Three common categorization traps:

1. The Loan Trap: Don’t categorize your entire loan payment as an expense. Only the interest hits your P&L; the principal part of the payment just moves the needle on your Balance Sheet liabilities.
2. The Equipment Blunder: Buying a $5,000 laser cutter isn’t a ‘supplies expense.’ It’s an Asset. If you put it on your P&L all at once, you’ll think you’re losing money when you’re actually just trading cash for equipment.
3. Mixing Personal & Business: Categorizing your personal Netflix sub or a grocery run as a ‘Business Expense’ muddies your data and puts a target on your back for an audit. Keep them separate to keep your Equity clean.”

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