Accounts payable is money a company owes to a creditor.
Advertising expenses relate to any money spent on promoting the company through advertising. This can relate to traditional and web-based advertising.
Anything relating to vehicles, like gasoline bought on a business trip or a set of new tires for a company truck.
Bank/ATM/Credit Card Fee
This relates to any fee or charge issued by a banking institution or credit card company, like an ATM fee.
Content production includes written, visual, and video content.
The contractors category is broken up even further into domestic, international, and other.
Cost of Goods Sold
Costs of goods sold relate to direct costs attributable to the production of the goods sold by a company.
Deposit assets include security deposits paid to your office’s property owner.
Entertainment relates to employee outings or entertaining clients. According to the IRS, entertainment deductions must pass these two tests:
- Directly-Related Test
- The main purpose of the entertainment activity is the conduct of business, business was actually conducted during the activity, and the taxpayer had more than a general expectation of getting income or some other specific business benefit at some future time.
- Associated Test
- The entertainment was associated with the active conduct of the taxpayer’s trade or business and occurred directly before or after a substantial business discussion.
Equipment assets include machinery, tools, vehicles, or any other tangible asset that you can use to create and sell your product or service.
Exactly as it sounds, furniture assets relate to chairs, tables, desks, and any other office furnishings your business possesses.
Buying snacks, chewing gum, or fresh fruit for the office? Categorize it under groceries.
Any business-related insurance expense should be categorized here.
Intangible assets are not physical in nature. Intellectual property like copyrights, goodwill, trade names, and patents would be categorized this way.
Raw materials as well as completely finished unsold goods are categorized as inventory assets.
Any transactions categorized as “legal” should be directly related to payments issued to law firms for legal services.
Office expenses relate to things that are bought for the purpose of office upkeep, like new carpeting or paint. This category can be broken down further to include office supplies, which include tangible, everyday supplies like printer paper, pencils, and toilet paper.
Any business-related expense that doesn’t fit in another category should be categorized here.
Payment Processing Fee
Any fee that you’re charged when you pay a bill online or over the phone should be categorized as a payment processing fee.
Any expenses relating to paying employees need to be categorized as “payroll.”
This category can be tricky, so follow the IRS’ guidelines below:
Categorize a transaction as a “Personal expense” when:
- You would include the money used to pay personal expenses in your business income when your business earned it.
- You would not write off these expenses as business expenses because they are not ordinary and necessary costs of carrying on your trade or business.
Also, keep in mind:
- Personal, living, or family expenses are generally not deductible.
- It is a good idea to keep separate business and personal accounts as this makes it easier to keep records.
Paying an accountant, architect, or construction company are just a few examples of the transactions that can be categorized as “professional services.”
Refunds you issue to clients or customers should be categorized as “refund.”
This involves business-related rent payments.
Any business transaction relating to restaurants and dining, like taking a potential client out for lunch or taking your employees out for pizza. Keep in mind this is an easy place to mix personal transactions with business transactions, so take caution that you only categorize restaurant transactions that are directly related to your business.
Money spent paying federal, state, or city taxes should be correctly categorized as “taxes.”
Trips you take for business purposes are tax deductible. Also, meals you eat while traveling can be classified here as well.
If no category is set, the transaction will be uncategorized. These will need to be categorized at the end of the month.
Electric bills, gas bills, and the like all get categorized as utilities.
Web services include wireless internet for your office or paying for cloud-based server space.