The Easy Way
The easiest way to track your income and expenses is to use a business checking account. According to IRS Publication 583 – Starting a Business and Record Keeping:
“Business checkbook. One of the first things you should do when you start a business is open a business checking account. You should keep your business account separate from your personal checking account. The business checkbook is your basic source of information for recording your business expenses. You should deposit all daily receipts in your business checking account. You should check your account for errors by reconciling it.”
Since the business checking account is the basis for bookkeeping records, it makes sense to record as much detail as possible right on the bank statement. This is accomplished by taking advantage of modern banking tools such as bank debit and credit cards, online bill paying, direct deposit arrangements and check deposits scanned into a mobile banking app (cellphone). These procedures not only save time and money (no trips to the bank or postage expense), but they also make your bank statement become a complete and detailed record keeping document.
The things that make bookkeeping into a drudgery are cash expenditures, hand-written checks or personal expenses ( check or credit card) mixed in with business expenses. Additional bookkeeping is required for each of these items in order to properly integrate (or extract) these records into (or from) the business bank records.