Thomas is an entertainer for children's parties. He runs the business and works the parties himself. He just uses his personal checking account to keep track of his deposits and debts. Is this adequate accounting?

Question

Thomas is an entertainer for children's parties. He runs the business and works the parties himself. He just uses his personal checking account to keep track of his deposits and debts. Is this adequate accounting?

• Yes, he knows what each transaction is.
• Yes, there are records of every transaction.
• No, he needs specific records of business transactions.
• No, checking accounts do not document all transactions.

Answer 1

No, he needs specific records of business transactions. Using his personal checking account may make it difficult to separate personal expenses from business expenses and could lead to errors in tracking income and expenses for tax purposes. It is important for Thomas to have a separate business checking account to accurately track all business transactions and ensure proper accounting.