What are Books of Account in the Philippines

October 13, 2023

In the Philippines, maintaining accurate books of account is mandatory for all businesses, ensuring financial transparency and compliance with the Bureau of Internal Revenue (BIR) regulations under Section 232 of the National Internal Revenue Code (NIRC). These systematic records, encompassing transactions like sales, purchases, and expenses, are vital for tax reporting, audits, and operational efficiency. This article provides a detailed roadmap for managing books of account in the Philippines, covering types, registration processes, compliance obligations, and digital tools. With insights into penalties, audits, and regulatory updates, businesses can navigate the complexities of BIR requirements confidently, leveraging the expertise of Triple i Consulting to streamline their bookkeeping processes.

Types of Books of Account Recognized by the BIR

The BIR approves three types of books of account—manual, loose-leaf, and computerized—each suited to different business sizes and operational needs. Selecting the appropriate type ensures compliance and aligns with a company’s financial management capabilities. Below is a list of the BIR-recognized types and their characteristics:

Manual Books: Pre-printed, bound ledgers suitable for small businesses with annual gross sales below PHP 3 million, requiring handwritten entries.
Loose-leaf books are printed sheets bound for manual or typed entries. They are ideal for medium-sized businesses transitioning to digital systems and require BIR approval before use.
Computerized Books: Software-based systems for large businesses or those with sales exceeding PHP 3 million, needing a BIR Permit to Use and integrate with digital platforms.
General Journal: Records all financial transactions chronologically, mandatory for all businesses, capturing sales, purchases, and adjustments.
General Ledger: This section summarizes journal entries by account, providing a comprehensive view of the financial positions required for all entities.
Subsidiary Ledgers: Tracks detailed transactions for specific accounts, such as accounts receivable or payable, used by businesses with complex operations.

Choosing the right type depends on business scale and technological readiness, ensuring efficient record-keeping.

BIR Registration Process for Books of Account

Registering books of account with the BIR is a mandatory step for businesses to obtain legal recognition and comply with tax regulations. The process, updated via Revenue Memorandum Circular (RMC) No. 5-2021, emphasizes using the Online Registration and Update System (ORUS). Below is a list of key steps in the registration process:

Secure Certificate of Registration (COR): Obtain a COR via BIR Form 2303, confirming business registration with a Taxpayer Identification Number (TIN).
Complete BIR Form 1905: Submit Form 1905 to the Revenue District Office (RDO) to register new or additional books, specifying the type (manual, loose-leaf, or computerized).
Provide Supporting Documents: Include unused pages of prior books, a sample printout for loose-leaf, or a system demo for computerized books.
Obtain Permit to Use: For computerized systems, secure a Permit to Use by demonstrating compliance with BIR software standards, per RMC No. 29-2019.
Pay Registration Fees: Fees range from PHP 500–2,000, depending on the book type and RDO requirements, payable annually by January 31.
Stamp Books: Present physical or sample books to the RDO for stamping, confirming official registration and readiness for use.

Proper registration ensures books are BIR-compliant and ready for audits or inspections.

Minimum Components of Books of Account by Business Type

The BIR mandates specific components for books of account tailored to the nature of the business—service-oriented, goods-based, or mixed operations. These components ensure comprehensive financial tracking for tax purposes. Below is a list of minimum components by business type:

Service-oriented businesses Require a general journal for all transactions and a general ledger for account summaries, which capture service fees and expenses.
Goods-Based Businesses: You need a general journal and general ledger, a sales journal for revenue, and a purchase journal for inventory costs and stock movement tracking.
Mixed Operations: Maintain all four—general journal, general ledger, sales journal, and purchase journal—to cover services and goods transactions.
Cash Receipts Journal: This journal records all cash inflows, which is mandatory for businesses with significant cash transactions, ensuring accurate revenue reporting.
Cash Disbursement Journal: Tracks cash outflows required for expense monitoring, particularly for businesses with frequent payments.
Subsidiary Ledgers: Used for detailed tracking of accounts like receivables or payables, recommended for businesses with complex financial structures.

These components ensure businesses meet BIR standards for transparency and audit readiness.

Compliance Obligations and Penalties for Books of Account

Maintaining compliant books of account involves ongoing obligations, including audits, retention periods, and digital submissions, with strict penalties for non-compliance. The BIR enforces these rules to prevent tax evasion and ensure accurate reporting. Below is a list of key compliance obligations and penalties:

Annual Renewal: Register or renew books by January 31 each year, submit BIR Form 1905, and pay fees to maintain active status.
Audit Requirement: Businesses with gross sales exceeding PHP 3 million must have books audited by an independent CPA, per BIR regulations, for submission with tax returns.
Retention Period: Books should be retained for 10 years—5 years in hard copy and 5 years electronically—to ensure accessibility for BIR inspections.
Digital Submissions: As of 2025, most businesses must submit financial summaries using the Electronic Filing and Payment System (eFPS) or eBIRForms.
Non-Compliance Fines: Per Section 258 of the NIRC, penalties range from PHP 1,000 for late registration to PHP 50,000 for failure to maintain books.
Falsification Penalties: Falsified entries may lead to fines up to PHP 50,000 or imprisonment for 2–6 years, emphasizing the need for accuracy.

Adhering to these obligations mitigates risks and ensures smooth BIR interactions.

Digital Tools and Systems for Books of Account

The BIR has embraced digital transformation, encouraging businesses to use electronic platforms like ORUS, eFPS, and eBIRForms for registration and reporting. These tools streamline compliance, particularly for computerized books, but require proper setup. Below is a list of key digital tools and their applications:

ORUS Platform: This platform facilitates online book registration via BIR Form 1905, reducing processing time to 3–5 days, per RMC No. 5-2021.
eFPS System: Enables electronic filing of tax returns and financial summaries, which are mandatory for large taxpayers and businesses with computerized books.
eBIRForms: Supports offline preparation of tax forms, ideal for small businesses transitioning to digital compliance, ensuring accurate submissions.
Computerized Accounting Software: BIR-approved software like QuickBooks or SAP integrates with eFPS, requiring a Permit to Use for compliance.
Electronic Sales Reporting: Online businesses must register receipts via eSales, capturing real-time sales data for BIR monitoring.
Cloud-Based Backup: Ensures secure storage of electronic books for the 10-year retention period, protecting against data loss.

Leveraging these tools enhances efficiency and aligns with BIR’s digital mandates.

The Importance of Expert Assistance for Books of Account Compliance

Navigating the complexities of books of account in the Philippines is daunting, with intricate BIR requirements, digital submissions, and severe penalties for errors. The process demands precision and expertise from registration to audits, making professional support essential. Engaging Triple i Consulting is vital to ensure compliance and avoid costly mistakes. Below is a list of reasons why expert assistance is indispensable:

Regulatory Expertise: Triple i Consulting offers in-depth knowledge of BIR regulations, ensuring accurate registration and maintenance of books.
Streamlined Processes: Their team expedites registration via ORUS and secures Permits to Use, reducing timelines from weeks to days.
Compliance Assurance: Expert guidance minimizes risks of fines or audits due to non-compliance with eFPS or retention rules.
Digital Integration: They assist in selecting and implementing BIR-approved software, ensuring seamless eFPS and eBIRForms submissions.
Audit Support: Their CPAs prepare audited books for businesses with over PHP 3 million in sales, meeting BIR standards.
Trusted Provider: Triple i Consulting, with its ISO 9001:2008 certification, is a reliable partner for businesses managing books of account in the Philippines.

Given the regulatory complexity, attempting this process without professional support can lead to penalties and operational disruptions, making Triple i Consulting an invaluable ally.

Final Thoughts

Maintaining compliant books of account in the Philippines is a fundamental business requirement, as well as ensuring financial transparency and adherence to BIR regulations. Companies can navigate the complexities of tax compliance effectively by selecting the appropriate book type, following the registration process, meeting minimum component standards, and leveraging digital tools. Triple i Consulting’s expertise simplifies this intricate process, offering tailored solutions to avoid penalties and streamline operations. Registered businesses that prioritize regulatory adherence and professional support position themselves for success in the Philippines’ dynamic economic landscape.

Is Assistance Available?

Yes, Triple i Consulting provides expert guidance to simplify the complex books of account compliance process. Contact us today to schedule an initial consultation with one of our experts: