Categorization
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.
In short
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.
Also called: categorizing a transaction, coding a transaction
You might have arrived here asking
- What account does this charge go in?
- How do I sort my bank transactions?
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.
What people get wrong
- 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.
Common questions
- What happens if a saved rule matches a new transaction?
- 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.
- Can one transaction be split across multiple accounts?
- 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.
Machine-readable: /api/knowledge/concept:categorization