What's the difference between an Item and an Account in QuickBooks Online?

Accounts live on the chart of accounts (P&L and balance sheet). Items are what you sell/buy on transactions. Items point to accounts — so an item called 'Framing Labor' might post to a 'Labor COGS' account. Reports use accounts; invoices use items.

Should I use Categories, Classes, or Items for job costing?

All three, for different jobs. Items = what the transaction is (framing, lumber). Projects = which job it's on. Classes = optional second dimension like division or entity. Categories are just a folder for organizing the item list.

Can I change an item's income or expense account later?

Yes. QBO will ask whether to update historical transactions or only new ones. Update historical only if you're consciously reclassing — otherwise pick 'new transactions only' to avoid rewriting closed-period reports.

How many products and services items should we have?

As many as your reporting needs — no more. For a small contractor, 30–80 well-mapped items is normal. For a builder using detailed cost codes, 200+ is common. Fewer well-mapped items always beat a huge list nobody uses correctly.

QuickBooks Online Guide · Products & Services

How to use Products & Services mappings in QuickBooks Online

Products & Services items are the bridge between what you sell on an invoice and what shows up on your P&L. Map them wrong and your income accounts, COGS, and job-cost reports all drift. Here's how to build a clean item list that stays reliable as you scale.

Who this is for: Any QBO user — especially construction and product businesses — who wants invoices, job costing, and reports to tie out automatically.

Step-by-step

1. Pick the right item type
Non-inventory: materials you buy for a specific job. Service: labor and cost codes (framing, drywall). Inventory: stock you track quantities on (only in Plus/Advanced). Bundle: a group of items sold together. Use the simplest type that fits.
2. Turn on two-sided items
Check 'I purchase this product/service from a vendor.' Two-sided items let you use the same item on both a bill (posts to expense/COGS) and an invoice (posts to income). This is what enables Estimate vs. Actual reporting.
3. Map each item to the correct income and expense accounts
Income → the revenue line you want on the P&L. Expense/COGS → the cost bucket (Materials, Labor, Subcontractors). Keep the mapping consistent across items — every framing item points to Labor COGS, every lumber item to Materials COGS.
4. Build a construction cost-code hierarchy with parent items
Group items under parent categories: 01-General Conditions, 02-Site Work, 03-Concrete, etc. Sub-items roll up to the parent on reports. Match your item hierarchy to how you estimate jobs so estimate vs. actual is apples-to-apples.
5. Assign sales tax categories
For each item, set the sales tax category (taxable, nontaxable, or a specific product category). QBO's Automated Sales Tax uses this to calculate the right rate — critical in Washington where labor is often taxable.
6. Set default rates and cost — but keep them editable
Enter a default sales price and default cost for each item. On invoices and bills, you can still override per job. Defaults just make data entry faster and keep new team members from guessing.
7. Audit item mapping quarterly
Once a quarter, run the Product/Service List report with income + expense accounts. Look for items pointing to the wrong account, items with no expense mapping, or duplicates. Fix mappings before they contaminate a full year of reports.

Pro tips

Prefix items with a cost-code number (e.g., 03-100 Concrete Slab) so they sort in estimate order.
Never delete an item that has history — mark it inactive instead, so historical reports stay intact.
Use item categories (not just parents) to filter the item list in long chart-of-accounts setups.
Import items via CSV during setup — much faster than adding one at a time.

Common pitfalls

One-sided items (income only) — you'll enter bills as Category detail and lose Estimate vs. Actual entirely.
Every item pointing to a generic 'Sales' income account — makes it impossible to see revenue mix.
Duplicate items ('Framing Labor' and 'Labor - Framing') that split reports.
Renaming items instead of creating new ones — historical transactions get relabeled and confuse audits.

Frequently asked questions

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How to use Products & Services mappings in QuickBooks Online

Step-by-step

1. Pick the right item type

2. Turn on two-sided items

3. Map each item to the correct income and expense accounts

4. Build a construction cost-code hierarchy with parent items

5. Assign sales tax categories

6. Set default rates and cost — but keep them editable

7. Audit item mapping quarterly