How to Categorize Transactions in QuickBooks Online Like a Pro

Clean books start with accurate categories—here’s how to get it right.

If you’ve been asking “How do I categorize expenses in QuickBooks Online?” or “What category should I use in QBO?”—you’re not alone. Categorizing transactions correctly is one of the most important (and most misunderstood) parts of bookkeeping.

At DBR Bookkeeping, we work with service-based business owners—coaches, consultants, contractors, and creatives—who want to stay organized, maximize deductions, and make smart financial decisions. It all starts with knowing where your money is going.

Here’s a step-by-step guide to help you categorize transactions in QBO like a pro—plus how to stay up to date with every QuickBooks change.

Step-by-Step: How to Categorize Transactions in QuickBooks Online

⚠️ Note: QBO’s interface may change from time to time, so features and buttons may look slightly different. Always check for updates.

1. Connect Your Bank or Credit Card Account

• Go to Banking or Transactions from the left-hand menu.

• Click Link Account to connect your bank or credit card.

• QuickBooks will automatically import your transactions.

2. Review Transactions in the Banking Tab

• Once connected, your transactions appear under the “For Review” tab.

• Click on each transaction to view details.

3. Choose the Right Category

• Under “Category,” select the appropriate account from your Chart of Accounts (e.g., Advertising, Meals, Office Supplies).

• You can also split transactions across multiple categories if needed.

4. Add a Vendor or Payee (Optional but Recommended)

• This helps you track who you’re spending with and run more detailed reports.

5. Add a Memo (Optional)

• Useful for keeping context or attaching receipts.

6. Click “Add” to Accept the Transaction

• Once everything looks good, click Add.

• The transaction moves from “For Review” to “Categorized.”

7. Use Bank Rules to Save Time

• Set up automatic rules for recurring expenses (like subscriptions or rent) to categorize them automatically in the future.

FAQ: Categorizing Transactions in QuickBooks Online

Q: What if I don’t know which category to choose?
Start with your accountant or bookkeeper’s recommendations—or use IRS tax categories as a guide. When in doubt, avoid “Uncategorized Expense.”

Q: Can I change a category later?
Yes! Go to the “Categorized” tab, find the transaction, and click to edit it.

Q: What is the Chart of Accounts?
It’s the list of categories your business uses to track income, expenses, assets, and liabilities. QBO provides defaults, but you can customize them.

Q: Can I automate this process?
Absolutely. QBO’s Bank Rules feature saves time by automatically categorizing repeat transactions.

🎥 Want to see this in action and ask real questions?
Join the DBR Bookkeeping Online Community—led by Dr. Bryan Raya, a certified QuickBooks ProAdvisor.
Try it FREE for 7 days and get access to live demos, training, and step-by-step support.

Let’s start Doing Business Right—with books you can trust.

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