Recording Those First Transactions as a New Business Owner

Congratulations! You’ve started a business and now you are wondering what accounts to set up and how to record your transactions properly. First, make sure you open a separate banking account for your business. Depending on the nature of your business you may want to open several different accounts. For instance, if you have employees it is a good idea to have two checking accounts. One for regular business, and one just for payroll expenses. If you need to pay sales tax then a separate savings account is a good idea to hold those payments. Finally, you may also want a credit card. After you figure out which accounts you need and you set them up, you should connect them to your Quickbooks account (or similar service). Now, you may be wondering “I paid for some start up costs out of my own personal funds, how do I account for that?” or “I received a loan, how do I enter that into my books?” Let’s tackle both of these issues:

In bookkeeping, there are always at least two accounts involved in a transaction. Let’s say you buy printer ink with your business debit card. The transaction is recorded in an expense account and again in the business checking account. This makes the books balanced. While I won’t get into the details of the double entry bookkeeping system itself in this post, just remember that a transaction will always involve at least two accounts. If you received a loan then your business checking would have that amount recorded as well as a loans payable account. If you pay for something for your business with your own personal funds then you would record the transaction in an expense account and credit your owner’s equity account. (instead of the business checking account). What if instead of getting a loan, you are funding your business with your own personal savings? Whatever amount you are funding, you would add that transaction to your checking account and credit your owner’s equity account.

I hope the above information is helpful. If you work with Quickbooks Online, it makes the bookkeeping process a little more user friendly and there are tons of online resources to help you. If you feel pressed for time or already or have too much on your plate, hire a bookkeeper. They will save you a lot of time and headaches, they will save you money, and they will help your business run more smoothly.