How to Add a Transaction in QuickBooks Online

Recording individual transactions in QuickBooks Online is the foundation of accurate bookkeeping and reliable financial reporting. While seemingly straightforward, choosing the right method to add a transaction—whether an expense, a payment, or a sale—is key to keeping your books clean and avoiding reconciliation headaches. This guide breaks down the correct way to add any type of transaction in a step-by-step format, from the daily efficiency of bank feeds to the specific workflows for invoices, bills, and journal entries.

The Best Practice: Using Bank Feeds to Add Transactions

The most efficient and accurate way to get transactions into QuickBooks Online is by connecting your business bank and credit card accounts. This feature, known as the bank feed, automatically imports your transaction data, drastically reducing manual entry and preventing common errors like typos or duplications. It turns bookkeeping from a data entry task into a review and confirmation process.

Your primary goal should be to handle as many transactions as possible through the bank feed. Once connected, your recent transactions appear in the "Bank Transactions" tab, ready for you to categorize.

Here’s the step-by-step process for adding transactions from your bank feed:

1. Navigate to the Banking Screen: From the left-hand menu in QuickBooks Online, click on Transactions, then Bank Transactions. You'll see cards for each connected account and a list of transactions in the "For Review" tab. These are the transactions QuickBooks has imported but haven't yet been added to your books.
2. Review QBO's Suggestions: QuickBooks uses machine learning to suggest a payee and a category for each transaction based on your past activity and common user patterns. For example, a charge from "Chevron" will likely be pre-categorized as "Fuel" or "Automobile:Fuel."
3. Match or Add Each Transaction: You have a few options for each imported item:
   • Match: QuickBooks is excellent at finding transactions you’ve already entered manually (like an invoice payment or a bill payment) that correspond to the money coming in or out of your bank account. A "match" simply links the imported bank transaction to the existing QuickBooks transaction. This is crucial for preventing duplicates. If it finds a probable match, it will be highlighted in green. Simply confirm the details and click "Match."
   • Add: If the transaction is new and hasn't been entered elsewhere in QuickBooks (like a typical debit card purchase for office supplies), you need to "Add" it. Before you do, confirm the details:
     • Payee/Customer: Add the vendor or customer name. Adding vendors helps you run reports to see where you're spending your money.
     • Category: This is the most important field. This tells QuickBooks which account from your Chart of Accounts to post the transaction to (e.g., Telecommunication, Office Supplies, Rent Expense). Proper categorization is vital for accurate financial statements and tax preparation.
     • Memo: This is a great place to add extra detail for future you or your accountant (e.g., "Lunch meeting with ABC Client").
     • Billable: If this expense needs to be passed through and billed to a specific customer, check this box and select the customer.
4. Create Bank Rules for Recurring Transactions: If you have frequent, identical transactions (like your monthly Adobe subscription or rent payment), you can create a "Rule." This tells QuickBooks to automatically categorize and add these transactions every time they appear in your bank feed, turning a manual click into a fully automated process. You can create a rule directly from a reviewed transaction.

Manually Adding Income and Sales Transactions

Sometimes you need to record income before the money actually hits your bank account. This is usually managed by creating an invoice or a sales receipt. You should manually create these forms first, and then "Match" the payment when it comes through the bank feed.

Creating an Invoice

Use an invoice when you provide a client with goods or services and they will pay you later. Creating an invoice properly records the sale and adds the amount to your "Accounts Receivable"—the report that tracks who owes you money.

1. Navigate to the + New button in the top left corner.
2. Under the "Customers" column, select Invoice.
3. Fill out the invoice form completely:
   • Customer: Choose the customer from the dropdown or add a new one on the fly.
   • Customer email: Ensure this is correct so your customer receives the invoice.
   • Terms: Select the payment terms (e.g., Net 15, Net 30, Due on receipt). This automatically calculates the due date.
   • Invoice date: The date you are billing the customer.
   • Product/Service: Select the item you are selling. Using product and service items automates the bookkeeping by linking the sale to the correct income account on your Chart of Accounts. If you haven't set these up, you can map the sale directly to an income account in the "Category" field instead.
   • Amount & Tax: Enter the amount. If you are required to collect sales tax, ensure the sales tax module is set up and the correct rate is applied.
4. Click Save and send to email the invoice directly to the customer, or choose another save option.

Later, when the customer's payment shows up in your bank feed, QuickBooks will prompt you to "Match" it to this open invoice, closing the loop.

Creating a Sales Receipt

Use a sales receipt when you receive payment at the same time you provide the goods or services. This is common for e-commerce, retail, or point-of-sale transactions. A sales receipt records the income and the payment simultaneously, bypassing Accounts Receivable.

1. Navigate to the + New button.
2. Under the "Customers" column, select Sales Receipt.
3. Fill out the form similar to an invoice: As before, add the customer, date, and product/service details.
4. The Critical Step: Select a "Deposit to" Account: This field tells QuickBooks where the money went.
   • If the money went directly into a specific bank account (e.g., a credit card payment processed through a merchant), select that bank account here. When the deposit appears in your bank feed, QuickBooks should find a perfect "Match."
   • If you received cash or checks that you group together for a single bank deposit later, choose an account called Undeposited Funds. This special account holds the funds until you make the physical deposit. You then use the "Bank Deposit" feature in QuickBooks to group multiple payments into the single deposit that will appear on your bank statement, making reconciliation simple.
5. Click Save and Close.

Manually Adding Expense Transactions

Just like with income, you'll sometimes need to record an expense before it shows up on a bank or credit card statement. This is done with an "Expense" form for immediate payments or a "Bill" for items you’ll pay later.

Entering an Expense

Use the "Expense" form when you pay for something immediately with a debit card, credit card, cash, or e-transfer. Recording it this way ensures your expenses are up-to-date even before the transactions sync via the bank feed.

1. Go to the + New button.
2. Under the "Vendors" column, select Expense.
3. Complete the key fields on the form:
   • Payee: Select the vendor you paid.
   • Payment account: Tell QuickBooks how you paid. Was it from the business checking account, a specific credit card, or petty cash? This is vital for accurate reconciliation.
   • Payment date: The date of the purchase.
   • Category Details: In this section, select the expense account from your Chart of Accounts that this purchase belongs to (e.g., Meals & Entertainment, Dues & Subscriptions).
   • Description: Add a memo for what the purchase was for.
   • Amount: The total amount of the expense.
4. Attach a digital copy of the receipt. This is a best practice for creating an audit-proof trail.
5. Click "Save and close." When this transaction comes through the bank feed, QuickBooks will offer to "Match" it.

Entering a Bill

Use the "Bill" form when a vendor sends you an invoice and you will pay them later. This correctly records the expense in the period it was incurred and adds the amount to "Accounts Payable"—the report that tracks what you owe to others.

1. Navigate to the + New button.
2. Under the "Vendors" column, select Bill.
3. Fill out the bill details:
   • Vendor: Select the vendor who sent the bill.
   • Terms: Choose the payment terms (e.g., Net 30), which will automatically populate the due date.
   • Bill date: The date on the vendor's invoice.
   • Category Details: Choose the appropriate expense account for the item or service you purchased.
   • Amount: The total due.
4. Click "Save." This bill now lives in your Accounts Payable. You can run an A/P Aging report at any time to see all your outstanding bills. To pay it, use the "Pay Bills" workflow, which will generate the corresponding payment transaction from your bank account.

For Advanced Users: Making a Journal Entry

A journal entry is a tool accountants use to make direct adjustments to the general ledger. It should be used sparingly and with caution by non-accountants because it bypasses the user-friendly forms and can easily throw your books out of balance. Debits must always equal credits.

Journal entries are best used for non-cash transactions or complex adjustments, such as:

• Recording depreciation expense for the month.
• Reclassifying an expense from one account to another.
• Making year-end adjustments provided by your CPA.

Here’s how to make a journal entry to reclassify an incorrect coding:

1. Go to the + New button.
2. Under "Other," select Journal Entry.
3. Set the journal date.
4. Imagine you incorrectly categorized a $150 software purchase under "Office supplies."
   • Line 1: Select the correct account, Software & Subscriptions, and enter $150 in the Debits column. (Debits increase expense accounts).
   • Line 2: Select the incorrect account, Office Supplies, and enter $150 in the Credits column. (Credits decrease expense accounts).
5. Add a clear memo explaining what you're doing, such as "To reclassify Basecamp subscription from Office Supplies."
6. Confirm that total debits equal total credits, then click "Save."

When used correctly, journal entries provide a powerful way to keep your financial records precise.

Final Thoughts

From the efficiency of bank feeds to the procedural requirements of invoices and bills, QuickBooks Online provides multiple ways to add transactions. The key is choosing the right method for the situation to ensure every dollar is accounted for correctly, creating reliable financial reports that you can use to make smart business decisions.

Knowing how to enter a transaction is the first step, but being certain of its tax implications is what separates simple bookkeeping from strategic financial management. Misclassifying an asset purchase or a complex service expense can have significant tax consequences. We built Feather AI to eliminate that uncertainty, giving you immediate, citation-backed answers to your tax questions. It allows you to categorize every transaction with confidence and shift your focus from tedious research to valuable client advisory work.