{"id":"concept:categorization","kind":"concept","label":"Categorization","synonyms":["categorizing a transaction","coding a transaction"],"definition":"Categorization is the decision of which account absorbed the other side of a bank transaction's money, turning a raw imported fact into a real, balanced journal entry.","summary":"Naming the other half of a transaction. The bank side is already known; categorizing says \"this $120.50 was Materials,\" and BalanceMCP posts the balanced entry automatically. It can be split across several accounts, previews before it writes anything, and skips (rather than fails) a whole batch over one bad line.","explanation":["Categorization is the decision of which account absorbed the other side of a bank transaction. The bank already stated the date, the amount and the description; what remains unknown is where the money went in accounting terms, and naming that account is the whole of the act.","It is a judgement, not a lookup, which is the reason it is the part an AI assistant is genuinely useful for and the part it can be wrong about. The same hardware-store charge is job materials for a builder and office supplies for an accountant, and nothing in the transaction itself distinguishes them.","Its output is a journal entry, so everything true of entries is true of the result: it balances or it is rejected, it cannot be edited afterwards, and undoing it means posting a reversal. A categorization is not a label attached to a transaction, it is a permanent record created from one.","One transaction can name several accounts at once when the pieces sum exactly to the total, which is a split rather than several transactions. What categorization never does is create money — it decides where existing money went."],"commonMistakes":["Assuming a saved rule will auto-categorize the next matching transaction — rules are stored but not applied automatically in the current version.","Assuming split amounts don't need to add up exactly — they're checked arithmetically and rejected if they don't sum to the transaction's total.","Approving a large batch's preview reflexively without a glance — catching an obviously wrong pattern in the preview costs nothing; catching it after confirming means reversing entries instead."],"category":"transactions","questions":[{"question":"What happens if a saved rule matches a new transaction?","answer":"Nothing automatic — in the current version, saved rules are stored but not applied. The transaction still shows up unposted and still needs to be categorized directly."},{"question":"Can one transaction be split across multiple accounts?","answer":"Yes, as long as the split amounts sum exactly to the transaction's total — categorized as one entry with multiple lines, not several separate transactions."}],"url":"/glossary/categorization","relatedTo":[{"id":"concept:bank-transaction","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Abank-transaction"},{"id":"concept:journal-entry","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Ajournal-entry"},{"id":"concept:split-transaction","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Asplit-transaction"},{"id":"concept:dry-run","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Adry-run"},{"id":"concept:uncategorized-transaction","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Auncategorized-transaction"},{"id":"tool:categorize_transactions","relationship":"references","weight":0.7,"api":"/api/knowledge/tool%3Acategorize_transactions"},{"id":"guide:how-to-categorize-a-bank-statement","relationship":"references","weight":0.7,"api":"/api/knowledge/guide%3Ahow-to-categorize-a-bank-statement"}],"referencedBy":[{"id":"concept:posting","label":"Posting","url":"/glossary/posting"},{"id":"concept:transaction","label":"Transaction","url":"/glossary/transaction"},{"id":"concept:bank-transaction","label":"Bank Transaction","url":"/glossary/bank-transaction"},{"id":"concept:split-transaction","label":"Split Transaction","url":"/glossary/split-transaction"},{"id":"concept:transfer","label":"Transfer","url":"/glossary/transfer"},{"id":"concept:refund","label":"Refund","url":"/glossary/refund"},{"id":"concept:uncategorized-transaction","label":"Uncategorized Transaction","url":"/glossary/uncategorized-transaction"},{"id":"concept:vendor","label":"Vendor","url":"/glossary/vendor"},{"id":"concept:month-end-close","label":"Month-End Close","url":"/glossary/month-end-close"},{"id":"concept:mcp-tool","label":"MCP Tool","url":"/glossary/mcp-tool"},{"id":"concept:dry-run","label":"Dry Run","url":"/glossary/dry-run"},{"id":"concept:spending-summary","label":"Spending Summary","url":"/glossary/spending-summary"},{"id":"guide:how-to-categorize-a-bank-statement","label":"How to Categorize a Bank Statement","url":"/guides/how-to-categorize-a-bank-statement"},{"id":"guide:how-to-let-an-ai-do-your-bookkeeping","label":"How to Let an AI Do Your Bookkeeping Without Letting It Corrupt Your Books","url":"/guides/how-to-let-an-ai-do-your-bookkeeping"},{"id":"tool:categorize_transactions","label":"Turn bank transactions into real, balanced bookkeeping","url":"/tools/categorize_transactions"},{"id":"tool:create_rule","label":"Save how you categorize a recurring charge","url":"/tools/create_rule"}],"license":"https://creativecommons.org/licenses/by/4.0/","attribution":"BalanceMCP — https://balancemcp.com"}