Rockel Bookkeeping

Martin County, Florida Bookkeeping Services

Expenses Definition: Understanding Expense

Expenses Definition: Understanding Expense

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There are several types of expense accounts used by small businesses just to get a transaction out of the bank feed. Miscellaneous Expenses, Other Business Expenses, and Ask My Accountant are some of these catch-all accounts. Some of them might have been built right into your Chart of Accounts when you signed up for Quickbooks Online . So why is it better to avoid them?

Most tax-preparers prefer for all the transactions during the tax year to be in a specific category. Some are less important than others – for example, knowing specifically what type of advertising you’ve been doing isn’t as important as knowing what types of insurance you’re paying for. Almost everything is listed out by category when you file your taxes, so this also saves that tax preparer some time (which could save you $$$).

Bookkeepers like me try to avoid having any miscellaneous expenses if possible. This could partly be because we generally love having a place for everything and everything in its place, but it also serves a purpose. We want you to be able to know where every dollar in your business is coming from and where it’s going. This helps you manage your cash flow appropriately and in real-time.

If we’re being honest, it can be tricky to decide what the best option is while you’re sorting out what you’ve spent. Some seem to fall into multiple categories (is this a Software or a Subscriptions expense?), and sometimes it seems like it doesn’t fit into anything that’s available. The best practice for this is to pick the closest option if there’s one that logically fits, or create a new one. While you don’t want to create a new expense account for every new vendor or expense, sometimes there really isn’t a good option available, and your best bet is to create something new.

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