Bank Accounts in Bookkeeping Software

Once you have opened a business checking account and already set up your chart of accounts when you started your company, you are ready to add the checking account.

If the software added a bank account or operating account for you then you can just alter that account. If it is not already there, you can create it. If you go to your chart of accounts and open it up and choose add a new one, this will be the very first account at the top of the list. It belongs in the Bank type and if you are using numbered accounts, assign this one 1000 or 10000 depending on how many digits you are using in the numbering system in the chart of accounts. DO NOT ENTER A BEGINNING BALANCE. I would name it simply Checking. If it is already there and doesn’t need to be created, you can alter it to be the same as I have described above by editing the account. You will also add the checking account number and routing number. No need to enter anything else at this time.

Now you will go to your Vendor section and add the information for this specific bank. The Vendor Name field is not shown on reports and is only like a tab on a paper file and you can name it any way that you will know what it is for, such as Checking or your banks name. The rest of the information fields will show up on reports. You will create a new Vendor and add the bank name, address, phone number, etc. You will also add your account number and fill in the name you want printed on a check, such as XYZ Bank. For the default account to use for transactions, choose Bank Service Charges.

You can add as many bank accounts as you need and they can be different banks too. You would set up each bank account separately in the chart of accounts and if they are different banks, you would set up separate vendor accounts for each one.

Funding the account: you would have made a deposit to open the bank account initially and need to record that in the checking register. One of the fundamental things you must always think about in bookkeeping is the source of the funds. If you are just starting a business this money to open the bank account likely came from your personal funds. There is no account set up for personal funds in the chart of accounts and never will be. Your personal funds are not tracked in this company, they are always separate. We need to create another account to keep track of money the company owes you when you have used your personal funds for the benefit of the company. You will create an account as described above except the type will be Other Current Liability and you can name it Due To ‘Your Name’ and give it a number that starts with a 2 according to your numbering conventions, 4 or 5 digits. The types and numbers you are using to set up accounts are going to determine the order in which the accounts show up on your reports, so it’s important that they are correctly numbered.

Next go to Deposits and make sure the Deposit To account is your bank account that you created. Choose the date of the transaction and go to the memo field and type Open account and choose the Due To ‘Your Name’ account you created. Skip to the Amount field and put in the amount of the deposit. Tab out of that field and you will see a total at the bottom. Skip the rest of the fields and choose Save and Close. If you now go to the Checking account and open it up, you will see your balance and deposit there. This is why you do not enter an opening balance when you create the bank account, because this first transaction creates the opening balance and needs to be recorded this way so that you can reconcile it when you get the bank statement.

Now you will not record all your deposits this same way. Deposits from customers or clients are recorded differently and I’ll cover that in the Charging Customers in Bookkeeping Software section.

If you have a debit card with this checking account, do not create another account for it in the chart of accounts. It is part of your checking account just like a paper check will be. You must keep all the transactions together under one account, checks, debit card transactions, deposits, service charges, etc. This is because when you receive your bank statement, you will need to reconcile it or balance it and it will mirror all of your transactions in this one account.

In the beginning you will have to set up each Vendor you pay, but after that, all you will have to do is choose the Vendor from the list to pay them again. When you need to record a check payment or a debit card purchase, go to Write Checks or Payments. Verify the correct bank account is shown at the top and fill out the form. Your Vendor info will populate on its own so you won’t need to enter an address. You will need to choose an account to record the type of expense it is for if the correct account is not pre-populated and you can fill in the memo field with any pertinent details for your own records if you wish. If you are printing a paper check, make sure the Print Later box is checked at the top of the form or leave the check number box blank, depending on what software you are using. If you are not printing a check, such as a debit card transaction, uncheck the Print Later box. In the number field above the date field, you can put Debit to indicate that is the payment method. Do not allow the automatic check numbering to remain in that box, erase it or you will be sorry later. Then save the payment at the bottom. You will now see this transaction in the Check Register. When you pay bills with the checking account there is a different procedure for that and it is covered under the Bills Tracking in Bookkeeping Software section.