 QuickBooks Online 2023 Home Office Expense Tracking Method 3 Track Business and Personal Expenses with Class Tracking Get ready to earn the skills needed to boost your bank books on up with QuickBooks Online 2023. Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. Here we are in our QuickBooks Online test company file using the account view as opposed to the business view you can toggle between the two views by going to the cog up top and switching the view down below. We're going to duplicate some tabs to put reports in like we do every time right click in the tab up top to duplicate it. We're going to right click on that duplicated tab to duplicate it again back to the tab to the middle reports on the left. We want to open up the favorite the balance sheet tab to the right as that is thinking reports on the left and this time the P to the L the profit to the loss to the income statement closing the hamburger scrolling up changing the range. Let's start off with 010123 to 123123 and run that and then go to the tab to the middle same thing closing the hamburger range to the same 010123 tap 123123 tab and run it to refresh it. So we're mainly focused over here on the income statement so tapping back on over to the income statement we're looking at methods we can use for that home office tracking in prior presentations we thought about how we can use the class tracking to break out and make adjustments so just to if I turn on the class tracking that we did in the prior presentation by hitting the drop down and break this out by classes it shows us this nice adjusting column so that I can then only assign a class if I so choose using this method to the items when I need an adjustment between taxes and the books such as the auto adjustment we looked at and the home office this gets us that nice worksheet that oftentimes tax professionals will do by exporting this information to excel and then creating it but if you can do it this nice little adjusting column entry worksheet and quick books that's kind of neat because then you can tie in the net income on the schedule seed to what's in your books in the event that there's an audit and have that nice reconciliation now we want to think about a method well where we could say hey look if I have this class tracking thing that we're going to be using I could then just allocate everything between business and personal so and that way if you're a sole proprietor business that's only reporting on a schedule C doesn't necessarily in other words need to report a balance sheet on your tax return then you might use one quick books file to help you break out both your personal and business which can help you with your budgeting and whatnot and the ease of transaction recording because you can use the bank fees to do that oftentimes bookkeepers don't like that but it can work for a small business and then you could break everything out using your class tracking remember that if you do so you have to have class tracking which means that you need pro plus or above if you don't have that you might be able to use a similar method with the tags although it's not quite as nice and we've talked about tags in a prior course or section if you want to dive into a similar method you might be able to use with tags which might be a little bit cheaper now if we do this we can imagine every transaction then we're going to break out between business and personal so we get an income statement for our business that we can tie into the schedule C however there's still going to be some things on our business side just as if we had the whole quick books file that was just for business where we had going to have those tax adjustments now for the home office we might be able to do do the data input as we go to properly allocate between business and personal which is great but you still might have like the auto which we had on the mileage method where there's going to be a difference no matter what we do between our business books and the tax books because we're using a different method as opposed to actual expenses actual cash being paid and so we can try to think can I still have this adjusting column we might be able to use subclasses to still kind of have this adjustment type of column so that's the end goal we'll think about this time so let's go to the tab to the left to try to put this together if you have your class tracking we turned on the class tracking just as a reminder in the cog up top you go to your accounting and taxes then advanced on the left hand side and we're going to go into the classes or the categories and we turned on our class tracking now with this method we're going to assign a class to every transaction that we have and if we forget to assign a class to the transaction that's okay it's not like a big deal because that transaction will then show up on our income statement as not specified for a class under the class tracking report and we can then just drill down on it and properly assign the class so that's a great little internal control that it gives us but we might also want to take this off to say hey look if I don't assign a class warn me that I need to assign a class we've got this ticked on to go it's going to assign to every transaction each row in the transaction so we could have multiple classes per transaction if there's multiple different line items going to different classes so I'm going to say save it and done it save it and done it and then as we enter the data into our system we will of course assign it to a class so if we imagined for example that we say that our business and home use is being broken out by that 30 business then those expenses that might be rent it might be the utility bill and it might be if you own the home the mortgage and the property taxes we're going to now be breaking out with that 30 percent breakout so we saw it within the bank feeds last time this time i'll i'll mimic the bank feeds because we saw how we can make the rules and whatnot in the bank feeds so we'll do that similar thing but now just use the expense form and so i'm going to put the expense form up top if you do this with the bank feeds you can as we saw before you can see the classes in the bank feeds and you can use that allocation percent method to automate this process if you so choose with the use of the bank feeds but let's just do it with the expense forms for now we're going to say that we have the similar expenses gas company for example let's do this one in 2025 let's say 010125 and then i'm going to say it's the gas company and we'll say it goes to home office utilities so it's memorizing the transaction that looks good 750 okay 750 but we're going to be breaking out between the two classes so i'm going to put this to business and personal this time so if i hit the drop down i already have a business one set up i just put b for business to make it like a short named class so if you don't have it set up you can add one and just put b for business and i'm going to put p for personal for the class so i'm going to say it's b for business boom and then i'm also going to have utilities same account down here utilities sub account and let's say this was let's break this 750 down to like let's just make it like 200 oh i have to do the 30 let's say it was 750 was the whole bill and pull out the trustee calculator if we could okay trustee calculator we're going to say 750 times 0.3 business portion is going to be 225 on the business side and then the other side 750 times the 0.7 is going to be the 525 525 and that's on the personal side so notice when you use this type of method it's useful to have a class assigned to each one you could just say i'm just going to have the business stuff broken out in business and then everything else will be a non classified for example however you don't get that nice double check that you have recorded the proper classes if you kind of mess something up that way so i think this is the way to go typically so if i save and close this just to check it out as we go and we go to our profit and loss i'm going to change the range to the one we're working in 010125 to 123125 and run it so now we've got our breakout between business and personal and i scroll down and there's the breakout notice that i entered stuff into this this report or this quick books file before this and of course i wasn't assigning classes before this and that's why i have this other category of not specified now if i had assigned a class to everything i wouldn't have this other category of not specified i would only have b and p and then the total this not specified is a great internal control because then if i if i was trying to assign a class to everything and i didn't i can drill down on each of these line items and then drill down to the source document and then assign the proper class that i would need to assign to each of these items so so that's a great that's why we want to assign a class to everything typically with this method so do you want to leave without saving i'm going to say i do i really do want to leave without saving just get me out of here poor for four i want to go get me out of this hotel california let's go back to the first tab and we'll do it again plus button up top expense form and let's do another one ultra bass uh let's say this is going to the the uh electric company electric company got to pay them to if you want those lights on you've got to pay that bill man mr edison wants his money so we're going to go down it was 550 before and so let's do our same thing 550 times 0.3 boom if you are doing this in the bank feeds then you can do that percentage breakout and automate this whole process as it goes to the bank feeds as we saw with the prior method but i'm just going to do the manual method here because we've seen that before this is also going to the utilities utilities and by the way if we enter this again as well it would probably memorize the transaction for this breakout so you can kind of see it broken out that way but it doesn't have that nice percentage breakout such as the bank feed rules do but uh then i forgot what the what the full amount was what was i dealing with what was take let's try to remember this this was this was uh 165 divided by 0.3 uh that's not right 165 divided by 0.3 it's 550 okay that's the original amount i think and now we multiply it times 0.7 which is the 385 boom shaka laka and if i add that to the 165 we're at the 550 mui b to the n and we'll put a p next to it and then let's save and new it this time save and new and some of those other expenses we talked about before is like the tax collector property taxes so tax what do i call property tax collector uh i called it big gov you gotta pay big gov the property taxes so big gov uh on seven okay big gov wants its money or else they'll knock your door right down here we go we're gonna say this is gonna be uh 6000 times 0.3 and that's gonna be 180 and then i'll just put the amount first this time so i don't forget minus 6000 this time to calculate it 4200 let's say and home this is property taxes property taxes t taxes okay and so and this assign this to class to now we would only have this one of course if we owned the home as opposed to rent in the home but just for an example and we can say save and new it once again it and then let's do the other one which was uh the other common one is you you would have the mortgage insurance right so you gotta pay the bank i just called the bank big gov and the big bank they're kind of becoming one and the same it seems like which is a little scary that's whatever just do the accounting just do the accounting okay we don't need to hear the commentary this is going to be going down by 1500 that's on the balance sheet you might not need a class for the balance sheet side but then when you're breaking out the interest side of things then uh we would need to be breaking it out possibly between the business and the professionals so now we've got the interest so if if the interest portion so if we pay the full amount according to this 1500 plus the 240 plus the 560 we would have to pay 2300 we're saying according to the amortization schedule which hopefully we if we have one we can go according to that we can use other methods to track the loans remembering that loans have their own kind of issue with tracking them that we've talked about in prior sections and courses but here we're focused on the interest income side of things that we would have to be breaking out between the deductible on the schedule c possibly and the amount that possibly could still be deductible on the schedule a itemized deduction so the interest we said was 240 plus the 560 times 0.3 so there's the 240 this is going to go to the business side of things and then on the personal okay so that's good let's save and close it this time save it close it and this transaction has one or more missing fields that notice it gave me a thingy here because i didn't assign a field to this one and the reason i didn't is because it's going to a balance sheet account and i'm not so concerned with breaking out the class tracking on the balance sheet side i want the income statement that's the form necessary to fill out the schedule c so i'm gonna say okay no problem thank you for the telling me that so then if i go on over to my here and i run it again now we've got our breakout of this information nicely broken out already down here and if you were using this method then anything that's not specified we would normally go back into each of these transactions and properly specify it to business or personal and then i would hopefully only have two columns after i had fixed that issue and then of course the business income statement would be the one that we would be using to help populate our schedule c however we still have the full amount here for these expenses related to the home office which might be necessary for the tax preparer to put the full amount of mortgage interest in and the property taxes and the utilities and the rent or whatever so that they can then use the tax software to break out using the percentage on the tax software using the square footage or something to get to where we stand right here so so this will give us a nice tool to to see the business versus personal as we put it into the place it'll give us the information that we can provide the tax professional so they can see the total amount and then hopefully after they put it in they should come to the same result that we got on the business side of things it also allows us to kind of have this adjusting column for the business versus personal side however now you might be thinking well what about some of these other tax adjustments here that i might still have meaning this is my basically my business income uh net income bottom line i still might have some tax adjustments from here under this method such as the auto uh the auto stuff for example that i would put on on the books at the actual cost which i would have to break out so could i still use another category possibly so that i can i can i can make my my adjustments for taxes and for that we might be able to use sub accounts so if i go back on over here and i say okay let's let's go to my cog up top and i'm going to go into my lists let's go to my lists and then i'm going to go into my classes and i'm going to make another tax adjustment one but i'm going to this time put it as a sub account of b here so i'm going to say let's go to a new one tax i'm going to say tax adjustment number two account but it's going to be a sub account i made a number two so it's different than the other one because i don't want to reassign that other one because we put it in all those other practice problems that we might want to take a look at later so i'm going to make it a sub account of b there we have it so now we've got that sub account and if we had a situation such as the auto let's imagine the auto situation again where we had like actual expenses i'm going to make a expense here and say we paid for gas the gas station we paid the gas station uh let's just say let's just say for the full year like like a thousand dollars or something ten thousand that's a lot of gas we don't need that much gas we don't need that much gas do we and we're going to put that into our breakout of just business right we're just going to put that under business because i'm not trying to break it out between business and personal even though i would need to break it out between business and personal uh in some way shape or form because i'm going to do that with the mileage method as opposed to the actual expense method so so i mean you could still come up with your own method that wouldn't be tax related to break out between business and personal but if you're using the mileage method then that's how you're going to do it for taxes so i'm going to say if i save and close that then on over here on my report if i run it again there's my there's my gas now what if the mileage method worked out to be better and i actually had more what let's say it was one thousand three hundred for the mileage method when i calculated the mileage method well then i can i would like to have a nice little tax worksheet adjustment in here with that tax column again basically in one place this would be my net income for my books and then i could might maybe i could make a tax adjustment column here like we did before but just like for the business stuff and so what i need to do is increase the gas by like like 200 let's say so i'm going to go back on over and i can say new and i'm going to make it a journal entry a journal entry as of the end of the year this would typically be 12 3125 and we're going to put it into the auto auto but it's going to be a tax adjustment account now we did it in two steps last time decreasing what we had and then increasing what was on the books now we'll just put the difference right we're going to increase the difference of two hundred dollars so description would be tax adj for auto uh for for mileage method mileage method i know we're not doing the mileage method auto stuff right now but i'm just trying to see how this this business and personal method could also allow us to do these adjusting entries you get what i'm doing here i think so auto tax adjustment and this is going to be 200 on the other side and then let's see if i can get the classes going the right way so i'm going to say this one is going to be just b and this one is going to be the subclass with the tax adjustment so it's just going to go in and out of this one line item again but we're going to be pulling it out by column now for our adjusting entry so let's say save and close and say this transaction has one or more missing class fields it does not just save it man okay it had that added column i think was whatever run it let's see what k posso aorta and so now you still get this nice tax worksheet down here i put it into its own account we could have put it into the gas account or whatever but we put it up top and within b we have now b and in the sub account to get to the total for the business and then the personal is its own thing and then the not specified would be zero if we went through and re-specified everything to get the total for the business and the personal so we're focused on these three columns which still act like as a little worksheet for us to say hey look this amount right here is the total business expenses that we reported the bottom line i mean that we we had before adjusting for taxes that that should tie out and it goes in and out because this is back down to zero this is the adjustment that we had with regards to the auto expenses which actually resulted in the auto expenses going up because we're assuming the mileage method is greater than in this case the actual items written off by the 200 so this in theory would be what would be reported on our tax returns we get that nice reconciliation in the event of an audit happening we can say i was able to break out stuff between business and personal as we go and still have that nice reconciliation column within the business side of things for those things which i couldn't break out using the business versus personal class tracking thing and i can have the reconciliation saying this is what is in my books this is what's on the bottom line of a tax return the schedule c for net income and here is the adjustment mr or mrs auditor there you go i did it right so get on my face because i did it right here it is my reconciliation now they have a bunch more iris auditors these days i don't know if you know this they've been hiring iris auditors i think they're arming them even and stuff so i'm not even sure that but anyways that's a different story so that's that we might take a look at another method then we could say why don't we put this uh personal side as a draw if we're looking at the business books and we'll take a look at that possibly in a future presentation