Part of our 2011 fiscal year end and tax preparation resources for small businesses.
Ready. Set. Categorize!
If you uploaded bank statements or connected your bank accounts, you need to categorize them. (Though if you've entered all of your transactions using the Quick Entry method or using Journal Transactions, this work will already be done.) If you still have transactions (i.e. Income or Expenses) that you have not input into Wave, go back to Step 1 and follow the instructions.
1. Sign in to Wave.
2. Click Imported Transactions.
3. Scroll down until you see a list of your imported transactions.
4. If categorizing a large quantity of transactions, you may find it easier to sort by Description. That way similar transactions will already be grouped together.
Now do the following steps for each transaction you have on this screen.
5. Select the checkbox of the transaction you want to categorize. Then, click the green box under Actions.
6. Determine if the transaction needs to be split. You can split a transaction if:
- part of it is a Personal expense and part of it is Business
- if you want to assign part to one business, and part to another
To split a transaction, select Split this Transaction. Indicate the amount for each portion of the split. You can split each transaction into as many pieces as necessary.
7. Now calculate the sales taxes that apply, if any. (This step assumes that you have already set up all your sales taxes in Wave. If you haven't, you will be prompted to Add a Tax. Follow the directions, then return to Imported Transactions.) Click Calculate Sales Tax, and select the applicable sales tax(es). Wave will automatically calculate the amount. If you did not pay taxes on your entire expense (such as a restaurant bill that includes tip), you can override the calculation manually.
(Note: Always split your transactions before you attempt to calculate sales tax. If you attempt to calculate sales tax before splitting an expense, the system will delete the tax.)
8. Once an expense has been split, and necessary Sales Taxes calculated, you can categorize your expense. First, make sure that you've correctly selected either the Business tab or the Personal tab in the Financial Categories box on the right. Now select the expense you want to categorize by clicking the check box. Find the correct Financial Category on the right, and click it. That's all it takes. Your transaction is now categorized, and will disappear from your list of Imported Transactions.
If many expenses fall into the same category, you can select them all, and categorize them with a single click.
(Note: Make sure you follow the steps above before categorizing transactions, as you will not be able to easily split transactions and calculate sales taxes after your transactions have been categorized.)
9. Repeat steps 5-8 until all expenses have been categorized.
10. Congratulations, you’re now ready for Step 3!
Need more help? If you want more assistance, or if you prefer to let someone else do the work, we can put you in touch with accountants and bookkeepers from the Wave Pro Network. Find a Wave Pro.
Make your next tax year as pain-free as possible: Sign up for free online accounting for small businesses, by Wave.