Creative Uses for Cash Accounts «

Creative Uses for Cash Accounts

Having a cash account is a necessity for those who budget very seriously and account for every penny. However, anyone can benefit from setting up a cash account in financial software to provide creative solutions for handling a variety of transactions. Consider the ideas below, then set up a cash account in Quicken. Or, if you use Microsoft Money set up an account in Money using the Other Account option in the account set up.

Cash Management with Cash Accounts
Categorize cash purchases. This is the most obvious reason to use a cash account. Take cash out of an account at an ATM or bank, then use the cash account to track how that cash is spent. This requires that you keep track of cash expenditures by collecting receipts religiously.
Cash payments for medications or other health care services which be reimbursed by a Flexible Spending Account. Record payments for prescription or some over-the-counter medications in your cash account. When you are reimbursed by your FSA, record the deposit in the appropriate account but categorize the proper amount as a transfer to your cash account and the cash account maintains no balance unless you are waiting on reimbursements.

Undeposited funds. Record checks or cash received but which will not be deposited for some time. When you make the deposit of these funds, transfer the amount from the cash account to the account the deposit was actually made in. This method lets you keep track of monies onhand while creating an accurate accounting of the actual deposit.

Job-related expenses. Not all job-related go on the credit card. Tolls, tips, cab fare expenses incurred while traveling for your job are usually cash expenditures and they are either eligible for reimbursement from your employer, or they are tax deductible work expenses. In either case, keep receipts and keep an accurate accounting of these expenses with a cash account.

Child’s Allowance. With the ease of online banking, many parents transfer funds from their bank account to a linked savings account for their child’s allowance. When the child requests a small amount from their allowance, the parent usually opens their wallet to provide the allowance rather than driving to the bank to make a withdrawal from the child’s account. Set up a cash account to track monies disbursed in this manner. This cash account also can be used to track allowance when the parent makes a credit card purchase for the child when the child wants to use allowance. Bring the cash account balance back to zero when transfering funds from the childs bank account back to the parent’s account to reimburse for allowance spent.

Rolling funds over. There is a time lag lasting from days to weeks when you roll funds over from one FI to another, such as with a Rollover IRA. Transfer your funds from the old account to a cash account and hold them there until receiving notification that the funds are in the new account. Then, create a transfer from the cash account into the new account.

Paypal and other merchant accounts. Merchant accounts used for online buying and selling, such as Paypal, can hold funds you intend to later transfer to your bank account or use for a purchase. Keep track of your merchant account balance with a cash account by:

•When you make a sale, record the debit to the merchant account in the cash account. You can set up categories to use for merchant account fees.

•When you use funds held in a merchant account to make an online purchase, record the purchase in the designated cash account, and categorize the item as you would had you made the purchase with a check or credit card.

Multiple Cash Accounts
You can keep multiple cash accounts to manage cash for different financial needs. Just give each account a name that is relevant to what you will use the account for. For example, if you track allowance for three children the accounts could be named Allowance-James, Allowance-Tammy and Allowance-Junior.


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