Students and clients often ask me how to track income and expenses by such categories as product line, department, partner, and customer type. Creating sections in the chart of accounts for each category, results in income statements that are too long and difficult to extract information from. QuickBooks provides an easy solution with classes.
Lets take a look at how an income statement would look if when we use the chart of accounts to categorize income and expenses by “Focus Groups” and “Survey Research”.
Notice that, while we do have income and expenses separately categorized, we would have to do some manual calculations to arrive at gross margin for “Focus Groups” and “Survey Research”.
Now let’s look at the same report if we use QuickBooks classes.
Notice, how we no longer duplicate income and expenses categories by creating separate sections for each product line. We automatically calculate gross margin for each product line and the addition of another product line still allows the report to be concise and easy to read.
You can turn on class tracking by selecting “Edit/Preferences” from the menu bar at the top of your screen, select the company preferences for accounting, and check “Use class tracking”. You can add classes on the fly as you enter transactions or add and edit classes from the “Lists” menu at the top of your screen. Once class tracking is activated your will see a new “class” column appear on your data entry forms.
Note: Class tracking is designed for income and expense tracking. While there is an income statement report by class, there is no balance sheet by class report.
Robert Guild is certified QuickBooks ProAdvisor in Austin, TX who conducts CPE courses for CPAs and individual training and group classes to QuickBooks users. His company, Accounting Insight, maintains a sixteen-station QuickBooks lab, providing hands-on training. You can contact him directly at email@example.com or follow him on twitter at QBPro