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Types of Cash Accounts for Your Business

Part of the Cash Flow For Dummies Cheat Sheet

The cash you use to run your business resides in different accounts. To manage your cash flows effectively, you generally need to have cash in the following types of accounts:

  • General operating account: Used for processing the large majority of a business’s normal and customary transactions, such as paying vendors and receiving customer payments.

  • Payroll account: A separate bank account for processing payroll activity. A payroll account is funded with just enough to cover the next payroll.

  • Investment account: Various names apply for this type of bank account, including savings, money market, interest bearing, and others. The basic idea is that when a company has excess cash balances, the cash is “parked” in an account that can generate interest or other investment earnings.

  • Restricted cash accounts: A restricted cash account can be any one of a number of different unique bank accounts that hold a cash balance for a particular use. For example, it could be a trust account set up to segregate cash that can be used only for a very specific purpose.

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