New small business owners who are gearing up to get organized and put their best foot forward in a new business venture encounter many daunting tasks in the first few months of business operations. Once settled in, most are ready to dive into an official method of accounting rather than a handwritten check register with an envelope full of receipts to serve as backup for future tax returns. However, some are unfamiliar with the basics of setting up their accounting system and common questions prior to taking on the task are, “What if I have two checking accounts? Do I need to split things up for my tax filings?”
Many business owners opt for two (or more) checking accounts and, perhaps, a savings or reserve account. Reasons for this vary and are the prerogative of the owner. But a common choice is utilizing a second checking account for payroll expenses only.
The business entity may have multiple bank accounts listed as assets on its balance sheet. And all cash transactions will run through one set of financial statements. These transactions will contribute to tax filings under one tax identification number. Therefore, there is no need to “split things up.” One entity is accruing all income and expenses regardless of the number of bank accounts holding funds.
Multiple bank accounts do not equate to a more complicated accounting process nor do they complicate your tax filings. What may seem superfluous for one, may simplify the process for another. The best choice is to fund your business in a way that works efficiently for you.