Bookkeeping guide
Business expense categories
A useful category answers one question: what did the business spend money on? Consistent categories make it easier to compare costs, review cash flow and reconcile your books. These are common starting points, not a universal chart of accounts.
Common categories and when to use them
Cost of goods sold
Inventory, materials and other direct costs tied to the products you sell. Keep these separate from general operating costs.
Salaries & wages
Employee pay for work performed. Track employer payroll taxes separately so the full cost of a pay period is visible.
Rent
Payments for an office, shop or other business space. A security deposit may belong on the balance sheet instead of in rent expense.
Utilities
Electricity, water, internet and similar services used by the business.
Software & subscriptions
Recurring charges for tools such as bookkeeping, hosting and team software.
Meals & entertainment
Business-related restaurant and meal charges. Save who attended and the business purpose; tax treatment can differ by expense.
Travel
Business trips, including transport and lodging. Record the trip purpose alongside the receipt.
Office supplies
Everyday consumables such as paper and printer supplies. Major equipment purchases should be reviewed separately.
Advertising & marketing
Ad campaigns and promotional spending used to reach customers.
Bank fees
Account service charges and other fees from financial institutions.
Professional fees
Payments to outside accountants, lawyers and other professional advisers.
Before you categorize a transaction
- Check whether the payment is actually an expense. Loan principal payments, owner draws and transfers between accounts should not be recorded as operating expenses.
- Use the same account for similar purchases. Keep the receipt and a short description when the merchant name alone does not explain the charge.
- Review uncertain or large purchases before posting. Equipment, prepaid costs and taxes can require different treatment from ordinary expenses.
Ledgerline first matches descriptions to the keywords in your own chart of accounts; when no keyword matches, its AI suggests a category and explains why. Review the suggestion before posting it to your journal. For tax deductibility or capitalization decisions, consult your accountant.
Categorize a transaction