Dealing with Uncategorized Transactions

Each time I reconcile a client’s bank or credit account, there are inevitably going to be transactions where I am not sure where to book them. Some examples of transactions where a bookkeeper may be unsure where to book them are:

• Amazon, Walmart, Target, Other E-Commerce purchases:
  • Lots of different types of items can be purchases from giant retailers, so a bookkeeper should be clear on what the purpose of the transaction was for.
• Transactions to and from Paypal & Venmo:
  • Paypal memos on bank statements are typically pretty limited and Venmo information on bank statements can be non-existent so it is usually best for a bookkeeper to put these aside until more information is obtained here.
• Out-of-town convenience stores or small retailers:
  • So many times I have had to jump onto a search engine to help figure out the very limited memo information related to these types of purchases. Even then, a bookkeeper may be unclear as to the purpose of a transaction here, such as for fuel, meals, office supplies, etc.

It is NEVER a good idea to consistently guess on where to book stuff because it is going to be your financial reports that may suffer, then the business owner may be relying on information that may not prove to be the best course for the business or perhaps an audit will force you to change things after a tax return has already been filed.

It is usually best to put Uncategorized transactions aside, perhaps into a special expense account, in your chart of accounts, called “Suspense”, or “Uncatgorized”, or any name that will help flag these transactions so you can remember to deal with them later on, when you receive more clarification.

I recommend to never have a transaction marked as uncategorized for no longer than one month. Otherwise, the purchaser may not remember what the purpose of the transaction was for and could have discarded the purchase receipt already.

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.