FAQ: Why do we see uncategorized income and expenses in QuickBooks Online?
One of the most common problems that I see on the Profit & Loss report in QuickBooks Online are amounts in Uncategorized Income and Uncategorized Expense. You may not know that you have this problem. In fact, your tax accountant may bring it to your attention during tax time. If left unaddressed, your reports won’t be accurate, your accountant will be unhappy, and you’ll have to correct a lot of transactions!
Here is an example of what these accounts look like in the Profit & Loss report:
How to tell if you have uncategorized income an uncategorized expense transactions in QBO
Here is a video you can follow along:
You can easily find these transactions by running a “quick report”. Simply go to the Left Navigation Bar, click on Transactions > Chart of Accounts. Scroll down till you see the account called “Uncategorized Income” or “Uncategorized Expense” and click on Run Report on the far right .
A “quick report” window will open showing you all transactions in the account.
Why are there uncategorized income and uncategorized expense transactions in QBO?
It all starts with downloaded banking transactions. When banking transactions are downloaded into QuickBooks Online, QBO can’t always figure out how to categorize the transaction. In that case, QBO assigns the Uncategorized Income account to amounts received and the Uncategorized Expense account to amounts paid.
To avoid this, you need to tell QuickBooks Online how to categorize the transaction. So, if you ever see Uncategorized Income in the “Category or Match” column, you should select the appropriate category (or account from your chart of accounts).
For an amount received (a deposit), click on the transaction to view more details. Depending on the type of deposit you will 1) click Find Match to apply the payment to an invoice you have already entered in QBO, or 2) choose an income account from the chart of accounts.
If you see Uncategorized Expense in the “Category or Match” column then click on the transaction to view more details. Select an expense category (or account from your chart of accounts) to classify the expense transaction.
How to fix transactions recorded to uncategorized expenses in QBO
If you accidentally recorded transactions to uncategorized expenses, you can easily edit the expense transactions. There is no need to delete them and start over.
Go to the left navigation bar and click Transactions > Expenses. You will see a list of all expenses. Click on the Category column to sort transactions by category.
Scroll down till you see Uncategorized Expense. Double-click on each transaction to open it.
- Click on Online banking matches to view the details of the transaction.
- Assign or add the vendor name.
- Change the account from Uncategorized Expense to the correct expense account.
How to fix transactions recorded to uncategorized income in QBO
These transactions can be tricky to correct because you may have already entered an invoice, a customer payment, or even a deposit and you may have already prepared bank reconciliations in QBO. Each transaction should be reviewed individually and corrected depending on what else is already recorded in QBO. I recommend that you contact a QuickBooks Online Proadvisor to help you correct these.
I hope that you found this useful and that you will check to see if you have uncategorized income or uncategorized expenses in QuickBooks Online. I highly recommend that you check this on a regular basis and that you correct any transactions right away. Remember, 5 Minute Bookkeeping is much better than 5 hour bookkeeping!
Any comments or questions? Just post it below and I’ll reply as soon as I can!
Here’s the Slideshare post for you: