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Reclassifying a Transfer to a Expense in QuickBooks Online

I own a small business and do my own accounting work with QuickBooks Online but I am a 100% novice and am honestly surprised that I haven't made more mistakes than I have. LOL!

When "adding" transactions via "Banking" and my company bank account I accidentally listed something as a transfer, when it should have been an expense. 

 

I have a business credit card whose payment is sucked right out of the bank, vs. paying the credit card bill with the bank's debit card. Because this is technically "transferred" out of the bank account and to the credit card, QB labelled it as a transfer and I "added" it without changing it to an expense. I was just ignorant and didn't realize what I had done. I did a few of the credit card payments that way before realizing what I was doing and starting to add the rest of the credit card payments as expenses. 

So my issue here is that the transfers do not show up in my Profit and Loss with the rest of the "Credit Card Payments" that I accuratelty added. I've been researching this issue and how to resolve it for 2 days and have had no luck finding a solution so now I need to ask!

PLEASE when responding, speak to me like I am a child... because that's how I feel when it comes to navigating QB! Learning curve, for sure!

Thank you so much and I look forward to seeing the responses and getting this figured out. 

 

EDIT - Of course, as SOON as I posted this I managed to figure out how to change the transaction from a transfer to an expense. But unfortunately it has categorized itself as a "credit card credit.." This is throwing my profits and loss ascew. 

Best answer 09-13-2018 12:26 PM

Accepted Solutions
QuickBooks Team

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

Hello there, @Hammerhead.

 

It would be my pleasure to help you reflect this expense properly. When you say that you've synchronized your bank statement, do you mean that you're using Bank Feeds to download transactions from your statement into QuickBooks? When these items are imported, they appear in the For Review tab to be classified to their applicable income and expense accounts.

 

Since QBO suggests a category based on the bank description, it's possible this is what caused the issue when you added the transactions. Reclassify them by following the steps below:

 

  1. From QuickBooks Online, navigate to the Banking tab.
  2. Click the In QuickBooks tab, and scroll down until you see the transaction. Select Undo to bring it back into For Review.
  3. On the For Review tab, click the transaction and classify it with the desired expense account. Select Add to create the expense.

I'll attach a video displaying the process here:

 

 

This allows you to reclassify items that are imported incorrectly through the bank feed with ease. Please don't hesitate to get in touch with me here should you have any additional questions or concerns. Thanks for coming to the Community, wishing you continued success.

QuickBooks Team

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

Hello and welcome to the Community, @Karma_chopel.

 

It would be my pleasure to provide some clarification on the Transfer transaction in QuickBooks Online. In regards to each of your questions:

 

  1. Money movement between bank (asset) or credit card (liability) accounts can be represented by Transfer, Expense, or Deposit transactions. The source account is selected at the top, and the destination account below it.
     
  2. Ultimately, it's a decision of how your business would like to categorize the exchange. The type of transactions used will determine which reports display them. Credit card payments and inter-bank transfers are generally recorded with a Transfer transaction, but other accounts can also be used in case of unique scenarios.
     
  3. The inter-bank account transfer won't display on a Profit & Loss report because there are no income or expense accounts involved. The original poster was more concerned about the label than the purpose. Although the money movement was the same as an Expense or a Transfer, they would have preferred it be an Expense for consistency.
     

We offer detailed guides on handling bank transfers and categorizing downloaded bank transactions that you may also find helpful. Please know you can continue to reach me here with any additional questions or concerns. Thanks again, wishing you a wonderful rest of your day.

25 Comments
ProAdvisor

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

When you pay a credit card electronically with your bank acct. it is not an expense transaction.  It can be listed as a bank  transfer to the credit card acct.

 

Then you list the purchases on the credit card using +expense and use the credit card as the account from.  When the statement arrives, reconcile the credit card and create the payment.  

 

QBO has a learning curve for sure.  But I bet you have done things more “right” than incorrect.   Cat Happy

Community Host

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

Hey @xcftw

 

Welcome to the community. Happy to hear you figured out part of the transfer issue. 

 

@lynda already provided a great explanation, and I wanted to echo her in saying, based on your post, you're going about things the right (considered) way. There's a bit of a learning curve at the beginning, but once you get the hang of it, QBO all comes together quite nicely. 

 

Feel free to check out the official tutorial videos and reach out to us anytime!

Established Member

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

Could you please expand on your explanation.  I am having the same issue.  In both areas it is listed as a transfer and I am unable to change the ref no. type.  It is also affecting my P&L and I did not understand what I needed to do based on your explanation.

 

Thanks!

ProAdvisor

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

Hello @chuckln:

 

if you open the transfer, what accts does the transaction point to? 

 

Next, go to the profit and loss and find the transaction that is showing there.  Click to open that and then click more>and get the transaction history on it.  It is possible you have 2 transactions for this credit card payment?

 

Also, when you reconcile the credit card, is there a transaction that is not cleared from a prior period?  That will also indicate two transactions.  

Established Member

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

The transaction points to the business credit card.  If I look at the transaction journal, each month has a credit (say $500) and debit of $500.  Is this the correct way it should record the transaction?  I do see the credit card purchases in my P&L itemized data when I click on the total (i.e., office supplies, gas, electric...)

ProAdvisor

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

A payment of a credit card should be a check (or transfer) from Bank acct to credit card account.  It is ONE transaction.  You will see a credit to checking and a debit to the credit card if you look at the details listed under "more" transaction journal. 

 

Lynda

Experienced Member

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

I have a similar situation.

 

My company car is financed by a Credit Union.  Because I don't want to send a bill payment from my business checking (a different bank) directly to the credit union loan account (it's a $15/month extra fee), I sent the payment to the credit union savings account, and made the payment internally at the credit union.

 

However, when I synchronized my bank statement, it was picked up by QBO as a bank (Owners Equity) transfer, rather than an expense.

 

How can I change it to reflect its actual intent?

QuickBooks Team

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

Hello there, @Hammerhead.

 

It would be my pleasure to help you reflect this expense properly. When you say that you've synchronized your bank statement, do you mean that you're using Bank Feeds to download transactions from your statement into QuickBooks? When these items are imported, they appear in the For Review tab to be classified to their applicable income and expense accounts.

 

Since QBO suggests a category based on the bank description, it's possible this is what caused the issue when you added the transactions. Reclassify them by following the steps below:

 

  1. From QuickBooks Online, navigate to the Banking tab.
  2. Click the In QuickBooks tab, and scroll down until you see the transaction. Select Undo to bring it back into For Review.
  3. On the For Review tab, click the transaction and classify it with the desired expense account. Select Add to create the expense.

I'll attach a video displaying the process here:

 

 

This allows you to reclassify items that are imported incorrectly through the bank feed with ease. Please don't hesitate to get in touch with me here should you have any additional questions or concerns. Thanks for coming to the Community, wishing you continued success.

Established Member

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

I think I've got it.  Thank you!

QuickBooks Team

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

I'm glad you were able to get that transfer straightened out, @chuckln.

 

The Community will always be here for all of your QuickBooks Needs. Be sure to let me know if there's anything else I can do for you. Thanks for reaching out, have a wonderful rest of your day.

Established Member

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

I am really confused. People are asking why an expense is booked as transfer. My questions are:

1. How can a transaction between two balance sheet items ever be an expense ?

2. Rather why did QB even have an option of classifying the inter-bank transaction as an expense?

3. When one inter-bank transfer transaction was classified as an expense, it did not reflect in QB in P/L. So why do people ask about it ? Also why even QB gave an option ??

Established Member

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

1. How can a transaction between two balance sheet items ever be an expense ?

2. Rather why did QB even have an option of classifying the inter-bank transaction as an expense?

3. When one inter-bank transfer transaction was classified as an expense, it did not reflect in QB in P/L. So why do people ask about it ? Also why even QB gave an option ??

QuickBooks Team

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

Hello and welcome to the Community, @Karma_chopel.

 

It would be my pleasure to provide some clarification on the Transfer transaction in QuickBooks Online. In regards to each of your questions:

 

  1. Money movement between bank (asset) or credit card (liability) accounts can be represented by Transfer, Expense, or Deposit transactions. The source account is selected at the top, and the destination account below it.
     
  2. Ultimately, it's a decision of how your business would like to categorize the exchange. The type of transactions used will determine which reports display them. Credit card payments and inter-bank transfers are generally recorded with a Transfer transaction, but other accounts can also be used in case of unique scenarios.
     
  3. The inter-bank account transfer won't display on a Profit & Loss report because there are no income or expense accounts involved. The original poster was more concerned about the label than the purpose. Although the money movement was the same as an Expense or a Transfer, they would have preferred it be an Expense for consistency.
     

We offer detailed guides on handling bank transfers and categorizing downloaded bank transactions that you may also find helpful. Please know you can continue to reach me here with any additional questions or concerns. Thanks again, wishing you a wonderful rest of your day.

Established Member

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

I am having the same issue. I need to change a transfer to an expense. I did as you suggested and looked "In QuickBooks" but the transaction is not listed there but is listed elsewhere. How can I change to expense without deleting it?

ProAdvisor

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

@lingoinspection:  You said "the transaction is not listed there" Where is it listed? Do you see it in the bank account?

Established Member

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

Yes it is listed in the bank account register but when I click on it I am not seeing a way to edit it to change to "ADD"

ProAdvisor

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

Yes, that is correct.  This is why I educate my team NOT to use transfers.   Use check or deposit because of this limitation.  You would have to delete the transfer and re-reconcile the replacement expense transaction.  Happily, I have a video and a blog that steps you thru fixing that. 

 

Here is the corresponding blog post link for the written steps. So, yes, you will mess up your beginning balance when you delete the transfer transaction, but you can easily replace that with the new expense transaction and find it and quickly click and re-reconcile that one transaction and be back balanced again!

 

I hope this helps fix your issue.   If you need more help, feel free to keep posting!  Smiley Happy

 

Lynda 

Established Member

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

Thank you so much for your help!  Have a blessed day!!

ProAdvisor

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

You too! Glad this helped you. Smiley Happy
Established Member

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

OK this is scary. I have a few other Transfers (that I now know I will NOT use this function again) that I need to delete as well. Before I do, I wanted to try to fix this one transfer I am referring to. I deleted the transaction. I looked on the gear, reconcile page and it asks to list a date and ending balance. I went with ending balance in August but when the list came up, that transaction wasn't there and according to my bank statement, it was deposited on 04/30/18. I am real leery of really messing things up right now!

Community Host

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

Hey @lingoinspection,

 

Whoa, so once you reclassified the original transfer, it appeared on a reconciliation and it was dated 4/30/18? Was this the time when you originally made the deposit?

 

You deleted the transaction in QuickBooks, so it is now gone and shouldn't come up on a reconciliation. Maybe I am misreading your sentence, but were you trying to delete and remove the transaction?

ProAdvisor

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

@JamesOng:   She reached out to me privately and I think she is all set now.  I told her to "practice" on the demo file before she does more until she is comfortable with deleting transfers. 

 

Remember, if you delete, you can always find what you deleted in the audit log.  And to find the newly reinstated transaction, go to the spyglass (find) button to find your last transaction entered.

 

Lynda  Smiley Happy

Community Host

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

@lynda Test Drive for the win!

Established Member

Re: Reclassifying a Transfer to a Expense in QuickBooks Online

the problem is the when you click the category arrow, Only equity accounts appear and it does not give me any any expense options and if this is the case how can it be changed to an expense type

Neil