Bill vs Expense in QuickBooks, What’s the Difference?

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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 other by 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.

Creating an expense in QuickBooks Online.

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.

Meals expense created in QuickBooks Online.

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.

Expense viewed in Profit and Loss report in QuickBooks Online.

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.

Searching for the Accounts payable aging summary report in QuickBooks Online

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

Accounts payable aging summary report in QuickBooks Online

I’ll now enter this transaction as a bill so you can see the difference.

Entering a Bill into QuickBooks

To create a bill click the quick create button and select “Bill” from the Vendor’s column.Creating a Bill from the menu in QuickBooks Online

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

Creating a bill in QuickBooks Online 

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.

Viewing accrual accounting method in the Profit and Loss report of QuickBooks Online

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.

Viewing the Profit and Loss report with accounting method set to cash

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

Viewing a bill in the A/P Aging summary report in QuickBooks Online

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.

Paying a bill from the quick create menu in QuickBooks Online

The first step will be to choose a payment method.

Choosing a payment account when paying a bill in QuickBooks Online

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.

Entering a check number when paying a bill with a checking account in QuickBooks Online

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.

Paying a bill in QuickBooks Online

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.

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If you’d like to watch me walk through this process check out the video below:

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16 Responses

  1. 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?

    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/

  2. 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

    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

  3. 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!

    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

  4. 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!

    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

  5. 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.

    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

  6. 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!

    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

  7. 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

  8. 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

    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

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  • Save time and money by streamlining your bookkeeping process and reducing errors.

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