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Level 2

Categorizing expenses correctly for digital-focused small business

Hello,

 

I represent a small business that is building a digital application. We have expenses for our office, software tools, supplies...so basically the full gamit. I am helping now with reorganizing how our expenses are recorded with Quickbooks, but there is some confusion on how we should categorize expenses on a consistent basis. I have looked for a while for any decent sources that could advise us on all expense categories (what should go where) but haven't seen anything good. I'm hoping that someone has a resource they would be willing to share!

 

Solved
Best answer 03-05-2018

Best Answers
Highlighted
Level 2

Categorizing expenses correctly for digital-focused small business

@Sangeethmathew and @Rustler,

Thank you for the responses, the information does help! I think what we have been looking for is more of a dedicated guidline source we can use to be more confident in our categorization instead of having our accountant go line for line on expense organization to ensure accuracy, but we have not found anything this specific online yet. It looks like at this time, I will use the information you both provided and create our own system guidelines.

 

Thanks again.

View solution in original post

5 Comments
Highlighted
Level 6

Categorizing expenses correctly for digital-focused small business

 

Hi,

Welcome to the community. We shall be glad to assist you. Please let us know the edition and version of QuickBooks you are using currently.

Highlighted
Level 2

Categorizing expenses correctly for digital-focused small business

Hello,

 

We are using edition "Quickbooks Plus" and version 3.3.7-174.

Highlighted
Level 6

Categorizing expenses correctly for digital-focused small business

Hi BrendanT,

In QBO transactions can be broadly categorised in a simple manner -

[1] Vendor  

[2] Customers

[3] Employees

These are all transacted trough -

[1] Bank

[2] Cash

All of them come under some or other Taxation regimens

[1] IRS

[2] State 

[3] Town or Municipality

 

I could elaborate further if you need me to. Please let me know and I will be only happy to do so. But you will also need to give me more specifics. :smileyhappy:

 

Highlighted
Level 15

Categorizing expenses correctly for digital-focused small business

@BrendanT

 

If you are building a digital application, that sounds like programming to me. The costs you spend for that would be posted to R&D expense (R&D costs no longer have to be amortized, though you can elect to do so if you wish - that would be a tax accountants call IMO). If programming is what you are doing, there is very little R&D expense to worry about. If you are paying an outside programmer to work with you on the program, that would be R&D expense and that programmer/expense would need to be linked to the 1099-misc year end form.


If you have employees, their salary is already an expense, I really see no need to move payroll expense to R&D expense, face it whether they work on the new program, or sweep the office they are still getting paid.


Other expenditures should be pretty obvious, rent exp, utility exp, office supplies exp, etc.. Basically it all about being consistent in how you post the expense, use the same exp account for the same type of thing all the time.


Is there a specific expense you are concerned about?

Highlighted
Level 2

Categorizing expenses correctly for digital-focused small business

@Sangeethmathew and @Rustler,

Thank you for the responses, the information does help! I think what we have been looking for is more of a dedicated guidline source we can use to be more confident in our categorization instead of having our accountant go line for line on expense organization to ensure accuracy, but we have not found anything this specific online yet. It looks like at this time, I will use the information you both provided and create our own system guidelines.

 

Thanks again.

View solution in original post

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