Businesses of all sizes need to know the present condition of their finances. In doing so, business owners can allocate and maximize resources according to their financial interests. The most basic and obvious method of knowing the outcome of their operations is keeping a record of their everyday business transactions. The record is called the “book of accounts”.
According to professional accounting services in the Philippines, the book of accounts must also be registered whenever a business applies for a Certificate of Registration or COR with the BIR. This is a mandate because this allows the BIR to keep an eye on businesses to make sure they are paying the right amount of tax dues and complying with other requirements.
A list of frequently asked questions (FAQs) about the book of accounts can be found below. This list seeks to answer these common questions for you so you can understand the importance of maintaining your accounting books and motivate you in keeping an organized book of accounts:
- How is a book of accounts prepared?
In the preparation of the book of accounts, one must consider factors like the size of their business and how much money it has. Nevertheless, irrespective of the type of book of accounts the company would maintain, the minimum requirements are as follows:
a. General Journal – for service business and merchandising
b. General Ledger – for service business and merchandising
c. Cash Receipt Journal – for service business and merchandising
d. Cash Disbursement Journal – for service business and merchandising
e. Sales Journal – for merchandising
f. Purchase Journal – for merchandising
- What must be recorded in each book of accounts?
There are different items to take not of in each account book. Tax services in Manila share that you must log the following:
a. General Journal – a General Journal comprises of all transactions not entered in a specialty journal. The following kinds of transactions can occur within it:
i. Accounts receivable
ii. Accounts payable
iii. Accumulated depreciation
v. Interest income
b. General Ledger – this comprises the summary of all the entries made in all the different books of accounts and is also the basis of the business’ financial statements and tax returns. Ensure that each chart of accounts has its own section, include columns for the following as well:
ii. Source books
The company must total the debits and credits for each account, to compute the net debit/credit. It can then proceed to the Trial Balance.
c. Cash Receipt Journal – this consists of all the cash received from business transactions which must be supported by receipts issued.
d. Cash Disbursements Journal – this includes all cash-paying expenses and purchases, as evidenced by supplier receipts or invoices.
e. Sales journal – this consists of credit sales which must be supported by a credit sales invoice.
f. Purchase journal – this includes all credit-related purchases and transactions, as evidenced by supplier receipts or invoices.
- What are the different ways to maintain the books of accounts?
There are three types that can be registered in the BIR:
a. Manual Books – pre-printed books usually columnar notebooks found in a regular bookstore that must be stamped and approved by the BIR
b. Looseleaf books – these are worksheets the company has printed and bounded together
c. Computerized Accounting System (CAS) – an accounting software for recording, it must be registered with the BIR.
- Is it necessary to regularly submit my books of accounts to the BIR?
Yes. The business owner must submit tax returns on a regular basis. The tax types indicated in the BIR Certificate of Registration will determine the nature of these returns. And as state above, the books of accounts are a requirement for the BIR to regulate the proper paying of taxes.
Expert tax and audit services in the Philippines say the submission depends on what type of books you maintain. Manual books are submitted only when they are full, looseleaf books must be submitted on or before the 15th of January of the following year, while Computerized Accounting Systems must be submitted on or before the 30th of January of the following year.
- How long does a company have to store its book of accounts?
The company is required to keep the book of accounts for ten years. Failure to do so will cost the company P1000 to P50,000, depending on the gross sales or receipts.
If you have a business, it is very important to maintain your books of accounts using a system that has been approved by the BIR. More importantly, you have to be diligent in tracking your transactions for the most accurate results. If you need assistance in organizing or auditing your records, call our accounting services in Pasig. Our team is ready to help you manage your accounting books.