How to Set Up and Use Class Tracking in QuickBooks Desktop

Before you start

• Turn it on in single-user mode. In multi-user mode you can't change Company Preferences.
• Decide what classes stand for before you create any. Intuit's tip is to use classes for one category only, such as locations or departments, not both.
• Plan an Other class for transactions that don't fit anywhere else.
• If you build assemblies, read the Balance Sheet by Class limits below before you rely on that report.

To track stock quantities by warehouse, see how to track inventory by site.

Step 1: Turn on class tracking

1. 1Open the company file in single-user mode.
2. 2Go to Edit > Preferences.
3. 3Select Accounting, then the Company Preferences tab.
4. 4Select Use class tracking for transactions.
5. 5Optionally, select Prompt to assign classes so QuickBooks reminds users to assign a class.
6. 6Select OK.

On a Mac, go to QuickBooks > Preferences, select Transactions, and select Use class tracking.

Step 2: Plan your classes

Pick the one way you most want to split profit. For a manufacturer or distributor, common choices are:

• Location: one class per plant, warehouse or branch. Intuit's wholesale example uses distribution centers.
• Product line: one class per line you report on. Intuit's wholesale and retail examples use product lines or departments.
• Division: one class per business unit, an example Intuit gives for companies with several businesses.

Use subclasses for more detail within the same category, rather than adding a second category.

Step 3: Create the classes

1. 1Go to Lists > Class List.
2. 2Open the Class drop-down menu and select New.
3. 3Enter the class name.
4. 4For a subclass, select Subclass of and pick the parent class.
5. 5Select OK. Repeat for each class, including Other.

Step 4: Assign a class on transactions

On the sales side, Intuit lists invoices, sales receipts, estimates, sales orders, statement charges, and refunds and credits as taking a class. So do checks, credit card charges, bills, purchase orders and paychecks.

• Customer payments take their class from the invoice. You can't choose a class in the Receive Payments window.
• A prepayment stays unclassified until you apply it to an invoice.
• Sales tax payments can't take a class. Intuit suggests a journal entry to split them by class.
• On a journal entry with classes, make debits equal credits within each class. Otherwise Balance Sheet by Class shows it as unclassified.
• To move money between classes, use a journal entry with a clearing account. The Funds Transfer window can't do it.
• For payroll, go to Edit > Preferences > Payroll & Employees > Company Preferences. Select Job Costing, Class and Item tracking for paycheck expenses, then choose one class per entire paycheck or per earnings item.

Step 5: Run reports by class

1. 1Run the Profit & Loss by Class report. Amounts without a class show in the Unclassified column.
2. 2To show only some classes, select Customize Report, open the Filters tab, choose Class, then Multiple Classes, and pick them.
3. 3With subclasses, select Collapse Columns on the report to see totals without the detail. Select Expand Columns to bring it back.
4. 4Select Memorize to save any version you'll run again.

Open receivables by class

1. 1Go to Reports > Custom Reports > Transaction Detail.
2. 2Set Total By to Class.
3. 3On the Filters tab, set Account to All Accounts Receivable, Name to All Customers/Jobs and Paid Status to Open.
4. 4On the Header/Footer tab, rename the report, then select OK.
5. 5Select Memorize to save it.

To save, group and schedule reports like these, see how to create and memorize custom reports in QuickBooks Desktop.

Fix unclassified amounts

1. 1In Profit & Loss by Class, double-click the Net Income amount in the Unclassified column. QuickBooks opens a Transaction Detail by Account report.
2. 2Memorize that report if you can't fix everything in one sitting.
3. 3Open each transaction, choose the right class and save it. It then drops off the report.

Balance Sheet by Class: check these limits first

Intuit lists transactions the Balance Sheet by Class report can't classify. Several matter to manufacturers and distributors:

• Inventory assembly builds can't take a class. Intuit says not to run or use Balance Sheet by Class if you have assembly items.
• It doesn't support multicurrency transactions.
• Paychecks with more than one class, payroll liability checks without classes, and sales tax payments show as unclassified.
• Early payment discounts on invoices or bills with several classes can make it differ from Profit & Loss by Class.
• Applying a bill credit with a different class split than its bill gives wrong balances.

The A/R Aging Detail report has its own catch when filtered by class. It only uses the class picked at the top of an invoice. Payments are unclassified, so a classed invoice shows correctly only once it's paid in full.

Where QuickBooks Desktop leaves the work to you

• Someone has to pick the right class on every transaction. The prompt reminds them, but it can't choose for them.
• Unclassified amounts need regular cleanup before month-end reports go out.
• Sales tax payments and some payroll checks need journal entries or line-by-line classes.
• If you build assemblies, Intuit says not to use Balance Sheet by Class at all.
• Condensing the file strips classes from summarized transactions, so those amounts move to Unclassified.