Bank account housekeeping: transfers, stale checks, restricted cash, escrow, and deposits

Moving money between your own accounts changes where cash sits, not how much you have. Record it as a transfer between two cash accounts. If you record one side as an expense and the other as income, your profit looks different but your cash does not, and the reconciliation is confusing. Card payments and loan draws are different, and have their own accounts.

A check you wrote that has not cleared the bank is outstanding. It reduces your book balance but not yet the bank balance, so it appears as a reconciling item. After a long time, often six months, a check becomes stale. Contact the payee. If it cannot be delivered, state unclaimed property laws may require you to hold or turn over the money, so check before writing it off.

Some cash is yours but limited in use: a loan reserve, a grant for a specific purpose, or money held for a transaction. Track it in a separate account and note the restriction. Escrow cash held for someone else, such as a customer or a closing, is a liability, not income. Show restricted amounts apart from freely available cash so no one plans to spend them.

A deposit you paid, such as for a lease, is an asset you expect back, not rent. A deposit you received from a customer or tenant is a liability, not revenue, until it is returned or applied under the agreement. Track each with the date, the amount, and the terms.

Interest earned on bank balances is income and should be recorded separately from sales. A cash sweep moves idle money automatically between accounts or into a yield-bearing one. Reconcile the sweep so you know the balance in each account and the interest earned. Short-term investments such as treasury bills should be kept in their own accounts, apart from the operating balance, because they have different risk and liquidity.