As a business owner, you’ll have to purchase products and services to facilitate your business’s operations. All businesses have expenses; it’s a regular part of running a business. You can keep track of your business’s expenses, however, by using the expense account feature in Quickbooks. To learn more about expense accounts and how they work in Quickbooks, keep reading.
Overview of Expense Accounts
In Quickbooks, an expense account is a category of transactions that’s used to track your business’s expenses. You’ll find expense accounts located on your business’s balance sheet. Alternatively, you can run a report of your business’s expense accounts by clicking “Reports,” followed by “Profit and Loss.”
Expense accounts allow you to categorize your business’s expenses. If you own a restaurant, for instance, you may want to create expense accounts for food deliveries, utilities, lease payments and payroll. Rather than grouping all these expenses together, you can categorize them into the appropriate expense account. Quickbooks doesn’t restrict you to using expense accounts for any specific type of expense. You can create and use an expense account for any type of expense. Therefore, they are a versatile accounting tool that can help you keep track of all your business’s expenses.
Expense vs Income Accounts: What’s the Difference?
In addition to expense accounts, Quickbooks supports the use of income accounts. As you may have guessed, income accounts are the opposite of expense accounts. While expense accounts are used to track expenses, income accounts are used to track revenue.
Most businesses, of course, make money through different channels. Even if your business sells a single product, it may generate sales through its brick-and-store as well as its website. Expense accounts allow you to separate these channels, thereby revealing which channel yielded the most sales during a given period and which channel yielded the least sales. You can even use an expense account to track income generated from franchising activities.
Running a Profit and Loss report in Quickbooks will reveal both your business’s expense accounts and its income accounts.
When using expense or income accounts, try to use a familiar structure that’s easy to recognize. In other words, don’t place a transaction into an account unless it’s an appropriate fit. If you have an expense account for payroll, only place payroll transactions into that account. Otherwise, it will throw off the account’s true total.
Have anything else that you’d like to add? Let us know in the comments section below!