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 & 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, read more about Parent Accounts and Sub Accounts on the CoA.
 
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.
Operating Expense header in dropdown of categories.
 
Cost of Goods Sold (COGS) are Expenses related to producing a product or delivering a service. COGS help you see the monetary value of the products or services you sell, which are covered more in detail in this COGS blog post.
COGS header in dropdown of categories.
 

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 & Loss Report, Expense and COGS are displayed by Subcategory under their respective sections (Less Expenses and Less Cost of Goods Sold)
  • Use the Expense Report to see 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 & 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, click on the Choose a category and type in the Custom Subcategory
  2. Click on the + Create (Subcategory name) button
    Button to create new subcategory option.
  3. For the Expense Type, choose between Operating Expense or Cost of Goods Sold
    Popup with fields to fill out for creating new subcategory.
  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. Click 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, click on Edit… next to the Custom Subcategory, from here you can either:
Edit link next to a custom subcategory.
  • Edit - Update the name of the Subcategory or reassign it to a different Parent Account
  • Delete – Click on 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 these default Categories and Subcategories:
 
For details on how Categories and Subcategories behave in your Chart of Accounts, including how to edit and archive them, read more about Parent Accounts and Sub Accounts on the CoA.
 
Expense CategoryExpense Subcategory
AdvertisingNone
Car & Truck Expenses
  • Gas
  • Mileage
  • Repairs
  • Vehicle Insurance
  • Vehicle Licensing
ContractorsNone
Education and TrainingNone
Employee Benefits
  • Accident Insurance
  • Health Insurance
  • Life Insurance
Meals & Entertainment
  • Entertainment
  • Restaurants/Dining
Office Expenses & Postage
  • Hardware
  • Office Supplies
  • Packaging
  • Postage
  • Printing
  • Shipping & Couriers
  • Software
  • Stationery
Other Expenses
  • Bank Fees
  • Business Insurance
  • Commissions
  • Depreciation
  • Interest - Mortgage
  • Interest - Other
  • Online Services
  • Reference Materials
  • Repairs & Maintenance
  • Subscriptions/Dues/Memberships
  • Taxes & Licenses
  • Wages
PersonalNone
Professional Services
  • Accounting
  • Legal Fees
Rent or Lease
  • Equipment
  • Machinery
  • Office Space
  • Vehicles
SuppliesNone
Travel
  • Airfare
  • Hotel/Lodging/Accommodation
  • Taxi & Parking
Uncategorized ExpensesNone
Utilities
  • Gas & Electrical
  • Phone
Cost of Goods Sold
  • Cost of Billed Expenses
  • Cost of Shipping & Handling
 

FAQs

How do I change or update the Category on multiple Expenses?
You can reassign Expense Categories using these steps below:
  1. Use the Search, or check off the boxes next to the Expenses you want to edit
  2. Click on the Bulk Actions button
  3. Select Change Category
  4. In the dropdown, type to find the Category, create a new Subcategory or choose from the list
  5. Click Save to finish. Your Expenses will now be reassigned to this new Category.