Your books of accounts, also known as the “accounting books” are records of your business transactions. We previously released a blog on how you can maintain simple accounting books. The tips there are useful so long as you are not yet registered with the Bureau of Internal Revenue (BIR). Once you are registered, you should maintain your accounting books in certain formats as discussed in this blog.
Take note, however, that your books of accounts should not just be for compliance, but they should serve as the official record for financial overview and control over your business. Your books of accounts should also organize all your financial transactions and therefore, serve as the basis in the preparation of financial statements and other reports for decision-making purposes.
In this blog, we would like to guide freelancers and small businesses by answering their five (5) frequently asked questions about books of accounts:
1. What are the types of books and How many should you have?
Some BIR district offices (Revenue District Offices or RDOs), allow freelancers to maintain two (2) sets of books (i.e., Cash Receipts Journal and Cash Disbursements Journal), while some RDOs issue one (1) book (i.e., Simplified Set of Bookkeeping Records for use by small merchants).
2. Should your manual books of accounts have a BIR stamp?
Yes! The books of accounts can be purchased from any bookstore. Simply look for a “Journal”, “Ledger” or “Columnar Book.” However, for these to be official, you need to proceed to BIR and have them stamped within 30 days after you’ve secured your BIR Certificate of Registration (COR).
3. What needs to be recorded in each book and How will you record them?
Cash Receipts Journal (CRJ)
What? - This contains a record of all the cash you received from business transactions, as supported by all receipts you’ve issued.
How? - Record an entry in the CRJ upon issuance of a receipt. When you do this, make sure to have columns for (at least):
Name of the customer
Output VAT (if applicable)
TIP THAT MATTERS: If you have two or more bank accounts, it’s best to add amount columns for each bank account, so that tracking is much easier. At the end of month or quarter, you may use this information to reconcile the amount per record versus the amount per bank (i.e., bank reconciliation).
Cash Disbursements Journal (CDJ)
What? - This contains all expenses and purchases you’ve paid in cash, as supported by receipts or cash invoices from suppliers.
How? - Record an entry on the CDJ once you pay an expense or purchase an item. When you do this, make sure to have columns for (at least):
Name of supplier
Particulars (to note the item/service bought)
Receipt/Invoice number (or any reference number)
Input VAT (if applicable)
TIP THAT MATTERS: Use a columnar book with four (4) or more columns. Use the columns for each of the different types of expenses (e.g. rent, subscriptions, supplies, etc.). In this way, you’ll know what types of expenses you spend heavily on. This will also guide you as you prepare your financial statements.
Sales Journal (SJ)
What? - This contains a record of all sales transactions made on credit (i.e., goods delivered but unpaid), as supported by your Credit Sales Invoice.
How? - Once goods are delivered to customers, issue a Credit Sales Invoice. When you do this, make sure to have columns for (at least):
Name of customer
Credit Sales Invoice number
Particulars (to note the item sold)
Output VAT (if applicable)
Upon receiving payment from your customer, record the transaction under the CRJ.
Purchases Journal (PJ)
What? - This contains a record of all purchases or transactions on credit (i.e., goods and services received but not yet paid), as supported by credit sales invoices or billing statements from suppliers.
How? - If you have credit terms with your suppliers, record the unpaid amounts in the PJ. When you do this, make sure to have columns for (at least):
Name of supplier
Supplier's Credit Sales Invoice/Billing Statement number (or any other reference number)
Particulars (to note the expense or item purchased)
Input VAT (if applicable)
What? - This contains all other transactions aside from those recorded in the books above (e.g. sales or purchases on credit in case you don’t have a SJ or PJ, depreciation of equipment, amortization of prepaid expenses, etc.)
How? - Make sure to have columns for (at least):
Particulars (to put a brief description of the transaction)
What? - This contains the summary of all the entries made in the different books of account and shall be the basis of all information in your financial statements and tax returns.
How? – Make sure to have a section for all your chart of accounts . Also have columns for the following:
Source books (i.e., CRJ, CDJ, SJ, PJ, GJ)
Every month, you must compute the total debits and credits for each account, from which you can already calculate the net debit/credit. All net debits/credits are then posted on a Trial Balance.
TIP THAT MATTERS: Basic accounting knowledge is necessary to fill out the books of accounts especially the general journal and general ledger. You may consult with an expert to properly fill out this book. There are also online tax filing platforms with books of accounts generation functionalities that could make your life easier.
4. Is there another option to maintain books of accounts other than manual books?
Yes! There are three types that you may register with the BIR:
Manual Books - These are pre-printed books that you normally buy in bookstores.
Looseleaf Books - These are prepared through worksheets using your computer, printed and bound thereafter.
Computerized Accounting System (CAS) - These are generated through an accounting software registered with the BIR.
TIP THAT MATTERS: Upon registering your business, you may opt to register either of the books above. Traditionally, the easiest option would be manual books. Eventually, you may shift to looseleaf or CAS by applying with the BIR. A service provider like Numbers that Matter can definitely assist you on this.
5. Do I need to submit my books of accounts to the BIR regularly?
It depends on what type of books you maintain.
Manual Books - Submitted only to the BIR when the books are full. You must buy another set of books and have them stamped.
Looseleaf Books - Printed copies must be submitted to the BIR on or before January 15th of the following year.
CAS - Records must be saved in a CD-ROM (read only) in text file format together with a duly notarized affidavit ascertaining/attesting the accuracy of the number of receipts and invoices used during the year, and the soft copy of the books of accounts and other accounting records/documents. These must be submitted to the BIR on or before January 30th of the following year.
TIP THAT MATTERS: Always keep your books of accounts updated. Don’t cram to meet the deadline nor comply just for tax mapping or audit purposes. Remember that your books of accounts help you with internal tracking of your financial records too!
Some terminologies might still puzzle you but don’t worry! Watch out for our future blogs or follow our social media accounts as we simplify accounting and tax topics that are relevant as you run your business. If you need assistance in your books of accounts, contact us.
Disclaimer: Numbers that Matter Inc. aims to curate topics that are simplified and easily digestible for micro, small and medium enterprises, by balancing our technical know-hows as accounting professionals and the practical experiences of our team working on ground with our clients. There may be technicalities intentionally omitted from our content to preserve its simplicity. Any practical tip is purely the opinion of the team and is merely informal advice, and thus, should not be taken as a definitive rule. Should you have any specific questions, feel free to message the team at firstname.lastname@example.org and we’d be happy to discuss with you further.