> ## Documentation Index > Fetch the complete documentation index at: https://docs.getasset.com/llms.txt > Use this file to discover all available pages before exploring further. # Categorizing Transactions ### **Overview** Categorization assigns [Transactions](/getstarted/CoreConcepts#transactions) to the correct [Ledger(s)](/getstarted/CoreConcepts#ledgers) in the Chart of Accounts, ensuring accurate financial reporting and compliance. Accurate categorization is not just good bookkeeping—it’s a legal and financial necessity. Misclassified expenses can lead to tax complications, compliance issues, and financial misreporting. Yet, manual categorization is consistently reported as one of the most tedious responsibilities for [Business owners](/getstarted/CoreConcepts#businesses-your-smb-customers). At Asset, we’ve built a **best-in-class categorization system** that reduces the time and effort required to categorize Transactions, ensuring accuracy while allowing Business Owners to focus on running their companies. ### **How Categorization Works in Asset** Categorization happens directly on the **Transaction**. Each Transaction carries a review status and a set of **line items** that record how the Transaction is categorized, and each line item assigns an amount to a Ledger (its category). A Transaction with a single line item is categorized to one Ledger; a Transaction with several line items is split across multiple categories, with the line item amounts always summing to the Transaction amount. Each Transaction that enters Asset follows a structured categorization pipeline to determine those line items: 1. **Transaction Enters Asset** * When a new Transaction enters Asset, it starts out uncategorized: it has no line items and its `posted` flag is `false`. 2. **Categorization Pipeline** The Transaction moves through a multi-step process to determine the appropriate category: * **Transfers Detection** - Was the Transaction a transfer between accounts? * **Similarity-Based Categorization -** Have we previously categorized a similar Transaction? * **AI-Powered Categorization -** What does AI predict the Transaction should be? * **Uncategorized Transactions -** If no match is found, the customer provides the correct category. 3. **Business Review and Finalization** * Once the Categorization Pipeline assigns line items, the Transaction is categorized and its `posted` flag is set to `true`, and it is ready for Business review. * Asset recommends that [Tenants](/getstarted/CoreConcepts#tenants-your-platform) include a workflow step requiring Businesses to review and confirm assigned categories, ensuring accuracy. * Any Uncategorized Transactions should be manually assigned to complete the books for the period. ### **Categorization Attributes in Asset** To support customizable workflows, Asset exposes the following categorization attributes on each Transaction: | Attribute | Description | | :------------- | :--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | **Posted** | Whether the Transaction is posted to the books: `false` while it is uncategorized, and `true` once it has been categorized. | | **Status** | The categorization review status of the Transaction, derived from its journal entry: `bookkeeper_pending`, `business_pending`, or `confirmed`. A Transaction is finalized once its status is `confirmed`. Null when the Transaction has no status. | | **Line Items** | The categorized allocations of the Transaction. Each line item carries the `ledger_id` (and `category` name) it is categorized to and the `amount` allocated to it, signed in the same direction as the Transaction amount. Null when the Transaction has no categorization. | These attributes allow Tenants to build workflows that ensure Transactions are properly categorized while maintaining flexibility based on Business needs. ### **How to Categorize a Transaction in Asset** To categorize or re-categorize a Transaction, call the [Update Transactions for a Business](/api-reference/transaction/update-transactions-for-a-business) endpoint. The endpoint accepts an array, so one or more Transactions can be updated in a single request. ``` PATCH /v0/business/{business_id}/transactions ``` **Path Parameters:** * **Business ID** – Specifies the Business where the Transactions are being updated. **Request Body** – an array of update items, each with: * **Transaction ID** (required) – Identifies the specific Transaction to update. * **Type** (optional) – The updated type of the Transaction (`business` or `personal`). * **Tags** (optional) – Inline tag input to merge into the Transaction's tags. * **Line Items** (optional) – Replaces the Transaction's line items with a new set of categorized allocations. Each line item has: * **Ledger ID** – The Ledger (category) to allocate the amount to. * **Description** – The description of the line item. * **Amount** – The amount allocated to the line item, signed in the same direction as the Transaction amount. Provide a single line item to change the category, or several to split the Transaction across categories; the amounts must sum to the Transaction amount. **Re-categorize to a single category** (a \$89.23 outflow assigned entirely to Office Supplies): ```json theme={null} [ { "transaction_id": "txn_WQMDNUHpBThYSNh4AprDBo", "line_items": [ { "ledger_id": "ldg_Ns6rRRLYVZPh4cVB7MDby5", "description": "Office Supplies", "amount": -89.23 } ] } ] ``` **Split across multiple categories** (a \$100 outflow split evenly between Office Supplies and Travel): ```json theme={null} [ { "transaction_id": "txn_WQMDNUHpBThYSNh4AprDBo", "line_items": [ { "ledger_id": "ldg_Ns6rRRLYVZPh4cVB7MDby5", "description": "Office Supplies", "amount": -50.00 }, { "ledger_id": "ldg_WQMDNUHpBThYSNh4AprDBo", "description": "Travel", "amount": -50.00 } ] } ] ``` Categorizing a Transaction—assigning its line items—is what confirms it: its `status` moves to `confirmed` and it is finalized on the books. Once updated, the new categorization will reflect in the application. A typical Tenant workflow is to [List Transactions for a Business](/api-reference/transaction/list-transactions-for-a-business) (optionally filtering to unconfirmed Transactions), review each Transaction's line items, and call the update endpoint to set the correct Ledger on the line items, confirming the Transaction. ### **Categorizing High-Impact Transactions First** Not all Transactions carry the same weight. To help Businesses clear the most outstanding value with the least effort, Asset groups similar unconfirmed Transactions and ranks those groups by **impact**—the share of outstanding dollar value each group represents. Categorizing a high-impact group at once clears more of the books in a single step. To fetch these groups, call the [List high-impact Transaction groups to categorize](/api-reference/categorization/list-high-impact-transaction-groups-to-categorize) endpoint: ``` GET /v0/business/{business_id}/categorization ``` **Query Parameters:** * **limit** (optional) – Maximum number of Transaction groups to return (1–50, default 10). * **account\_ids** (optional) – Restrict to these External Account IDs, comma-separated. Each group in the response contains: | Field | Description | | :--------------------- | :------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | | **transaction\_ids** | The IDs of the unconfirmed Transactions in this group. Applying a category to all of them clears the whole group. | | **transaction\_count** | The number of Transactions in the group. | | **total\_amount** | The total dollar value of the Transactions in the group, summed as absolute amounts. | | **impact** | The share of outstanding dollar value this group represents (`total_amount` divided by the total dollar value of all unconfirmed Transactions). Higher means categorizing this group clears more outstanding value. | Example response: ```json theme={null} { "data": [ { "transaction_ids": [ "txn_WQMDNUHpBThYSNh4AprDBo", "txn_2xPbN4qFxA97NZHtxeLPUy" ], "transaction_count": 12, "total_amount": 1480.32, "impact": 0.18 } ] } ``` A recommended bulk-categorization workflow: 1. **Fetch the high-impact groups** from `GET /v0/business/{business_id}/categorization`. 2. **Fetch the Transactions** in a group (using the returned `transaction_ids`) so the Business can confirm they belong together. 3. **Update them all at once** by passing every Transaction in the group to `PATCH /v0/business/{business_id}/transactions` with the chosen line items, categorizing the entire group in a single request. Questions? Reach out via our [Contact form](https://www.getasset.com/get-in-touch).