By Amanda Karen | CrunchSum
We have discussed what items are and why they are important, what two-sided items are and when to use them, and how using items benefits reporting. We will now continue our previous example and look at what your options are for using items and expenses when recording a transaction in QuickBooks.
The use of items are only required on sales forms. When you enter a bill, write a check, or create a credit card form, you can choose to record the transaction as an item on the Items tab or as an expense on the Expenses tab. If you use the Expenses tab, the transaction will be recorded straight to the chart of accounts. If you track expenses without using items, you will lose out on valuable reports that show cost, sales, and profit data for a given item or customer:job.
We will now look at two different scenarios.
Scenario 1: Recording and Tracking Expenses as Items
When entering the bill to record and track the cost for catering services owed to CookShip Catering, you input the amount on the Items tab.
When creating a new invoice to record and track the sales revenue that you will receive from Lucy and Carl Nanos, the outstanding billable time and costs that were just entered above, are applied from the Items tab.
In referencing the Job Profitability report below, we see that this transaction appears as expected. The cost, revenue, and profit associated with this item are displayed.
Scenario 2: Recording and Tracking Expenses as Expenses
When entering the bill to record and track the cost you owe to CookShip Catering for the catering services, you input the amount on the Expenses tab.
When creating a new invoice to record and track the sales revenue that you will receive from Lucy and Carl Nanos, the outstanding billable time and costs from the Expenses tab are applied.
The Job Profitability report below reports this transaction under No Item because you recorded the expense on the Expenses tab.
As this example demonstrates, when you fail to use items to record expense transactions you lose out on valuable reporting information. How you record your expenses in QuickBooks is ultimately your decision. How much detail do you want your reports to provide you?
How do you record expenses in QuickBooks? Leave a comment below or send an email to firstname.lastname@example.org.
CrunchSum provides web-based bookkeeping and QuickBooks support services to web and technology companies.