A class in QuickBooks is a single-purpose tool to classify income and expense transactions. Class tracking is not used for balance sheet accounts. It’s also not a way to group customers, jobs, or vendors. To do that, use a Type, which can be managed on the Lists->Customer & Vendor Profile Lists menu selection.
To use class tracking, it first must be enabled on the Accounting sub-menu of the Company Preferences tab on the Edit->Preferences menu selection; just check the box for Use class tracking. To have QuickBooks request the appropriate class for a transaction, check the box for Prompt to assign classes.
Keep in mind that class tracking is a single purpose tool – it can’t be used to track unrelated aspects of your business. Proper use of classes depends largely on your business reporting needs. Classes can be used to track:
- product lines or service types
- partners in a professional services firm
- funds for a public sector or non-profit enterprise
Since classes can be applied to both income and expense transactions, class tracking enables producing a Profit & Loss statement for each class.
QuickBooks supports sub-classes, or nested classes, up to 5 levels deep.
If you use class tracking, you’ll want to:
- carefully consider your reporting requirements before you use class tracking
- assign classes to both income and expenses
- create a “miscellaneous” or “other” class to classify transactions that don’t fit another, more specific class
- consistently assign a class to all transactions so that your class-level reports are accurate
- create an “unclassified” class for transactions not yet classified – QuickBooks reporting won’t allow you to filter for transactions that have no class assigned
To manage your classes, click on the Lists->Class List menu selection.