When using Quickbooks to keep track of your business’s finances, you’ll probably come across items and expenses. Quickbooks offers items and expenses to track costs incurred by your business. Items and expenses aren’t the same, however. They are designed for different purposes, and to use them correctly, you must learn the nuances between items and expenses.
What Is an Item?
An item is any recorded product or service that your business purchases or sells. Quickbooks offers several item types, including service, inventory part, non-inventory part, other charge, subtotal, group, assembly and more. If your business buys or sells a product or service, you can record it as an item.
To create an item in Quickbooks, click the “Lists” menu and choose “Items.” You can then select the option for “Item,” followed by “New.” Quickbooks will prompt you to select the type of item you wish to create. Next, complete the fields for the item, after which you can click “Save” to complete the process.
What Is an Expense?
An expense is a cost incurred by your business. It may consist of anything from rent or lease payments, utilities, office supplies, legal fees, cleaning service and more. All businesses incur expenses. When you spend money on services such as these, you should record them as expenses. Quickbooks offers a separate area for recording expenses.
To create an expense in Quickbooks, click the (+) icon and select “Expense.” You can then enter information about the expense, such as the payee or vendor. You’ll also need to select a payment account with the date of purchase and payment method. After entering the required information, click “Save and close” or “Save and new.”
Comparing the Differences Between Items and Expenses
Items are used for any product or service that’s directly related to your business’s operations. If your business buys 100 units of a product to resell for a profit, you should record those product units as items. You’ll be reselling them in hopes of generating a profit, so they are considered items. Expenses, on the other hand, don’t affect your business’s revenue-generating capabilities. You’ll still have to pay for expenses — and in many cases expenses are essential to keeping businesses up and running — but you don’t resell or other turn expenses.
Another difference between items and expenses is that the former supports tracking. If your business operates from multiple locations, you can use items to track specific products or services sold from each location.
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