How to Record and Categorize Expenses in QuickBooks Online

by | Sep 19, 2025 | Accounting, QuickBooks Tutorial

A 2025 step‑by‑step guide to the Expenses center in QuickBooks Online — record purchases, attach receipts, and categorize spending with confidence.

Overview

The Expenses center in QuickBooks Online (QBO) centralizes vendor activity, out‑of‑pocket purchases, card swipes, reimbursements, and bill payments. You can add transactions manually, import and categorize bank/credit‑card feeds, attach source documents, and analyze spending by vendor, category, class, or project.

This guide focuses on the U.S. version of QBO and uses the current 2025 navigation (labels may appear as Bookkeeping → Transactions → Expenses or Banking/Bank transactions depending on your view).

Before you start: chart of accounts & settings

Set up expense categories (Chart of Accounts)

  1. Select ⚙️ Settings → Chart of accounts.
  2. Click New, choose Account type = Expenses (or Cost of goods sold for purchase‑related costs), select the most accurate Detail type, name it clearly (e.g., “Office supplies,” “Software subscriptions”).
  3. Optionally mark as sub‑account for cleaner reports (e.g., Travel ► Airfare, Lodging, Meals).

Turn on helpful preferences

  • Bills and expenses: enable Show Items table on expense and purchase forms, Track expenses and items by customer, and Make expenses and items billable if you rebill clients.
  • Advanced: enable Class and Location tracking if you need departmental or site‑based reporting.
  • Attachments: plan to attach receipts to improve audit readiness.

Record an expense (manually)

  1. Go to + New → Expense (or Check for printed checks, Credit card credit for returns).
  2. Enter Payee (vendor) and select the Payment account used (e.g., Checking, Corporate Card, Petty Cash).
  3. Set the Payment date, Payment method, and optionally a Reference no.
  4. In the Category details table:
    • Select the correct Category from your chart of accounts.
    • Add a clear Description for context (e.g., “Monthly SaaS plan”).
    • Enter Amount; use additional lines for separate categories.
    • (Optional) assign Customer/Project, mark Billable, and choose Class and Location.
  5. Add Attachments (drag‑and‑drop or use the upload link).
  6. Click Save and close (or Save and new to continue).

Use Items (Products & Services) when you need quantity, rate, SKU, or to track COGS/inventory impact. Use Category details for typical overheads (rent, utilities, software).

Attach receipts (web, mobile, and by email)

Web: Receipts workspace

  1. Open Bookkeeping → Transactions → Receipts (or Banking → Receipts).
  2. Click Upload receipts and drop PDFs/JPG/PNG files. QBO scans vendor, date, and amount.
  3. Review the extracted details, choose the proper Category, then Confirm to create an expense or match it to an existing one.

Mobile app: Snap and auto‑create

  1. Open the QBO mobile app → tap Snap receipt or the camera icon.
  2. Photograph the receipt, crop if needed, and submit.
  3. Review and approve the suggested details; the expense is created and the image is attached.

Email‑in: Forward receipts

  1. In Receipts, locate your unique forwarding address (ending in @qbodocs.com), then authorize the sender’s email.
  2. Forward vendor emails or send scanned receipts to that address.
  3. Open the For review tab to confirm, categorize, and add to books.

Categorize downloaded bank and credit‑card transactions

Most day‑to‑day expenses arrive via bank feeds. The goal is to review, categorize, and add them efficiently without creating duplicates.

  1. Go to Bookkeeping → Transactions → Bank transactions (or Banking).
  2. Select the account tile (e.g., Corporate Visa) and open the For review tab.
  3. For each line:
    • If QBO suggests a category, verify and click Confirm.
    • If blank or incorrect, pick the right Category (create a new one with Add new if needed), set Payee, add Memo, and assign Class/Location/Customer as needed. Then Add.
    • If a likely match exists (e.g., you already entered an Expense, Check, or Bill payment), choose Match and review details.
Tip: Pending card authorizations don’t download. Only posted transactions appear. If you see duplicates, use Exclude on the extra feed line; excluded items won’t post or re‑download.

Create bank rules to auto‑categorize

Rules reduce repetitive work and standardize categorization.

  1. Open the Bank transactions page → click Rules → New rule.
  2. Name the rule (e.g., “Lyft → Travel:Ground”). Choose Money out, select the relevant Bank/Credit accounts, and set conditions (e.g., Description contains “LYFT”).
  3. Set the Payee, Category, Class/Location, mark as Billable if appropriate, and choose whether to Automatically confirm.
  4. Save. New matching downloads will follow the rule, speeding up reviews.

Split amounts, use classes/locations, and bill customers

Split transactions

  1. Open a downloaded line → choose Split.
  2. Assign portions to multiple Categories (e.g., a hotel folio split to Lodging, Parking, and Meals).
  3. Ensure the split totals equal the transaction amount, then apply and accept.

Classes, locations, and billable

  • Class = departments or cost centers; Location = sites or regions.
  • For client‑reimbursable costs, check Billable and assign a Customer/Project. Later, add these costs to the client’s invoice from the right‑hand panel in the invoice form.

Edit or delete expenses

Edit

  1. Go to Expenses, locate the transaction, and click View/Edit.
  2. Adjust fields (Payee, Category, Amount, Class/Location, Customer, Billable, Memo) and Save.

Delete (use sparingly)

  1. From the Expenses list, use the Action menu → Delete → confirm.
  2. Deleted records remain in the Audit log. Prefer Void when you need the timeline but a zero amount.

Avoid deleting transactions that were already reconciled or linked to bills, checks, or payments; removing them can break reconciliations and reports.

Reports to monitor spending

Review by category & vendor

  • Profit and Loss (by month, by class, or by location).
  • Expenses by Vendor Summary / Transaction Detail by Vendor.
  • Purchases by Product/Service Detail (if using items).

Operational checks

  • Unbilled Charges to capture billable expenses not yet invoiced.
  • Vendor Balance Detail to monitor unpaid bills.
  • Recurring Transactions list to verify automated entries.

Real‑world scenarios

1) U.S. small business owner reconciling monthly bank transactions

  1. Update feeds; work the For review tab until it’s empty (Confirm, Add, Match, or Exclude).
  2. Run Reconcile for each bank and card account; resolve any differences before month‑end reporting.
  3. Download the Reconciliation report and archive it with statements and receipt attachments.

2) Travel agency creating recurring card purchases for tour operations

  1. Create Rules for airlines, ride‑shares, and booking portals (e.g., auto‑assign Travel:Airfare, set Payee, and Class = “Tour Ops”).
  2. Mark vendor‑specific costs as Billable when rebilling to clients; invoice from Unbilled charges.
  3. Use Projects to track trip profitability across invoices, bills, and expenses.

3) Wellness clinic tracking expenses across service categories

  1. Design a clear chart (e.g., Medical Supplies, Lab Fees, Software, Rent; Classes for “Chiropractic,” “PT,” “Massage”).
  2. Require staff to snap receipts and include memo details (patient‑safe descriptions, no PHI).
  3. Schedule monthly reviews of P&L by Class and Unbilled Charges.

Common mistakes to avoid

  • Misclassifying purchases (e.g., capital assets booked to expenses). Use a Fixed Asset account for equipment with multi‑year life; consult your accountant for capitalization thresholds.
  • Creating duplicates by entering a manual expense and also adding the downloaded feed line instead of matching. Use Match when appropriate.
  • Deleting reconciled transactions. Prefer edits or voids; otherwise you’ll unbalance prior reconciliations.
  • Using personal cards for business. If it happens, record as an Owner Draw or Employee Reimbursement to keep books accurate.
  • Forgetting billable flags. Unbilled costs hurt project margins; check the Unbilled Charges report.
  • Over‑granular categories. Too many accounts confuse reporting. Aim for a focused list with sub‑accounts only when they answer a business question.

Helpful tips & best practices

  • Standardize memos: adopt a memo format like “Purpose • Who • Vendor • Context” (e.g., “Team offsite • Ops • Marriott • Lodging”).
  • Leverage recurring transactions for rent, software subscriptions, and utilities to reduce manual effort.
  • Tag outliers with Tags (e.g., “CapEx‑review”) so unusual charges surface quickly in Tag reports.
  • Close the month with a checklist: feeds cleared, receipts attached, bank accounts reconciled, P&L reviewed, cash flow checked.
  • Use Projects for job costing and profitability by client/job.
  • Restrict access with roles and the Close the books password to prevent accidental changes to closed periods.

Compliance & document retention (U.S.)

  • Keep receipts and supporting documents for at least three years after the later of the return due date or filing date. Many accountants recommend seven years for safety, especially for records that affect basis or capital assets.
  • Separate business and personal spending. For personal charges on business cards, categorize to Owner Draw or Employee Advance/Reimbursement instead of an expense category.
  • Sales tax (if applicable): configure the Sales Tax center before recording taxable purchases or billable items.
  • Privacy: receipt images may include sensitive data—limit access and avoid storing unnecessary personal information.

This guide is educational and not legal, tax, or accounting advice. Consult a CPA or tax professional for your specific situation.

FAQ

What’s the fastest way to process lots of card charges?
Use bank feeds with well‑tuned Rules. Confirm, not add manually, when a transaction matches an existing entry. Work the For review tab to zero weekly.
Should I use Category lines or Items?
Use Category details for overhead (rent, utilities, software). Use Items when you need quantities, rates, SKUs, or to impact inventory/COGS.
How do I record a personal purchase accidentally made on the business card?
Create an Expense to an equity account such as Owner’s Draw (sole proprietor) or Due from Employee for reimbursement, not a business expense category.
How do I categorize a refund from a vendor?
Use Credit card credit for card refunds or a Vendor credit for bill‑based workflows, then match to the bank download.
Can I change categories later?
Yes, but changing historical categorization can affect reports and taxes. Make changes before period close; for prior years, consult your accountant.