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A transaction without a category is just a number. Is that 127fromAWSanoperatingexpenseoracostofgoodssold?Isthat127 from AWS an operating expense or a cost of goods sold? Is that 500 from “Smith, J.” revenue or a loan repayment? Categorization turns raw transactions into useful financial data. It’s what makes your P&L accurate, your tax deductions legitimate, and your business insights meaningful.

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Why categorization matters

Accurate reports — Your Profit & Loss, Balance Sheet, and other reports depend on correct categorization. Tax deductions — Expenses need proper categories for tax time. Office supplies vs. meals vs. equipment — each has different tax treatment. Business insights — See where your money actually goes. Which categories eat up the most cash?

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Categorize a transaction

1

Go to Banking

Click Banking in the sidebar to see your transaction list.
2

Find uncategorized transactions

Uncategorized transactions are highlighted. You can filter to show only uncategorized items.
3

Click on a transaction

Open the transaction detail panel.
4

Select a category

Choose from your chart of accounts. Common categories:Income:
  • Sales Revenue
  • Service Revenue
  • Interest Income
Expenses:
  • Office Supplies
  • Software & Subscriptions
  • Professional Services
  • Meals & Entertainment
  • Travel
  • Advertising
5

Add details (optional)

  • Memo — Notes about the transaction
  • Vendor/Customer — Link to a contact
  • Receipt — Attach documentation
6

Save

Click Save. The transaction is now categorized.

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Bulk categorization

For multiple similar transactions:
  1. Check the boxes next to transactions you want to categorize
  2. Click Bulk Actions → Categorize
  3. Select the category
  4. All selected transactions are updated
This is useful for categorizing a month’s worth of a recurring expense at once.

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Bank rules

Set up rules to automatically categorize recurring transactions:
  1. Go to Settings → Bank Rules (or click Create Rule from a transaction)
  2. Define the condition:
    • If description contains “AWS”
    • If amount equals $9.99
    • If vendor is “Spotify”
  3. Define the action:
    • Categorize as “Software & Subscriptions”
    • Add vendor “Amazon Web Services”
  4. Save the rule
New matching transactions are categorized automatically. Learn more about bank rules →

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Split transactions

Sometimes one transaction covers multiple categories. For example, an Amazon order with office supplies and cleaning supplies:
  1. Open the transaction
  2. Click Split
  3. Add line items:
    • $45.00 → Office Supplies
    • $22.00 → Cleaning & Maintenance
  4. Save
The transaction now appears correctly in both categories.

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Common categories

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Income categories

CategoryUse for
Sales RevenueProduct sales
Service RevenueConsulting, freelance work
Interest IncomeBank interest, investment earnings
Other IncomeMiscellaneous income

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Expense categories

CategoryUse forTax notes
AdvertisingAds, marketing, promotionsFully deductible
Bank FeesService charges, wire feesFully deductible
Contractors1099 paymentsRequires 1099 filing
InsuranceBusiness insuranceFully deductible
Legal & ProfessionalLawyers, accountantsFully deductible
MealsBusiness meals50% deductible
Office SuppliesPaper, pens, etc.Fully deductible
RentOffice rentFully deductible
SoftwareSaaS subscriptionsFully deductible
TravelFlights, hotelsFully deductible (business purpose)
UtilitiesElectric, internetFully deductible

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Handling specific transaction types

When money moves between your own accounts (checking to savings), it’s a transfer, not income or expense. Categorize as Transfer or use the Match feature to link both sides.
Money you put into or take out of the business:
  • Owner’s Contribution — Money you invest
  • Owner’s Draw — Money you take out These affect your equity, not income/expenses.
If you paid with a personal card and reimbursed yourself:
  1. Record the expense with the correct category
  2. Record the reimbursement as Owner’s Contribution or offset the expense
Customer refund? Categorize as negative income (or a refund account). Expense refund? Categorize as negative expense.
Principal and interest are different:
  • Principal — Reduces your liability (not an expense)
  • Interest — Is an expense (Interest Expense category)
Split the transaction if needed.

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Tips for efficiency

  1. Categorize regularly — Daily or weekly is easier than monthly
  2. Use bank rules — Set them up for recurring transactions
  3. Be consistent — Use the same category for similar expenses
  4. When in doubt — Check with your accountant or use a general category
  5. Attach receipts — Makes tax time and audits easier

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What’s next

Create bank rules

Automate categorization for recurring transactions.

Reconcile accounts

Match your books to your bank statements.