Your Employer wants to see profit in department A separate from department B. What is the best way to set this up?

The best way to set this up is to turn on Classes and establish each department as its own class. Utilizing the class feature in QuickBooks Online allows for effective tracking and reporting of financial data by department. By assigning transactions to specific classes, you can generate profit and loss reports tailored to each department, providing clear insights into their individual performance.

This method ensures that all financial activity can be consolidated in a single file while still being reported distinctly for each department. It also simplifies the management of financial data since you won't need to juggle multiple files or accounts. Furthermore, classes can be included in reports, making it easy to compare performance across different departments.

The other options, while potentially feasible, do not offer the same level of efficiency or clarity. Creating sub-accounts might complicate account management and could result in an unwieldy chart of accounts, while using separate files could lead to issues with data consistency and reporting. Lastly, labeling transactions manually would require additional effort and could increase the likelihood of errors. Therefore, using classes represents the most streamlined and effective approach for tracking the performance of each department.