Now that you have your shiny new handmade checking account, are you wondering how to use it and what you need to keep track of?
I’m not trying to be mean, but so many people these days have no idea how to use that paper register book that comes with a checking account.
According to my granddaughters (ages 18 and 21), how to use that paper register book that comes with your checking account isn’t taught in high school any more. They both came to me for help when they got their first personal checking account.
They tell me that most people just log into their bank, see what the bank says their balance is, and just go from there. That’s fine (I guess) for your personal account.
But, everything changes when you are a business.
This is where the bookkeeping part comes into play. What, did I just hear you groan? Ok, come on, enough of that! Put on your big girl panties and suck it up buttercup.
This bookkeeping stuff is serious business!
Your handmade business checking account is the backbone of your financial information.
Most of your business expenses can be deducted on your business tax return (Schedule C if you’re a sole proprietor) at tax time.
Deducting business expenses is a good thing!
The more business expenses you can deduct, the less money you owe the IRS!
If you don’t have the income or expense transaction recorded somewhere, then you just aren’t going to remember to deduct it – OR – you’re going to spend a ton of time digging through an entire years worth of email receipts and paper receipts trying to get ready for tax time.
And what if you’ve lost some of those receipts? Well then, you just lost the business deduction as well.
If this is the way you’re currently doing things, it’s little wonder that you hate bookkeeping!
So, let’s try something new!
There are lots of way to organize your financial information. You can use spreadsheets or invest in real bookkeeping software.
You can even use a spreadsheet instead of that lovely paper register that came with your shiny new business checking account.
Find a system that works for you, that’s easy to update, and easy for you to review and understand. And make a point to update it EVERY week!
Let’s record that opening deposit in your brand new handmade business checking account!
Before you get all excited about recording that very first transaction in your handmade business checking account, we first need to determine WHERE that money came from.
If you used personal money to start your checking account
Then this is considered an Owner Contribution and would NOT be included in Income. Meaning you took this money from your personal account to start your business account. Congratulations, you’ve just built Equity in your business.
You would record the deposit and flag it as an Owner Contribution. If you use a spreadsheet system it would look something like this:
If you dug through your personal account and figured out how much money was there that actually belonged to your business and used that as your opening balance.
This would be considered a “special bookkeeping transaction”. Because hopefully you’ve already recorded the income from those sales in your bookkeeping system. So now you’re just using that money to start your handmade business checking account.
You would record the deposit and flag it as a Special Transaction. If you use a spreadsheet system, it would look something like this:
I hope you found this post helpful. If you have a bookkeeping question feel free to leave it in the comments or shoot me an email through my Contact Us page. I’ll be happy to help.