Bill vs Expense in QuickBooks, What's the Difference? - Gentle Frog Bookkeeping and Custom Training (2024)

October 13, 2020

Written By

Rachel Barnett

Have you ever wondered what the difference between a bill and an expense is in QuickBooks?

In this tutorial I’ll teach you how they’re different and when you should use one over the otherby showing you:

The difference between a bill and expense
How to enter an expense
How to enter a bill
How to pay a bill
How expenses and bills show up differently in reports

Bill vs. Expense

Technically a bill is an expense. However, in QuickBooks, they do have two different meanings.

A bill is money that your business owes but will pay at a later date.

An expense is money that your business spends at the time of purchase.

If that’s confusing let me explain further.

When you purchase a product or service for your business and pay with cash or check. Or if you pay online with a credit card, Paypal, or similar, that is an expense. The money left your business at the time of purchase.

If you purchase and receive a product or service but won’t be paying for it right away, that would be a bill. You’ve purchased the product but the money will not leave your business’ bank account until a later date.

Quickbooks has various reports that allow you to see outstanding bills. If you enter what should be a bill as an expense it would not show up on those reports.

Quickbooks has various reports that allow you to see outstanding bills. If you enter a bill as an expense it won’t show up on those reports and you won’t know that you owe that money.

Let me show you what it looks like to enter both a bill and an expense in QuickBooks.

Entering an Expense into QuickBooks

To create an expense in QuickBooks click on the Quick Create button. This is the large button in the upper left-hand corner that says “+ New”

In the menu that opens click “Expense” in the Vendors column.

In this example, I’m creating an expense for $100 worth of burgers purchased at Bob’s Burger Joint. This was paid at the time of purchase from a checking account.

Let’s see what this looks like in the Profit and Loss report.

To view the Profit and Loss report click on Reports in the left-hand menu and then “Profit and Loss.”

I can see that I have $100 in Meals and Entertainment expenses.

If I viewed any reports in QuickBooks that show upcoming bills this expense would not be there.

To see upcoming bills we’ll view the Accounts payable aging summary report.

The easiest way to get to this report is to search for it from the Reports screen.

You can see that Bob’s Burger Joint is not listed in this report.

Entering a Bill into QuickBooks

To create a bill click the quick create button and select “Bill” from the Vendor’s column.

I’ll now recreate the purchase of burgers from Bob’s Burger Joint as a bill due in 10 days.

Now when I view the Profit and Loss report I once again see this as an expense.

BUT, only if I have the accounting method “Accrual” selected.

This is because accrual will show you pending invoices and bills. If I change the accounting method to cash the report is empty because I haven’t yet paid the Bob’s Burger Joint bill.

If I view the Accounts payable aging summary report I now see the Bob’s Burger Joint bill.

I’ll now show you how to properly pay a bill in QuickBooks and what that looks like in the reports.

Paying a Bill in QuickBooks

To pay a bill click the quick create button and select “Pay Bills” in the Vendors column.

The first step will be to choose a payment method.

I’ll be paying with a check so it prompts me to enter a check number. If this was paid by automatic payment the check number field can be left blank.

To pay the Bob’s Burger Joint bill I check it off in the list of bills and verify the amount is correct. Then click the green save button in the lower right-hand corner and select Save and close.

If I view the Profit and Loss report again I see the Bob’s Burger Joint bill whether I select the cash or accrual accounting method. This is because the bill has been paid.

You should NEVER create an expense to pay for something you’ve already entered as a bill. This will seriously screw up your accounting. Always use “Pay Bills.”

You now know the difference between a bill and expense in QuickBooks and when you should use one over the other.

☕ If you found this helpful you can say “thanks” by buying me a coffee…
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If you’d like to watch me walk through this process check out the video below:

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This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Gentle Frog, LLC does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Gentle Frog, LLC does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers and viewers should verify statements before relying on them.

16 Responses

Hi Rachel,
I am new to the company I work for I’m trying to understand why they have a loan as a BILL vs an Expense in QB. I don’t have the old bookkeeper to ask and the owners don’t know either. Is this a mistake or is there a good reason for this?
Reply
See Also
What are Bills Payable?
1. Hi Deb, that’s an approach that can get you where you need to go but it’s convoluted, clunky, and NOT a common practice. If you’d like Rachel would be happy to meet with you for 15 minutes to take a look at it, explain what’s currently happening and what you’re options are, https://www.gentlefrog.com/meeting/
  Reply
Hi Rachel
I am new to Quick book online, Before that i am user of QuickBooks Desktop version since 2002. i have few queries
1. if i am just starting my new business it means i didn’t have any transaction in my bank Account. if so than how i upload my Bank Account file for my future transactions.
2. Secondly is there any option in online Quick book for customers whose payable amount is overdue and system intimate me or didn’t generate further invoice for said customer until he cleared his due amount or Generate Invoice after getting permission from me.
Looking for positive and prompt response from you
Reply
1. Hi Kashif,
  1) If you’re starting with a new business bank account that has no transactions you’ll connect your account following this video: https://youtu.be/9DLsgIUMbfc Then when you do finally have some transactions you’d click Banking in the left-hand menu. It will likely already have transactions in the list but if not you can click the “Update” button and it will sync with your bank accounts.
  2) I’m not sure what you’re asking for here, could you please reword your question?
  -Jess
  Reply
hi!
I’m trying to track a loan which I used to pay for a bill. I have the bill already set up but now I can’t see any option to tag the bill payment as paid from my liability account in Quickbooks. Is there any workaround for this?
Thank you!
Reply
1. Hi Mio,
  It’s best not to use a bill for the loan, it works but makes the whole thing a lot more work. The best method is to just write a check (or enter an expense) and apply it toward the loan (and interest if applicable).
  -Jess
  Reply
Hey there,
What happens if expense is used instead of bill payment? How does that change records? This has been done a lot at my work and I’m wondering what mixing up bank feed withdrawals between bill payment and expense reflects for the payee and books.
Thank you so much!
Reply
1. Hi Trista,
  If you are on a cash basis (most of our readers are), you will be okay. The key will be to make sure that you don’t have any unpaid bills that are actually paid. Check your reports for “accounts payable aging summary”, review this report for mistakes. If you need help, please feel free to book a call. We should be able to walk you through it in a 15-minute session: https://www.gentlefrog.com/meeting/
  -Jess
  Reply
My question is about Credit Card bills. We use two credit cards for our drivers gas and tolls. I have connected my bank account and categorize them as they come in to the QBO program via banking. When I pay the bill, QBO wants me to categorize the check I am writing. The money has been spent on “credit” but we don’t carry a balance. Our former bookkeeper used QB Desktop. She allocated all the expenses in categories BUT we didn’t have the banking connected. Its hard for me to wrap my brain around how I categorize THE PAYMENT. All the expense on the card have been categorized already.
Reply
1. Hi Sam,
  A credit card payment is a transfer from checking to your credit card. It should not be entered as a bill. However, QB Desktop would prompt people to make a bill for the balance owed after reconciling. This is an old-school way of doing things and is incorrect, your credit card payments should not be entered as bills.
  This can be confusing. If you need additional help you can schedule a meeting and we’ll be happy to walk you through what you need to do: https://www.gentlefrog.com/meeting/
  -Jess
  Reply
Hello, Thank you for the article on Bill vs Expense in QBO – it was very helpful.
I would be so thankful if you were able to tell me how I enter the expenses on my clients CC statement that took place before the QBO company file start date (when I started working for them) and after my clients old bookkeeper stopped working for them. The gap is a month of transactions that were not entered in old system/file before handing everything over to me, so they were not included in Sales Tax filings, etc, and are wreaking havoc on my account reconciliations.
Thank you in advance!
Reply
1. Hi CJ,
  There are several ways you can enter missing transactions. You can manually enter them which Rachel explains how to do here: https://youtu.be/1-4woWHr8zo?t=283
  Or if you have a PDF bank statement for the missing month you can convert it to a QBO file and upload it into QBO using software like Money Thumb or Propersoft.
  If you’re still not sure how to go about entering these missing transactions you can schedule a 30-minute Zoom meeting with Rachel or Erica and they would be happy to walk you through the process: https://www.gentlefrog.com/meeting/
  -Jess
  Reply
Hello-
I just migrated (today!) my sole-proprietorship in QBO to better manage my books. I’m using cash accrual due to my simple business needs and don’t need QBO bill pay as my most of my service payees prefer paper checks. I linked my business checking account to QBO so QBO can see when the checks are debited from my account. My question is: If I ‘pay’ for a service expense today by placing a check in the mail from my business account, can I enter that expense at a later date (2 weeks into the future) so I can then match that expense to the debited amount in my checking account when the check is actually cashed? Or should I not enter the expense today and just wait for the check to clear and the amount to be debited from my account and then categorize that debited amount as the actual expense when QBO sees it? I know I’m trying to get around the proper use of Bills and Expenses in QBO but I’m just a very small business without need for detailed business reporting. I’m just trying to record expenses at the same time I write checks so I don’t forget I ‘paid’ those bills.
RAE
Reply
1. Hi RAE,
  It’s best to enter the check into QBO on the date that it’s written. If you’d like to discuss how to best use QBO for your business Rachel or Erica would be happy to go over it with you in a 15-minute meeting: https://www.gentlefrog.com/meeting/
  -Jess
  Reply
Hi Jessica,
I have confusion regarding the bill and expense. As above you booked 2 bills of burger, one was paid on cash basis and other would be paid after 10 days. then don’t you think it would impact dual? because we have booked two bills
Reply
1. Hi Adarsh,
  Yes, if you enter an expense and a bill, it will record it twice. The intent of the blog post is to show multiple ways to record something so that you (the watcher/reader) could see these in action and make determinations about what works best for your situation.
  -Jess
  Reply

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FAQs

Bill vs Expense in QuickBooks, What's the Difference? - Gentle Frog Bookkeeping and Custom Training? ›

A bill is money that your business owes but will pay at a later date. An expense is money that your business spends at the time of purchase.

Learn More ›

What is the difference between bill and expense in QuickBooks? ›

While Bills are for payables (received services or items to be paid later) Check and Expenses are for services or items paid on the spot. If you need to print a check, record an expense as a Check, instead of an Expense. If you paid something via credit card, use Expense.

See Details ›

How do you classify training in QuickBooks? ›

I need to enter a new Expense Category called "Training". How can I create that category?

Go to Accounting on the left panel.
Pick the New button.
Choose the Category Type (Expenses or Other Expenses).
Press the Detail Type.
Enter the Name.
The description is optional.
Push Save and Close.

Feb 10, 2020

View Details ›

What is the difference between expenses and items in QuickBooks? ›

Expense tab entries are direct posting to the Chart of accounts. Think of Items as More Meaningful to your Business activities. The Items List describes what your business makes, does, sells, buys, or buys and sells. Items control the flow of the data to accounts.

Discover More ›

What are the expense categories in QuickBooks? ›

Types of business expenses

Staff wages.
Rent or mortgage.
Utilities.
Insurance.
Business vehicles.
Equipment or equipment rentals.
Software.
Furniture.

More items...

Aug 3, 2022

Show Me More ›

What is the difference between a bill and an expense? ›

I'm here to provide you some insights about the difference between the two transactions. In QuickBooks, you'll enter Expense transaction at the time of purchase for goods or services that have already been paid. On the other hand, if you purchase and want to pay it later, then you'll enter the transaction as Bill.

Show Me More ›

What is an example of a bill vs expense? ›

▶ Bills- Recurring, they happen regularly and are predictable. Example rent. ▶ Expenses- Aren't bills but you spend money on them. Example groceries.

Learn More ›

What expense category is training? ›

Capital Expenses

Training that is not required for employees to do their jobs, but is instead meant to help them become more skilled or knowledgeable in their field (such as management training) is typically considered a capital expense.

Read On ›

How do I record training in QuickBooks? ›

You could create an account, for example Account type - 'Other expense', Detail Type - 'Other expense', *Name 'Training', and then select this account on the category drop-down when entering the expense transaction.

Read The Full Story ›

What type of business expense is training? ›

One common expense category for employee training is human resources. This is because training is often seen as a way to invest in employees and help them develop their skills and knowledge.

What are the two types of expenses in accounting? ›

Expenses can be defined as fixed expenses, such as rent or mortgage; those that do not change with the change in production. Expenses can also be defined as variable expenses; those that change with the change in production. These include utilities and the cost of goods sold.

Get More Info Here ›

Why create an expense in QuickBooks? ›

Entering your income and expenses gives a more complete picture of your business and profit. If you've already paid for a business expense, enter it as an expense. On the other hand, if you plan to pay for the expense in the future, enter it as a bill.

Show Me More ›

What are the two types of expense and explain the difference? ›

° Fixed expenses: Expenses, like bills, that must be paid each month and generally cost the same amount. Some fixed expenses, like a utility bill, may also be variable because the amount changes each month depending on usage. ° Variable expenses: Expenses that change in amount from month to month.

What expense category is bookkeeping? ›

There is no definitive answer to this question, as it will depend on the specific bookkeeping system used by a business. However, some common expense categories for bookkeeping include office expenses, professional fees, and software costs.

See Details ›

How do you categorize bookkeeping expenses? ›

There are three major types of financial expenses: Fixed, Variable, and Periodic. Fixed expenses are expenses that don't change for long periods of time, like office rent or vehicle lease payments for you or your staff. Variable expenses change from month to month. Such as utilities or meals and entertainment.

Read On ›

What are the three types of expense categories? ›

There are three different types of expenses: fixed, variable, and periodic.

Fixed expenses: Expenses that don't change in the upcoming future, like rent or mortgage payments.
Variable expenses: Expenses that change from month to month, like utilities.

More items...

Dec 6, 2023

Get More Info Here ›

Can you turn an expense into a bill in QuickBooks? ›

The process begins by logging into your QuickBooks Online account and navigating to the 'Expenses' tab. From there, locate the specific expense that needs to be converted to a bill, and click on it to access the details. Next, select the 'More' option, followed by 'Add to Bill'.

See Details ›

What is the difference between create bill and create expense in QuickBooks Online? ›

If you plan to pay for the expense in the future, enter it as a bill. You can record bills one at a time, or record multiple bills for multiple suppliers at once. On the other hand, if you've already paid for a business expense, enter it as an expense.

See Details ›

What does make expense and items billable mean in QuickBooks? ›

A billable expense is an expense you incur on your customer's behalf when you perform a work for them. You can easily record and track billable expenses so your customer can reimburse them when they receive their invoice.

Read The Full Story ›

What are expense transactions in QuickBooks? ›

In QuickBooks Online, expense and check transactions are used to report the services or products paid on the spot. If you want to enter the funds spent but you don't need to log it before it's paid, you'll have to track it as an expense transaction. This is also used if you paid something via credit card.

Read The Full Story ›