How to Set Up Cost Center Accounting Feature in QuickBooks?

In the world of business, tracking expenses and revenues across various segments is essential for informed decision-making. QuickBooks offers a powerful tool to achieve this—Cost Center Accounting. By enabling this feature, you can gain valuable insights into how different departments contribute to your business’s financial health. In this guide, we’ll walk you through the process of setting up and using Cost Center Accounting in QuickBooks.

Understanding QuickBooks Cost Center Accounting

Before diving into the setup process, let’s grasp the concept of Cost Center Accounting within QuickBooks – 

Cost center and Profit center – These are terms from the realm of management accounting. QuickBooks employs them to help you assess the performance of different facets of your business. These centers are represented by the Class List feature, and they allow you to track both expenses and income according to specific categories.

  • Profit center – This is a segment of your business where your primary goal is profit generation. It’s where your revenue streams flow into.
  • Cost center – This is a part of your business that functions to fulfill the needs of one or more profit centers. It’s responsible for providing services and support to other areas of your operation.

Now that we’ve clarified the terminology, let’s proceed with setting up Cost Center Accounting in QuickBooks.

Step-by-Step guide to enable cost center accounting

To activate Cost Center Accounting in QuickBooks, you can utilize either the Class Tracking or Location Tracking options. Follow these steps to get started – 

Step 1 – Access your QuickBooks account

Log in to your QuickBooks account to begin the setup process.

Step 2 – Enable class tracking or location tracking

  • Class tracking – If you prefer Class Tracking, go to the “Edit” menu and select “Preferences.” Then, navigate to the “Accounting” section and choose “Company Preferences.” Here, you can enable Class Tracking.
  • Location tracking – Alternatively, if you opt for Location Tracking, access the “Edit” menu, select “Preferences,” and choose “Sales & Customers” or “Purchases & Vendors” based on your tracking needs. Under the “Company Preferences” tab, you can enable Location Tracking.

Step 3 – Create cost and profit centers

Now, it’s time to set up your cost and profit centers. These could represent different departments, projects, or divisions within your business. Be sure to define them clearly so that you can allocate expenses and revenues accurately.

Step 4 – Assign transactions to centers

As you enter transactions into QuickBooks, make sure to assign them to the appropriate Cost or Profit Center. This step is crucial for tracking income and expenses accurately.

Step 5 – Generate reports

Utilize QuickBooks’ reporting capabilities to generate insightful reports on your Cost and Profit Centers. These reports will provide a clear picture of how each segment is performing financially.

By following these steps, you can effectively implement Cost Center Accounting in QuickBooks and gain valuable insights into your business’s financial landscape. This feature empowers you to make informed decisions, optimize resource allocation, and drive profitability across different areas of your operation.

How to Utilize Cost Centers in QuickBooks Online?

In the dynamic world of business, effective expense and income tracking across various segments can make all the difference. QuickBooks Online offers a valuable tool to achieve this—Cost Centers. By activating location or cost tracking, you can conveniently monitor account balances based on different departments, locations, business offices, properties, or any other segments crucial to your organization. Here’s a step-by-step guide on how to make the most of Cost Centers in QuickBooks Online:

Enabling expense and income tracking

To initiate expense and income tracking based on Cost Centers, you’ll need to enable either the “Track Locations” or “Track Classes” feature. Follow these straightforward steps – 

  • Login to your QuickBooks Online account – Begin by logging into your QuickBooks Online account.
  • Access account and settings – Click on the “Gear” icon located in the top-right corner of the screen. From the dropdown menu, select the “Account and Settings” option.
  • Switch to the “Advanced” tab – In the Account and Settings menu, navigate to the “Advanced” tab, which contains more advanced customization options.
  • Select the “Categories” section –  Under the Advanced tab, locate and select the “Categories” section.
  • Enable tracking – Within the Categories section, you will find options to enable tracking. You can choose either “Track Locations” or “Track Classes,” depending on your tracking needs.
  • Save and confirm – Once you’ve made your selection, click the “Save” button to confirm your changes. Then, click “Done” to exit the settings menu.

Note – If your organization’s different branches require separate reporting for payroll taxes or state taxes, it’s advisable to create an additional QuickBooks Online company. Keep in mind that setting up a second subscription is necessary to create this additional company.

How to Set Up Cost Centers in QuickBooks Desktop

QuickBooks Desktop users can also benefit from the Class Tracking feature to track balances by department. Here’s how to set up Class Tracking and establish class categories for accounts and expenses:

Step 1 –  Enable class tracking

  • Open your QuickBooks Desktop company file.
  • Click on the “Edit” button located in the top menu.
  • Select the “Preferences” option from the dropdown menu.
  • In the Preferences window, navigate to the “Accounting” section.
  • Click on the “Company Preferences” tab.
  • Here, you’ll find the checkbox labeled “Use class tracking for transactions.” Select this checkbox to enable Class Tracking.
  • If you’d like a reminder to assign a class, check the “Prompt to assign classes” checkbox.
  • Confirm your settings by clicking the “OK” button.

Step 2 –  Setting up class categories for accounts and expenses

  • Go to the “Lists” menu in QuickBooks Desktop.
  • Select “Class List” from the dropdown menu.
  • Click on the “New” button using the “Class” drop-down menu.
  • Add a name for the class you wish to create.
  • If it’s a subclass, check the “Subclass of” checkbox and select the appropriate parent class.
  • Click the “OK” button to add the class.

By completing these steps, you’ll have successfully set up Class Tracking in QuickBooks Desktop. This feature allows you to assign classes to various transactions, including estimates, invoices, sales receipts, bills, and more. It simplifies report generation, enabling you to compare balances across different departments, multiple classes, or locations effortlessly.

Assigning Cost Centers to Products in QuickBooks Online

Efficient document synchronization and financial management require precise allocation of cost centers to your products in QuickBooks Online. This process ensures that your products seamlessly integrate with the Chart of Accounts in your QuickBooks Online account. Keep in mind that each product can be associated with only one cost center. To assign a cost center to a product in QuickBooks Online, follow these straightforward steps – 

  •  Log in to your QuickBooks Online account and navigate to the “Settings” menu.
  • From the Settings menu, choose the “Products” option.
  • Pick any of the products for which you wish to assign a cost center. This selection will lead you to the “Product Details” section.
  • Within the Product Details section, you’ll find the “Cost Center” option. Click on it.
  • Select the appropriate cost center to assign it to the specific product. Remember, you can only assign one cost center per product. Ensure you select the most fitting one.

Once you’ve completed these steps, you’ll notice a numerical value associated with the product on the Product Details page. This means that the product is now synchronized and can be seamlessly used in quotes, estimates, or invoices within your QuickBooks Online account.


QuickBooks’ class tracking feature offers you the ability to monitor your account balances by business office, department, or specific properties. If you seek effective segmentation and financial tracking, setting up QuickBooks cost center accounting is the way to go.

In this guide, we’ve discussed how to enable class tracking features in QuickBooks Online, QuickBooks Online Plus, and QuickBooks Desktop versions. By incorporating cost centers into your account, you can easily track income and expenses, empowering you to make informed financial decisions.

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Frequently Asked Questions

What is the Cost center accounting feature in QuickBooks, and why is it important for businesses?

The Cost center accounting feature in QuickBooks allows businesses to allocate their expenses and revenues across different segments or departments within the organization. It’s important because it provides granular insights into how each department is contributing to the overall financial health of the company. This feature enables businesses to make informed decisions, allocate resources efficiently, and optimize their operations.

How does enabling Class Tracking in QuickBooks help in managing Cost Centers and Profit Centers?

Class Tracking in QuickBooks enables the distinction between Cost Centers and Profit Centers. It allows you to categorize transactions by department, location, or any other segment relevant to your business. This makes it easier to monitor income and expenses, generate customized reports, and gain a deeper understanding of each center’s performance.

Can I assign multiple cost centers to a single transaction in QuickBooks?

No, QuickBooks allows you to assign only one cost center per transaction. This ensures clear tracking and reporting of expenses and income related to a specific department or segment.

What are some practical examples of how Cost Center Accounting can benefit businesses in terms of financial analysis?

Cost Center Accounting can benefit businesses in various ways. For example, a retail chain can use it to analyze the profitability of each store location. A manufacturing company can track production costs by department. Service-based businesses can monitor income and expenses for different service lines. These insights help in making strategic decisions, optimizing resources, and identifying areas for improvement.

Is it possible to retroactively assign cost centers to transactions that have already been recorded in QuickBooks?

Yes, you can retroactively assign cost centers to transactions in QuickBooks. Simply edit the transaction, choose the appropriate cost center, and save the changes. This ensures accurate historical tracking and reporting.

What’s the difference between Cost Centers and Profit Centers in QuickBooks, and how do they impact financial reporting?

Cost Centers are segments within your business that are focused on servicing the requirements of Profit Centers. Profit Centers are areas of your business where you aim to earn profits directly. The distinction helps in financial reporting by providing separate insights into revenue generation (Profit Centers) and cost allocation (Cost Centers), leading to a more comprehensive view of your business’s financial performance.

Can I use Cost Center Accounting for both income and expenses, or is it limited to specific transaction types?

Cost Center Accounting in QuickBooks can be used for both income and expenses. You can categorize various transaction types, including sales, purchases, payroll, and more, according to your chosen Cost Centers.

Are there any limitations or considerations businesses should be aware of when implementing Cost Center Accounting in QuickBooks?

While Cost Center Accounting is a powerful tool, businesses should be mindful of assigning cost centers consistently to ensure accurate tracking. It’s essential to train employees and maintain clear documentation for smooth implementation.

How can I generate customized reports using Cost Center data in QuickBooks to analyze departmental performance?

You can create customized reports in QuickBooks by using the Class Tracking feature. Simply select the desired class (Cost Center) when generating reports, and QuickBooks will provide detailed insights into each department’s performance, allowing you to make data-driven decisions.

What steps should I take if I want to modify or delete a Cost Center in QuickBooks?

To modify or delete a Cost Center in QuickBooks, go to the Class List (for QuickBooks Desktop) or the Class Tracking settings (for QuickBooks Online), select the Cost Center you wish to edit or delete, and follow the on-screen instructions. Be cautious when deleting, as it may impact historical data. Always backup your data before making significant changes.

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