The best way to track QuickBooks transactions for grant reporting is through the Customer:Job field. QuickBooks calls any entity that normally increases your income a Customer, and each Customer can have multiple Jobs; hence the term Customer:Job. Typically, a funder will be set up as a Customer and the particular grant is the Job. For example, if Tides Foundation is the funder and the grant is the Underdog Fund for 2014, the Customer:Job would be Tides Foundation:Underdog Fund 2014.
The grant is initially entered to the Customer:Job, and expenses that are covered by that grant are tagged with the same Customer:Job. If desired, you can use the Billable feature to generate invoices from QuickBooks. This is useful for reimbursement grants, where funds are spent by the organization first and then paid back upon invoicing the funder. To allow invoicing via Customer:Job, check the Billable box for an expense. When you are ready to create a reimbursement invoice, click Customers, Create Invoices, and select the Customer:Job.
For more details on the Customer:Job field, see Vendors and Customer:Job in reports.