Accurate financial records are a practical and legal requirement for any business in the Philippines. This responsibility includes recording and maintaining a Book of Accounts, as mandated by the Bureau of Internal Revenue (BIR). A Book of Accounts is the foundation for filing tax returns, monitoring income and expenses, and ensuring compliance with Philippine tax laws.
To help you get started with financial recording, we’ll explain what Books of Accounts are, cover some common types, show sample entries, and guide you through the Book of Accounts registration process.
What Are Books of Accounts?
Books of Accounts are a set of financial records that summarize a business’s financial transactions over time. They include details such as sales, purchases, expenses, receipts, and payments. The primary purpose of these books is to help taxpayers and the BIR monitor financial activity and determine accurate tax liabilities.
Under the Philippine Tax Code, maintaining Books of Accounts is mandatory for all types of businesses, regardless of size. This includes self-employed professionals, freelancers, sole proprietors, partnerships, and corporations.
Three Formats of Books of Accounts
- Manual Books of Accounts: Physical ledgers where transactions are handwritten. This traditional method requires careful attention to detail and accuracy. Since manual recording can get tedious, this method is usually only used in small businesses.
- Loose-leaf Books of Accounts: Printed forms where transactions are entered manually but kept in loose-leaf binders. This format provides flexibility in record-keeping and can be more convenient than bound ledgers.
- Computerized Books of Accounts: Digital records maintained using accounting software. This modern approach allows for easier data management, faster processing, and better accuracy. Businesses using computerized books must comply with BIR requirements for authorization and registration of their accounting software.
Your business should consider using Computerized Books of Accounts to improve accuracy and ensure compliance. Feel free to contact us if you need professional assistance.
Types of Books of Accounts and Sample Entries
Depending on the nature of your business and the tax type you are registered under, you may be required to maintain some or all of the following books:
- General Journal
This is a chronological record of all business transactions before they are posted to the ledger. It includes adjustments and non-routine transactions.
Example Entry:
Account: Office Supplies Expense
| Date | Ref | Description | Debit | Credit | Balance |
|---|---|---|---|---|---|
| 01/01/2025 | GJ1 | Purchase of supplies | ₱2,000 | ₱2,000 |
- General Ledger
A summary of all financial transactions categorized by account. This is the foundation for preparing financial statements.
Example Entry:
| Date | OR No. | Received From | Description | Cash In | Account Credited |
|---|---|---|---|---|---|
| 01/02/2025 | 001 | Client ABC | Payment for services | ₱5,000 | Service Income |
- Sales Journal
Used to record all sales transactions, whether on a credit or cash basis.
Example Entry:
| Date | Invoice No. | Customer | Description | Sales Amount | VAT (12%) | Total |
|---|---|---|---|---|---|---|
| 01/04/2025 | INV-001 | Client DEF | Web Design Package | ₱10,000 | ₱1,200 | ₱11,200 |
- Cash Receipts Journal
Tracks incoming cash, such as customer payments, loan proceeds, or capital infusions.
Example Entry:
| Date | OR No. | Received From | Description | Cash In | Account Credited |
|---|---|---|---|---|---|
| 01/02/2025 | 001 | Client ABC | Payment for services | ₱5,000 | Service Income |
- Cash Disbursement Journal
Records all outgoing payments, including purchases, bills, and operating expenses.
Example Entry:
| Date | CV No. | Paid To | Description | Cash Out | Account Debited |
|---|---|---|---|---|---|
| 01/03/2025 | 002 | XYZ Supplies | Payment for printer ink | ₱1,200 | Office Supplies Expense |
During your BIR registration, they will inform you of the required types of Books of Accounts and the specific details you’ll need to record.
How to Register and Stamp Your Books of Accounts with the BIR
Before using your Book of Accounts, register it with the BIR. Here’s a step-by-step guide:
Step 1: Prepare the Required Documents
The documents you should submit include:
- BIR Form 1905 (for updates or additional books) or 1901/1903 (for new registrations)
- Photocopy of your BIR Certificate of Registration (Form 2303)
- Valid ID
- Books of Accounts (pre-printed ledgers for manual registration)
- DTI or SEC registration (for businesses)
- Barangay clearance and Mayor’s permit (if applicable)
Step 2: Go to Your RDO
Visit the Revenue District Office (RDO) where your business is registered. Submit your documents and present your Books of Accounts for stamping or encoding.
Step 3: Get Your Books Stamped or Approved
For manual books, the BIR will stamp each ledger with a “Registered” mark and indicate the applicable period. For computerized or loose-leaf books, you must apply for a Permit to Use (PTU) via BIR Form 1900 and submit a sample printout.
Step 4: Maintain and Update Accordingly
Once registered, you must record transactions promptly and avoid any backdating. Also, any changes made to your accounting method or book format must be reported to the IR.
Filing and Submission Procedures
Proper filing and submission of books of accounts are critical for compliance with BIR Regulations. The steps include:
- Recording Transactions: Ensure that all business transactions are recorded promptly and accurately in the respective books of accounts.
- Updating Books: Regularly update the books of accounts to reflect the latest financial activities. This practice ensures that the records are always current and accurate.
- Submitting Books: Submit the books of accounts to the BIR upon request, especially during audits or examinations. Businesses are required to present the actual books or certified true copies if necessary.
- Annual Submission: While there is no specific requirement for the annual submission of manual or loose-leaf books, computerized books must be submitted annually to the BIR. The submission includes printed copies of the computerized books and the corresponding electronic data files.
Important Timelines and Deadlines
Compliance with the BIR’s timelines and deadlines is essential to avoid penalties and ensure smooth operations. Key timelines include:
- Initial Registration: Register new books of accounts within 30 days from business registration or the start of operations.
- Renewal of Books: Renew books of accounts within 10 (ten) days after the last entry for the year or before using a new set of books.
- Annual Submission for Computerized Books: Submit the printed and electronic copies of computerized books within 15 days after the end of the fiscal year.
BIR ORUS System
The BIR implemented the Online Registration and Update System (ORUS) to streamline the registration and updating of books of accounts. ORUS allows you to:
- Online Registration: Register their books of accounts online without the need to visit the RDO physically.
- Update Information: Update business information, including changes in the type of books of accounts or accounting method.
- Monitor Compliance: Track their registration status and compliance with BIR requirements through the online portal.
Final Thoughts
Understanding and maintaining your Books of Accounts helps your business stay financially healthy, organized, and audit-ready. Accuracy and consistency are the most important factors for staying compliant with BIR regulations.
Are You Having Trouble Maintaining Your Book of Accounts? Here is Where to Find Expert Assistance.
Maintaining and managing books of accounts is legally mandatory for businesses in the Philippines. However, it can be difficult to set up a bookkeeping system that is accurate, consistent, and meets all of BIR’s requirements.
That’s where Triple i Consulting comes in. We’re among the best accounting outsourcing companies in the Philippines, offering bookkeeping, payroll, auditing, and tax consultation services. So, let our experienced lawyers and accountants provide comprehensive support for your business so you don’t have to stress over the paperwork.
Contact us today to schedule a consultation with one of our experts:
- Fill out the form below
- Call us at: +63 (02) 8540-9623
- Send an email to: info@tripleiconsulting.com
