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about e-ccounting
e-ccounting is a monthly
newsletter focusing on accounting tips and solutions.
Our mission is to educate our clients, students and
readers by offering these resources in response to
your ongoing questions.
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Business Scenario
- Business Banking
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I'm self-employed, do I need a separate bank account
for my business transactions or can I use my
personal account?
We will also address ordering company cheques, as
this is another thing we are often asked about.
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| Answer |
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To answer the first part of the question, as a self-employed proprietor you do not need a separate bank account to enable you to capture all your business transactions however it is highly recommend.
It is much easier to follow your business cash flow when it isn't nestled in between all your personal items.
Other advantages for having a separate business chequing account are, it eases the bookkeeping process and it establishes a professional image.
Disadvantages for not having a business account would be it is impossible to do a true bank reconciliation and a bank account will not be shown on your Balance Sheet (the activity would be through your draw account).
The only reason to not have a separate account is to keep costs down.
To address part two, information on ordering company cheques. (I discuss where to order them in the Recommendations section.)
There are several things to consider when ordering cheques, here's a list to consider to ensure you get it right the first time:
- Manual versus computerized cheques (they will
have proper cheques for all the popular accounting
software packages including: Simply, QuickBooks,
etc.)
- Colour
- Signature lines (one, two or more)
- Logo (optional)
- Starting number (not necessarily 001)
- Type - I recommend 3 part, which includes the
cheque portion and two stubs, one to send and one to
keep for your records.
- New security features and date specifications
(ensure your supplier is on top of these new criteria).
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| Accounting Tip |
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Although I do not encourage it, if you choose not to
use a bank account I would like to suggest how to
ensure all the business activity is recognized,
recorded and obvious to an outsider (ie.
auditor).
Once you've received your personal bank statement,
photocopy it and highlight the items relating to your
business.
Ensure all these transactions are entered into your
accounting system and that all the back-up is attached
and filed.
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| Did You Know ? |
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At month end, once the bank statement has arrived,
although (you may feel) all transactions are entered,
the bank account should be reconciled against your
accounting system to ensure everything has been
recorded.
This would be the ideal time to ensure all bank
charges, automatic payments and items purchased
via debit are accounted for.
As well, this will ensure the amounts match.
It is at this time you can also make precautions
against fraud (this will be discussed further in the April
issue of e-ccounting.)
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For more Did You Knows? |
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| Definition |
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It was difficult to come up with a word you may need
defined relating to banking.
Instead in this issue I thought I would address other
banking options for business, other than just a
chequing account.
Additional options for funds that are not needed right
away would be:
- Savings account
- US funds (or other currencies) account
- Investments: Short or Long term (ie. GIC's)
And on the opposite side of things, when funds are needed:
- Line of Credit
- Loan: Short or Long term
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For more definitions ... |
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| Sandy's Recommendations |
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Business cheques can be ordered at various suppliers. However there are two reputable sources that I highly recommend, they are:
- Through your bank institution - which is through Davis and Henderson.
- NEBS - a stationery supplier, who I use for all my client's cheques, and other (computerized) stationery needs (1-800-465-2888).
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Next Issue - Preventing (accounting) Fraud
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Desperate times lead to desperate measures - some easy steps to prevent fraud within your accounting department.
Learn:
- Three easy steps to preform at month-end
- Random checks to put in place
- Division of tasks.
- Astounding statistics that will make you think twice
- Who can help and how, you'll be amazed at the comfort level you can obtain in a short period of time for such a low fee.
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