an expense with the only exception being that bills are paid at a later time. You pay expenses on the spot, whereas bills are paid in the future (according to the seller’s terms). Aside from this subtle nuance, though, expenses and bills are pretty much the same. Just remember that expenses are paid on the spot, whereas bills are paid at a late time.
To record a bill in Quickbooks, go to the main screen and click the (+) icon, followed by “Suppliers” and then “Bill.” From here, choose the supplier from which you made the purchase. Next, click the drop-down arrow for “Terms” to enter the payment terms of the bill, such as “Due on receipt,” “Net 15,” “Net 30” or “Net 60.” After entering the bill’s payment terms, choose a bill date and due date, followed by an appropriate category.
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