 QuickBooks Online 2023 Class Tracking Get ready to earn the skills needed to boost your bank books on up with QuickBooks Online 2023. Here we are in our QuickBooks Online Test Company file in the Accountant view. As opposed to the Business view, you can toggle between the two views by going to the cog up top, switch the view down below. Duplicating some tabs to put reports in like we do every time. Right-click on the tab up top to duplicate it. Right-click on the tab up top again to duplicate it again. Let's go back to the tab to the middle. Reports on the left. And we want to open up the balance sheet as it's thinking. We'll tab to the right reports on the left. This time open up the profit and loss report. Close up the hamburger. Scroll up top and we're going to go changing the range a little bit again. This time to be let's go 050123 to 053123. So we have some room to work within this month and run it. Nothing's in it thus far. That's what we're looking for. Tab to the left and I'm going to close up the hamburger. Do the same range 050123 to 053123. Run it. Okay. Go to the tab to the left. Now we want to focus more just simply on the 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. The class tracking. So remember the order that the things came about. We first had the jobs which were converted into sub customers and then we had the class tracking. So we'll focus in on the class tracking there and then we had the projects and the projects are the thing that's most similar to the sub customers that we'll talk about in a future presentation. So the class tracking can be used in a similar way as we talked about with the sub customers before with a job cost kind of system. However it's more expansive than that because you can use the class tracking to track all kinds of different things that you would like to break out on the income statement. So in other words if I go to the income statement if I hit the drop down the when I looked at the sub customers that's basically a variant of just breaking out by customers. So now we have the sub customers and the projects in some ways can be thought of as a similar thing as well. But the classes give you a whole nother set of columns to break out by which gives you a wide range of applications for the classes. So just to switch things up on the classes this time we're going to imagine we're going to use them if we had a small business and we wanted to break out our personal books from the business books. So now we can assign every transaction to either being personal or business related and I can break out my income statement by business income and expenses and personal income and expenses. Possibly using the personal one for my tax preparation at the end of the year for the schedule C. So let's go to the first tab let's just kind of review how to turn on the class tracking. It's up in the cog up top noting that you only have class tracking if you're in the QuickBooks Pro Plus or above. And some of the functionality might get more sophisticated as you go above QuickBooks Pro Plus such as the capacity to break out the balance sheet accounts in more detail. Although you have some detail to break out the balance sheet accounts in the Pro Plus class tracking. So we're going to go into the account and settings again account and settings and then in the advanced area advanced. We've got the categories and then we have our two categories. So I'm going to turn off the location tracking because our major goal is to focus on the classes. However note that the classes if you only if you were able to pick one option to break out your items by location or classes. You might still consider the use of the classes if they're not being used to do something else because you have more sophisticated kind of options with the classes. And the classes as we'll see have more payroll compatibility that you may not have with the location tracking. So even if you're just trying to track by location that's what you want to use the classes for. If you're not using the classes for something else you might not use the location tracking but the class tracking to do that. So then we have the warn me when a transaction isn't assigned a class. Now if you use class tracking for many many kind of options that you would want to use class tracking for you would want to assign a class to every transaction. In other words if I'm if I'm breaking stuff out between personal and business I want to assign a class to every transaction as either personal or business. Usually I don't have to I could say everything that's not business is going to break out into personal as the default but usually you want that double check of assigning everything to a class. And if it's not assigned to a class then the class tracking gives you a nice indicator because it'll have a whole column that says hey you didn't assign it to a class and you can kind of fix it. But it'll give you this warning so I'm going to check it off to give us the warning as well. And then if I hit the drop down here you can assign one entire transaction which could make things easier or you can assign something to each row. Now one of the benefits of class tracking is the ability to assign it to each row. But sometimes this first one would be easier and if you're not breaking out a transaction between different classes that might be a good way to go. So let's just test both of them out. I'm going to do this one which is not the default one to enter the entire transaction and take a look at what it looks like and then we'll switch it up. So I'm going to save it and close this now to sort your classes. You can go to the cog up top and we can go to the lists and we set up some classes before so I'm going to go into the classes here. And let's go ahead and just delete these classes for now. I'm going to make them inactive going to make them inactive boom inactive and inactive and inactive. And then you could make your classes here or you could as you are entering data add classes. So if I'm doing business and personal as a breakout then I might say OK I'm just going to have two classes one is business I might just call it B for business. And the second is going to be personal so I could say new here and call it P for personal. And basically now I just want to have two columns on my income statement business versus personal right. So if I was to do that then I can enter all of my transactions and break them out from business to personal by assigning a class to it. So if we go into the plus button here let's see where the classes are located in an invoice form and expense form starting with the expense form. So if I go into the expense form you can see the classes are still breaking out line item by line item even though I assigned it to the full transaction. But if I go to an invoice over here plus button invoice then the class is up top at the top of the invoice assigning one class for the entire invoice not allowing us to break out line item by line item. We can change that option by changing the feature up top but this might make it a little bit easier for the data input. So that's actually kind of lines up to what most likely happens in a lot of scenarios. So in our case if we're breaking things out from business to personal we might have expenses that we need to break out between business and personal. It's less likely we're going to have income. The income is going to be either business or personal right. So if I go to the plus button up top and let's add an expense for example and let's say let's add a new vendor. Let's just call it vendor to vendor to sounds like a Star Wars planet or something vendor to let's make it as of let's make it as of 050123 to put it in our area in our range. And let's just make the category like utilities utilities and let's say it was for 400. And we're going to say the class is business with a B because we said a B for business and then utilities that we're going to break out the same bill for 200 to personal. And that's for P for personal and that comes out to a $600 total. What's this going to do decrease the checking account by 600 and then increase the utilities expense by 600 but break it out by column 400 200 for B and P classes. Now note I could have set up and said hey look I'm just going to say the utilities part that's business related. I'll make a business class and then I'm not going to make a class other than business and it'll just put everything else into unclassified which is personal. But usually when you use classes you would like to assign a class to every transaction because then it'll give you an indication if you just forgot to give a class it'll give you a column to show you that. So let's check it out. I'll say save and close that. If I go to my balance sheet and run it now we have a decrease to the checking account. If I run this by class hitting the drop down to the left classes and run it. Now it's got our breakout by classes and I deleted these ones and still pulling them in but in any case it's not breaking up that 600 because we were still able to assign it line item by line item. So that's kind of a one you can think of as kind of a detriment in the classes versus location tracking which might break out location tracking if it only allows you to assign one location per transaction on the expense side of things. But on the income statement tab into the right running it. Now we've got our expense of the 600. If I break that out by class. This is where the classes are kind of made for this is where they shine. You've got B and then you've got P on the utilities which is perfect. So now I can kind of track my business versus personal expenses. If I didn't assign a class if I go back into this and I said what if I didn't assign a class. Let's say I just didn't put one here and then save and close. Notice I get an error because I told QuickBooks to give me that error. So I'm going to say are you sure I'm going to say let's say I skip the error and then I go into here. Now it's been put into not specified. So notice you could do that you could say I just need one class which is going to be business and everything that's not business is going to default to not specified. It's easier but it's not really easier because you're still going to have to assign everything to business or not to anything. And you don't get this double check of using the not specified column as a check that you didn't properly allocate something. So usually you want to have a class most applications of classes you would like to have a class assigned to every transaction. So that you get that double check that if you didn't record something to a class then it's going to give you that non classified location. And you could just do just what we did is drill down on it and go in there and assign it to a class. Now obviously if we go to the income side of things let's make an invoice. Usually the invoice would just be for for business right now. Now you could have a situation where you have like W2 income which you might put on the personal side and then and then your other income which would be invoices and whatnot which would be business. Usually you're going to assign the entire transaction to one side or the other. You're not going to be breaking it out. And therefore this line item saying I just want you to assign it to business is quite nice. And then we can use our items down here to assign it out. Let's just say it was let's say it was ours and let's say we charge you know $5,000 just to put something in there. Let's increase accounts receivable the other side going to to what this is driven to which I think is going to be service items and then the class is going to be assigned to business. So accounts receivable goes up other side income assigning it to be for business for the entire thing. Save it and close it check it out on the balance sheet if I run it. So so now on the accounts receivable. It's interesting that the accounts receivable is over here and not specified as well on the balance sheet side of things, even though we assigned the full transaction to it. But the classes like I say where they usually shine is on the income statement side of things on the income statement if I run it by class. Now we've got our income on the business side and then our utilities broken out between business and personal. And then I'm building my income statement here that I can use to kind of make my schedule see for taxes and I can also track my personal and my total in a nice kind of column format which is really nice. Now note that the classes do break out some items on the on the balance sheet. So you might have like some items on the balance sheet that you need to break out like if you if you were paying for something that was a was a like a loan or something like that or you're tracking billings and work in process. Let's say let's say that we had a let's make an expense form and let's say that it's going to be decreasing the check in account say call it vendor to again. But instead of going to utilities it's going to go to like a loans payable or something loans payable and I'm going to set that up as an asset account. So it's going to be a I'm sorry liability account to be other current liability loan payable. That's what we want. So now now it's not going to the income statement. So this is going to decrease the check in account because it's an expense form. But the other side is going to a liability account and I'm going to assign it to business and save and close it. And then if I go back on over here and run this then that a breakout the loan payable it did. Right. So some accounts on the balance sheet it breaks out. It doesn't give up like if you if you get into the balance sheet you're going to you're going to start to think about well it doesn't like it doesn't balance for B doesn't balance on the business side. That's where the classes get quite complicated and kind of fall apart. And if you go into advanced use of QuickBooks pay more for QuickBooks level up you might get some more advanced uses of classes to kind of line up the balance sheet items but that gets kind of complicated. But you do have the limited functionality for some things that might be nice to break out some of the balance sheet items between whatever classes you're using. Obviously the income statement is usually where the focus is breaking out columns on the income statement and then having the total performance for that time frame. All right let's go back to the first tab. Now the other option let's go back up to the to the cog up top and accounting and settings and we're in the advanced settings again. Let's go back into the class tracking and this time let's say that we want to say one to each row of transaction. So I'm just that's like the default now so we're going to go back to the default and we can turn off the warning and save it. So let's just make sure that happened this time sometimes it doesn't take save it do it QuickBooks don't mess around with me. All right so then we're going to say let's go now if I go to an expense form looks pretty much the same because you got the classes that were broken out by line item. But the invoice form now if I go into my invoice then now we've got the classes by line item instead of up top where we have the classes. Now in our scenario it's less likely that we're going to have an invoice that we're going to send out part partially for personal versus business right. So so the other the other kind of setup worked fine for us but you can imagine situations where you where you have an invoice possibly that you need to assign out the income to part to different departments or whatever you're using the class tracking for so you might have a situation for whatever reason you got customer number one. And I'm going to exit out of this billable expenses and we're going to pull in just labor labor. Let's say it was was 700 that's going to business and then for whatever reason we had labor well not labor it's not to labor. Let's do let's do just hours and let's say it was 7000 and then we've got hours hours for personal and let's say that was 3000 and we'll put that to personal. So now we can break out the invoice line by line. So what's this going to do increase accounts receivable by the full amount 10,000. The other side going to income driven by these items and then breaking out by class on the income side business and personal doesn't really make sense for from our perspective for this scenario to have personal income that I'm going to invoice. It would make sense for me to have income from maybe a W2 job where I'm trying to break out the business on on invoicing from from customers on the business. But if you were using it in other scenarios like I'm breaking out income that I need to break out by department or something like that you can imagine where you would need to break out the income. I'm going to save it and close it balance sheet report run it. And now we've got our accounts receivable pulling in here not being specified so it doesn't do it on the balance sheet but on the income statement that's where our focus is. We've got the nice breakout between business and personal for the income so now we've got our personal income. So that actually works pretty pretty well in in this scenario where you want to break out business versus personal. Although most of the times if you tell a bookkeeper that or something they're going to be scared of doing that even if you have a small business. And it makes it a little bit more complicated to try to outsource your bookkeeping and whatnot because they want to you're going to want to keep everything as separate as possible so they can tell what's going on. But you can kind of do it on the small for a small schedule see business. Now the other thing you can imagine coming up is having the subclasses. So if I was to say that I want subclasses I can go back into my cog up top my lists and look at my classes and then and then maybe I've got a subclass here. Business business let's say run let's say new I'm going to make it number one subclass of business and then new number two subclass of business. So and this would often happen if you were running like departments or something like that or if you had like locations and then you wanted departments within those locations. But then you got to think about how this is going to play out on an income statement. It's just basically still going to have another column for the subclasses. They'll just be they'll just be kind of housed under the classes as opposed to like a filtering thing you might think of doing. So if I if I went and made another one like an expense for vendor to. And then this time I'm going to make it go to to do I have any other expenses supplies supplies for for six hundred. And this time let's make it go to subclass one business and then I'll do I'll do supplies. I'll do two line items on this one for four hundred and subclass number two. Okay so this is going to decrease the checking account the other time side going to supplies breaking out by subclass now one and two saving clothes. If I go to the tap to the right and run it the checking account doesn't really break out it's and not specified tapping to the right running it over here. Now you've got your B and you've got your subclasses. So if so notice like kind of the difference here of using a subclass versus using something else other than classes like tags or like locations. If I use a subclass now I've got this this this kind of sub situation I have I have a report that's going to be be longer or wider B and then the subclass subclass and then the total for B. So if I want that kind of totaling situation then I can do that versus P and I have this over here versus a situation where I wanted to basically have a whole another set of columns based on this other subclass. So for example if you had locations in California and Nevada and you wanted the sub locations of departments of each one you can do this method which is nice but it also will lead to a very wide report. Or you can think of having the locations being the the locations function and then the the other sections being the classes so that you can run a whole different set of columns by switching from classes here to locations. And then you can also sort by these items to so if I hit the filter option now that I have my classes I can sort by class. So if I go to my classes here I can sort by just the business or just be one and sort and that way to kind of drill down but it's still going to show that that area one is a subclass of B. Now the other thing with the classes is that they do kind of line up with payroll. So remember that payroll is a is a thing in and of itself that that is a whole world kind of in and of itself. Do you want to run payroll within QuickBooks or outside of QuickBooks and so on and so forth. But if you run payroll within QuickBooks then the question is maybe you want to assign the the employees to a particular class. Right. So so and you can kind of do that within QuickBooks but there's some limitations. So I turned on payroll if you want to turn on payroll. I think they use the author of a free 30 day trial. You can go into your accounting and settings and then go into your billings and you could basically turn on payroll within there and possibly get a free 30 day trial if you want to play around with it maybe. But I'm going to close this back out and then you'll have your payroll on the left hand side here. So I basically set up a quick payroll so that we can kind of look at it. And then if I go up top and I look at my payroll settings payroll settings are now on because I have payroll within QuickBooks. If I go into my payroll settings then down here I've got the accounting and I can assign I can assign class tracking. So if I go into class tracking I can assign each employee to a particular class and that's pretty nice. Notice I don't see the same option for location tracking. And so if I assign say my my employee here I'm going to close this back out. Do I have an employee did I set up an employee if I go down to payroll and go to my employees. Let's just I have Ivy I set up an employee for so I'm going to assign her to a class. OK I assigned Ivy to class B. So then when I say done I can then process payroll. See if I can do this process payroll payroll is a little tricky to do an example problem with. But I'm going to say let's go to the first tab. I'm going to run payroll and then I'm going to try to find a range within my within my range up top that I'm running in. And in May so let's say just let's say the beginning here that should work and I'm going to say OK. And then we're going to say Ivy regular pay. Let's say hours fifteen hours three hundred dollars preview. Let's do it and submit boom. And then let's do one oh five finish. And just to see it pull over. Now if I go to my balance sheet then you know it's going to be decreasing the checking account. And that's not breaking out but on the income statement. If I run it on the income statement now I've got my payroll that's running through a sign to business as opposed to personal. So that's pretty neat because again if you were using class tracking as like different locations then you would like to assign an employee ease the employees you would think to that location which might make it a little bit easier to to track that stuff the payroll. However if you're using class tracking similar to like projects then you're going to have a problem because that one employee might be working on multiple different projects. And you can't assign that one employee ease payroll to multiple different projects or I'm sorry to different to different sub customers. Now the projects does have a different way that you can do it instead of assigning the whole employee to a particular project. We could assign hourly employees their hours but we have to use we have to use the we have to use the weekly time entry to do that. So we can so we'll take a look at that when we get to projects but the location tracking I don't think has that capacity to kind of break that out now. Another method that you could use is you might use an external ADP or a paychecks or whatever to process your payroll and then you can just you could process payroll and possibly then break it out manually given the payroll reports. So you might go look at the payroll reports like I might process payroll and just put it into non classified. And then I'll go in and look at the payroll reports and maybe do a journal entry to properly allocate it either by class or by location or by or by project maybe making another account. So I don't disturb the actual payroll accounts and don't mess anything up there and but so that I can I can kind of break it out. So for example if I go back on over and I and I take a look at this again let's process payroll again and this time let's not assign it to a class. So now I turn class tracking off and I'm going to say all right done and then close back to payroll and then let's run payroll for the same employee. This time I'm going to choose the range this range and let's say just 10 hours this time and we'll say preview and submit the payroll. And then I'm going to say this is 1002 finish and finish boom I'll do it later. OK and so then if I run this now it's a not specified over here. So if that and then I can look at my payroll reports and look at which of the payroll should be assigned to which class depending on the employees and possibly do like a journal entry. So a journal entry I can go over here and say all right. Let's say new and then I'm going to say journal entry and let's make it five five one five eleven whenever that took place and then I'm going to put it into the they put it into wages. So let's say I say wages by class I'm going to just make another account and I'm going to make it an expense account just so I don't disturb the payroll account and I'll just make it other business expense wages by class. And I'll say save and let's say that let's say that that that that that one fifty is going to go into here and that's going to be for class number class B. Let's say subclass one and the other one's going to go wages by class for the other fifty and that's going to go into subclass two and then it's going to come out of of wages by class two hundred but I'm not going to assign it to a class. So notice what I did here is I put everything to the same account but I'm trying to assign it to break it out by class and not disturb the original account that was in place. So if I save and close this let's see if it does what I imagine and we'll run it and then we can see that that original two hundred dollar amount is now being is now broken out. I have an equal and opposite amount down here I didn't deal with the taxes. You can do the same thing for the taxes but an equal and opposite amount down here netting it out to zero and then I allocated it by class of the one fifty and the two and the fifty. That way you can you can keep this account to what it what it should what it's going to be. You could have I could do the same thing and just reduce this account and allocate it out and then I don't have this other line item down here. But some but my thought is that you might not want to touch that account because payroll is messy in and of itself. So so I'm thinking just leave that account alone so that we can make sure that it ties out to the to the nine forty ones and not mess up the payroll in any way. But then just kind of reverse it down here with another account and then properly break it out between these two. I don't think if you did delete this account itself it's probably not a big deal. But again if you go into the if you have a problem with payroll often times you want to drill down on this account and look at all the activity which could be complex in and of itself. And if you have journal entries there pulling the money out I don't really I would recommend leaving it alone and just making another account and then breaking it out and that's a nice little work around. And then you can process the payroll and then reassign it to another account break it out by class or by location or whatever you need to do and possibly break out costs to get sold component or job costing kind of stuff as well. So that's basically the classes.