Using a Checking Account For Your Small Business

Comments Off on Using a Checking Account For Your Small Business 26 December 2010

The starting point of any simple bookkeeping system is the checking account or check register
(manual or electronic spreadsheet). The checking account must be reconciled with the bank
statement every month to assure that the check register is correct. (This will be discussed
in Chapter 10, Bank Reconciliation).

It is assumed that the user of this guide knows how to write checks and make deposits.

If at all possible, you should open a separate checking account for your business.
A corporation must have a separate account, with a resolution from the board of directors
to open the account. Some banks do not assess service charges for micro businesses under
a certain transaction activity level. A separate account will make it easier to record
your transactions, and will also appear more professional.

If you do not use a separate checking account for your sole proprietorship or partnership,
all business receipts and disbursements should be noted in your check register in a different
color or with a highlighter.

All disbursements should be made by check or electronic payment to ensure documentation of
the transaction; currency and coin disbursements should be made only for small incidental
expenses. Electronic payments include but are not limited to online bill paying, regular
pre-authorized payments, and debit cards. Checks with carbon duplicates are an excellent
way to keep track of checks written until you are proficient with basic bookkeeping. You
should write a few words on the lower left ‘memo” line of each check describing the purpose
of the check. Record checks and electronic disbursements in your check register as soon as
you write or process them and deduct them from the previous check register balance. D
ouble check your math!

A great deal of thought needs to be given to the people authorized to sign your business
checks and use your debit card. If you give this authority to another person, make sure
that you or your accountant prepare the bank reconciliation. Strange things have been
known to happen to checking accounts that have been entrusted to others.

All monetary receipts should be detailed on your deposit slips. As with checks, duplicate
deposit slips in a deposit book are an excellent way to keep track of your deposits in one
place for easy reference. All checks received should be listed by name and amount on the
back of the deposit slip. Currency and coins deposited will be listed as a total, but detailed
elsewhere in your bookkeeping system. Currency and coin receipts should be avoided, except in
retail businesses. Checks provide better documentation for your bookkeeping system and less
of a temptation to others. Credit card sales and other electronic receipts are deposited
automatically. Record deposits in your check register as soon as you make them or receive
them, and add them to your previous check register balance.

Exhibit A is the check register for the month of June, 2012 for the examples in Chapters 7, 8, and 10.

Bank statements with or without deposit slips and cancelled checks should be retained
per “Exhibit a,” Record Retention Schedule.

Want to learn more about Bookkeeping? Then checkout Micro Business!

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