3 Formats and 6 Basic Types of Books of Accounts Explained (2024)

Being a taxpayer is not all about knowing what forms to file and how much taxes you’re going to pay. Your Books of Accounts play an important role in running your business and keeping track of your Sales and Expenses.

• 3 Types of Books of Accounts
• 6 Basic of Books of Accounts

According to the T.R.A.I.N. Law Sec. 232 (Republic Act No. 10963);

“All corporations, companies, partnerships or persons are required by law to pay internal income taxes must use and maintain a relevant and appropriate set of bookkeeping records duly authorized by the BIR where all transactions and results of operations are presented and for which all taxes due to the Government may be promptly and accurately ascertained and defined any time of the year.”

To put it simply, everything that’s Business related transactions is recorded in your 6 basic books. Let’s briefly go through the different formats and types of Books of Accounts used in the Philippines.

Not a lot of people know that keeping and maintaining your Books is required by law. Aligned with the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, BIR allows new business taxpayers to register these different formats of Books of Accounts (as per BIR RMC 29-2019). Listed below are the three formats you can apply for.

Formats of Books of Accounts:

• Manual Books of Accounts
  Manual Books of Accounts is the traditional journal, ledger and book columns that you can buy in office supply stores and offices. The recording of the Manual Books of Accounts is handwritten. This is the most popular type of Books of Accounts for small businesses since it is cheaper and easier to register with BIR.
• Loose Leaf Books of Accounts (with a permit to use)
  Loose-leaf Books of Accounts is a record of transactions by encoding the details on the computer and generating templated copies by printing this out using the loose-leaf approved formats to be bound as the bookkeeping record of the taxpayer.
• Computerized Books of Accounts (with a permit to use)
  Computerized Books of Accounts is an accounting program that facilitates efficient and fast record keeping. This format usually takes longer to get approved compared to the others. This is because the agency has to fully assess the system in line with rules and regulations. This format can only be registered at BIR’s National Office.

These formats have to be registered within your BIR Regional District Office except for the Computerized format (refer to your Certificate of Registration). BIR will stamp your format for approval.

6 Basic Types of Books of Accounts

The type of books that a business retains depends on many factors such as business size and financial capacity. These are the basic Books that every taxpayer like you should keep in mind:

6 Basic Books of Accounts:

• General Journal
  This book is referred to as the original entry book. It records the transaction of the business in the order of the date using the principle of “debit and credit”.
• General Ledger
  This book is referred to as the final entry book. This is where you will see the summarized journal entries of an account to get the reconciled balances. This book tracks your Assets, Liabilities, Owner’s capital, Revenues, and Expenses.
• Cash Receipt Journal
  This is a special journal used to record all cash payments of expenses and/or collection of receivables. Entries can be in forms of Cash Sales, Sale of an asset for cash, Collection from Customers, Collection of interest, dividend, rent, etc.
• Cash Disbursem*nt Journal
  This Book is an internal record kept by accountants to record and track the business’s outflow of cash. This helps keep the General Ledger up-to-date.
• Sales Journal
  This is a special journal used to record sales on credit (received from customers).
• Purchase Journal
  This is a special journal used to record credit purchases (payable to the supplier).

Whether you’re an accountant (or aspiring to be one), a business owner, part of the accounting department or a freelancer, understanding these different books is a must to get your practice compliant with the law.

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