What is QuickBooks Class tracking?
Class tracking is a feature in QuickBooks that enables you to keep track of your transaction data by creating classes to categorize them.
What is a class?
Classes are assigned to transactions that relate to one another by category. For instance, many clients have a need to track income and expenses by categories such as, department, business segment, location, etc.
This feature is the best way for a business to separate any significant segments of the business without having to add additional income and expense accounts to the general ledger.
- For profit companies may want to track multiple locations or divisions of the company.
- Not-for-profit companies may need to track grants and restricted and unrestricted funds.
- Any company doing business with a governmental entity can use classes to track fixed priced jobs versus cost plus jobs versus overhead.
Two of the biggest advantages to using class tracking is you do not need to add additional revenue and expense accounts to your chart of accounts for each segment and the QuickBooks® software has a predesigned “Profit and Loss by Class” report so you can immediately see the financial results of each segment.
How to Use Class Tracking:
- Go to the Edit menu and click on preferences, then the Accounting preference.
- Click on the following:
- The company preference tab,
- then select the Use Class Tracking box.
- Also, the Prompt to Assign Classes box should be checked. It's located directly underneath the Use Class Trackingbox. Note that if you turn this part of the feature off you may end up with revenues or expenses in the unassigned category.
- Once you have determined all the boxes are checked, click OK. This will enable you to use the feature going forward.
- Note: If you elect to do this in the middle of an accounting period, you will need to go back and enter the classes on all the revenues and expenses input in the software to date.
- Once you have turned on the class tracking preference, there will be a place for you to enter the class on the transaction you are working on, whether it be making a deposit, entering a bill or writing a check.
- Note: If you do not enter the class on a transaction and have the Prompt to Assign Classes box checked, an error message will appear stating that one or more transactions do not have a class assigned and will not let you move forward unless you specifically indicate you do not want to enter a class (a practice which is not recommended).
- Depending on how you segment your business, you may also create subclasses to give you even more details.
- The profit and loss report in QuickBooks® will show the revenues and expenses and the bottom line for each segment defined. If there are transactions that are "Unassigned", they will have their own column so that they can be corrected easily.
In the past, the class tracking feature was limited to only income and expense accounts. However, beginning with the 2011 version, QuickBooks® allows for balance sheet accounts to be separated by classes. This, again, eliminates the need for redundant accounts in the general ledger and makes segment reporting not only more efficient, but also more effective.
Explore our prior post from our QuickBooks Tips Series:
- QuickBooks Tips | Increase Your Business's Efficiency
- QuickBooks Tips | Which Version is Right for Your Business?
- QuickBooks Tips | Budgeting and Forecasting