What are expense categories?

FreshBooks makes it easy to keep track of your spending by organizing your business’ expenses into Operating Expenses and Costs of Goods Sold (COGS) categories and subcategories. These categories and subcategories follow Generally Accepted Accounting Principles (GAAP), which are commonly found on tax forms for claiming your business’ expenses. You can also create custom subcategories for your business’ unique reporting needs.

 

Once you’ve created Expenses and categorized them, you can upload receipts or rebill them to your clients on invoices afterwards.

 

• Categories and Subcategories
• Custom Subcategories
  
• Default Categories and Subcategories
• FAQs

 

Categories and Subcategories

FreshBooks’ default expense categories are equal to the default accounts in the Chart of Accounts (available on Plus, Premium and Select plans). Default subcategories are included to provide even more granularity in your reporting.

 

For details on how categories and subcategories behave in your Chart of Accounts, including how to edit, archive, and unarchive them, review parent accounts and sub accounts on the CoA here.

 

Operating Expenses are expenses a business incurs in order to keep it running, like staff wages and office supplies. Learn more about the types of Operating Expenses in this blog post.

 

Cost of Goods Sold (COGS) are expenses related to producing a product or delivering a service. COGS help you find the monetary value of the products or services you sell, which are covered more in detail in this COGS blog post.

• All COGS expense categories are their own accounts in the Chart of Accounts
• Categorize expenses as COGS by assigning it to an existing COGS expense category
• If needed, create your own custom COGS expense category in the Expenses section or by making a new account in the Chart of Accounts

 

Categories Overview

• Categories are listed with an icon next to them, and subcategories are listed underneath a category
• Default categories and subcategories can only be edited or archived if you have access to Advanced Accounting
• In the Profit and Loss report, expenses and COGS are displayed by subcategory under their respective sections (Less Expenses and Less Cost of Goods Sold)
• Use the Expense report to find expenses under a specific Operating Expense or COGS category
• Any expenses that are not automatically categorized will be labeled as Uncategorized Expenses until you can assign them a category to remember for the future. Search for all Uncategorized Expenses by using the Advanced Search and selecting Uncategorized Expenses as the category to search by

 

Custom Subcategories

You can create a custom subcategory to organize and report on expenses specific to your business’ unique needs. Custom subcategories are similar to default subcategories:

• Expenses can be assigned directly to a custom subcategory
• Custom subcategories are listed under their parent category on the Profit and Loss report, similar to default subcategories
• Custom subcategories can be edited or deleted

 

Create a Custom Subcategory

Watch this quick tutorial or use the below steps to create a custom subcategory: 

 

1. While editing an expense, select the Choose a category and enter in the custom subcategory
2. Select the + Create (Subcategory name) button
   
3. For the Expense Type, choose between Operating Expense or Cost of Goods Sold
   
4. Next, in Group Under Parent Account, if you’ve selected the Operating Expenses Type, choose the Category / Parent Account to assign this custom category to (choosing the Cost of Goods Sold Type defaults to Cost of Goods Sold parent account instead)
5. Select Save to finish
6. This new subcategory will now appear on the dropdown list as an option.

 

To edit or delete your custom subcategory, edit the expense and in the category dropdown, select Edit… next to the custom subcategory, from here you can either:

• Edit - Update the name of the subcategory or reassign it to a different parent account
• Delete – Select the Delete link and any expenses assigned to this custom subcategory will be reassigned to the parent category that it was previously under

 

Default Categories and Subcategories

Your account comes with the below default categories and subcategories:

 

For details on how categories and subcategories behave in your Chart of Accounts, including how to edit and archive them, review parent accounts and sub accounts on the CoA here.

 

Expense Category	Expense Subcategory
Advertising	None
Car and Truck Expenses	Gas Mileage Repairs Vehicle Insurance Vehicle Licensing
Contractors	None
Education and Training	None
Employee Benefits	Accident Insurance Health Insurance Life Insurance
Meals and Entertainment	Entertainment Restaurants/Dining
Office Expenses and Postage	Hardware Office Supplies Packaging Postage Printing Shipping and Couriers Software Stationery
Other Expenses	Bank Fees Business Insurance Commissions Depreciation Interest - Mortgage Interest - Other Online Services Reference Materials Repairs and Maintenance Subscriptions/Dues/Memberships Taxes and Licenses Wages
Personal	None
Professional Services	Accounting Legal Fees
Rent or Lease	Equipment Machinery Office Space Vehicles
Supplies	None
Travel	Airfare Hotel/Lodging/Accommodation Taxi and Parking
Uncategorized Expenses	None
Utilities	Gas and Electrical Phone
Cost of Goods Sold	Cost of Billed Expenses Cost of Shipping and Handling

 

FAQs

How do I change or update the category on multiple expenses?

You can reassign Expense Categories using these steps below, from How do I manage my expenses? here:

1. Use the search, or check off the boxes next to up to 50 expenses you want to edit
2. Select the Bulk Actions button
3. Then select Change Category
4. In the dropdown, enter the category, create a new subcategory or choose from the list
5. Select Save to finish. Your expenses will now be reassigned to this new category.