Creating categories for your products, services and expenses (Requisitions) will help you organize your catalogs based on categories.
To create a new category go Setup -> Prod / Service Categories
Click on “Add New Category” enter a name and select the category type where the category will be used. Products and services category is used on quotes and Requisition category is used on requisition module only. If you want to use the same category for both, add the category name twice.