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

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Bill or Expense?

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

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