Junk drawer. I think everyone is familiar with the one drawer in the home, usually the kitchen, where everything that doesn’t have a place ends up. Pen, pencils, paper, eyeglasses, left over swag from networking, business cards, old keys, toys, hammer, tacks, etc. My kitchen junk drawer expanded to three drawers over the 5 years in this house. When tools started making their way from the garage to the junk drawer, things started to get serious. The cause, of course, is we’re too lazy to put things back where they go. Or afraid to throw them away. Right? We just might need that tattered take out menu.
My experience with reviewing others’ bookkeeping can sometimes be the same. Within the Chart of Accounts, we often find accounts titled “miscellaneous” and “uncategorized.” Within those accounts, we toss all we are unsure of or too lazy to find out where it should really be posted.
If the client is doing their own bookkeeping, it’s difficult to blame them for categorizing transactions in those accounts. They don’t know better, and when using accounting software, the software will create a Chart of Accounts for them. It’s done automatically when they select an industry at set up. Intuit QuickBooks includes a “miscellaneous” account at set up, along with an “ask the accountant.” Both are easy places to post a transaction and “figure it out later.”
The Definition of Miscellaneous Expense
In accounting, “miscellaneous expense” may refer to a general ledger account in which small, infrequent transaction amounts are recorded. The account miscellaneous expenses should be used as the last resort. For example, the small bank fees would be better recorded in a separate account, such as “bank service charges” instead of recording them in miscellaneous expenses.
As stated in the accounting definition, “The account miscellaneous expenses should be used as a last resort.” I don’t know a lot of small business owners or entrepreneurs that have read that definition prior to picking an accounting software from the many free-to-try options and set off on their do-it-yourself bookkeeping journey. No, they just skim through the set up and start entering invoices and collecting revenue – invoices for revenue because that is the most important part.
It’s not until weeks, months, even years sometimes that the data they’ve entered is needed to put together financial reports, tax numbers or perhaps apply for a loan. If all that time every item they were unsure of was posted to miscellaneous, uncategorized or ask the accountant, that junk drawer is really full, and cleaning it out to define where those things actually go is very time consuming.
Everything really does have a place. There is no miscellaneous or uncategorized. I’d even venture to say there’s no ask the accountant unless you’re actually working with an accountant on a monthly basis and you actually ask.
So, How Do You Avoid Miscellaneous, Uncategorized or Ask the Accountant?
Create an account in your bookkeeping, and call it something you will look at. Title it “I don’t know,” “Ask ‘put your name here’,” or “I need a help.” The most important thing is to look at your Profit and Loss and Balance Sheet every month and correct these things early. Don’t let the junk drawer get out of hand.
Need Help with Bookkeeping & Accounting?
TheOfficeSquad’s trained professionals have over 30 years of bookkeeping and accounting experience for small- to medium-sized businesses. Each month, your “squad” can handle as much or as little as you’re ready to hand over, including accounts receivable, accounts payable, monthly reconciling of accounts, reviewing transactions to ensure they’re in the correct account, and producing financial statements. Ready to take some tasks off your plate? We’re standing by. Contact us at 702-649-3495 to learn more or get started today!
We know what it’s like to build a business from the ground up, and we understand the importance of a good support system.
TheOfficeSquad combines the precision and discipline of the military with training in the administrative and bookkeeping fields, all while maintaining the understanding and urgency of owning a small business.
Our mission is to change the way that America grows small business.
Let's do it faster, better, and smarter.