Recording is like a foundation of every successful business. “A business worth having is a business worth recording.” But yeah, I know you’re thinking that that’s just BIR saying “if you want to keep your business, record your business transactions.” Yes, BIR requires every business establishments to maintain a record of day-to-day business transactions called books of accounts. That’s one serious reason to have books of accounts!
Books of accounts should be registered once you apply for a certificate of registration, and must be accomplished in an annual basis. You will have to discuss with BIR the type of books you need to maintain as it varies depending on many factors. Here are mostly the requirements though:
- General Journal – book of original entry or simply the “debit and credit”
- General Ledger – book of final entry, summary of all journal entries to get the ending balance
- Cash Receipt Journal – recording of cash sales and/or collection of receivables
- Cash Disbursement Journal – recording of cash payments of expenses and/or payables
- Sales Journals – recording of sales on credit from customers (accounts receivable)
- Purchase Journals – recording of purchases on credit from suppliers (accounts payable)
Formats for Books of Accounts
Below are formats a taxpayer could choose from:
- Manual Books of Account
Manual books are the traditional ones and the most popular type for being cost effective and easy to register with BIR. You can buy pre-printed formats of these books from bookstores and other office supply stores. You would agree with me though, in this computer age, when I say that the downside of this is that recording would be handwritten.
- Computerized Books of Account
Computerized Books of Account or Computerized Accounting System (CAS) is the winner for large taxpayers. As the name implies, this is an accounting software designed for faster and accurate recording of transactions.
For BIR to ensure the software’s accuracy and capability in recording transactions, CAS should be accredited by BIR and should be applied for Permit to Use (PTU) with the National Accreditation Board (NAB). Believe me, this is a lengthy process but of course worth the effort and money (if hiring someone to do it) of large businesses with several and complicated transactions.
- Loose-leaf Books of Account
My personal preference and the reason I decided to write about this, loose-leaf books of account. Transactions in loose-leaf books are being entered in a spreadsheet, and are printed out based on an approved format.
This requires application for PTU with the RDO where the principal office of taxpayer is registered. Below are the requirements:
- BIR 1900 Form (Accomplished)
- Sample format/s to be used
- A sworn statement specifying the following:
- Books to be used, invoices/purchases and other transactional records along with serial numbers for principal/supplementary transaction documents.
- A commitment to bind loose-leaf forms (permanent) within 15 days after the end of each taxable year.
I personally have not tried applying for PTU for loose-leaf books of account yet, I have read blogs saying it’s not that easy. But I’m about to try. I have worked a lot with BIR, and I would say I’ve had both easy and difficult times, mostly difficult, I would say. I have talked to some BIR folks and some are not even aware of it. I’ll still gonna try. I want to be able to share to others that this is an appealing option and that they don’t have to apply for manual books of accounts, record transactions on spreadsheet and then transfer the transactions by hand into the manual books by the end of the month/year for BIR compliance. Will update this to include my experience.
Just a reminder that failure to register and maintain books of accounts will cost you P200 to P50,000 depending on Gross Sales/Receipts. That’s just another cost for not keeping books aside from risking killing your business for not making effort to understand what the numbers tell.
Related Revenue Issuances:
RR No. 7-2012, RMO No. 29-2002, RMC No. 13-82, RMC No. 82-2008
Section 232 to 235 of the National Internal Revenue Code