Do you maintain track of any revenue from your business in your accounts so you can accurately declare it on your business tax return?

We have no issues with entrepreneurs keeping the proceeds of their businesses or other transactions in private accounts. When this revenue isn’t reported, though, it becomes a problem.

Establishing a separate business bank account and depositing your sales and other business income into it is a perfect way to avoid this issue. You can use this to track your company’s cash flow and keep records.

Remember that your business’s revenue comprises all transactions, whether cash or digital (for example, internet sales). These are sources of assessable income that need to be listed on your company’s tax return. Reporting earnings for services rendered by your company is also required.

2 Main Reasons Why You Shouldn’t Use Personal Accounts for Business

Use of personal accounts for business is not advised for the following two reasons:

1. It Leads to Confusion

The quantity and number of your business transactions will increase as your company expands.

Your bank may eventually become aware that you are using your personal account for routine commercial expenses. If they do, it’s highly probable they’ll want you to use your account only for personal expenses.

Since they have separate costs for personal and business accounts, your bank might not allow you to utilize your personal account for business purposes. A business account typically has higher fees.

You could choose to disregard the bank’s request, but you run the risk of the bank closing your personal bank account.

Check the terms and conditions of your personal account to see if there are any possible repercussions for using it to handle your company’s cash.

2) Avoid Bookkeeping Headaches

Bookkeeping and accounting duties are necessary for running a firm.

Correctly executed bookkeeping and accounting form the cornerstone of your company’s balance sheet and profit and loss statements. If you want to make sure your taxes are correct and paid on time, having these up to date during tax time is essential.

Having your bookkeeping and accounting records is vital if you want to stay out of trouble with your tax authorities.

Tax authorities prefer it when a company has a different business account under the same name. They spend less time looking through your data and classifying and identifying your business expenses.

It will also save you time to have a separate corporate bank account. You do not need to delve into your bank account to locate and extract expense items to give to your bookkeeper, accountant, or tax authority. This way, you can spend more time on tasks that will benefit your company in the long run if you have more free time.

Need Help?

KPG Taxation offers affordable services, including bookkeeping, financial accounting, ASIC, ATO, and other external body compliances, tax planning, and tax returns. Get in touch with KPG Taxation for further details.