Traditionally, the books of accounts are logged into a ledger or book and information is encoded by hand. However, this tedious task is now made so much easier thanks to the advent of tech as seen in loose-leaf books of accounts. No one can blame you for choosing to automate your accounting practices.
Loose-leaf books of accounts are essentially a printed compilation of transactions that you have recorded through software like Microsoft Excel, Kingsoft sheets, Google sheet, or other accounting software. This method is great as it saves time since typing and having the machine do all the computations for you is easier compared to the manual handwritten counterpart.
If you are starting your business and are looking into starting your bookkeeping practice with loose-leaf books of accounts, or if you already have a business engaged in manual computation but want to transition into loose-leaf books of accounts, there is a process that you need to follow for the Bureau of Internal Revenue (BIR) to recognize your books of accounts. Learn more about this process below.
How to Apply for Loose-Leaf Books of Accounts
1. Write a letter of intent addressed to the BIR stating your intentions of using a loose-leaf book of account and the reason why.
2. Fill out the Application for Authority to Use Loose-Leaf Books of Account (BIR Form No. 1900) along with the following:
i. A Photocopy of your BIR Certificate of Registration (BIR Form No. 2303)
ii. A Photocopy of your Previously Issued Permit to Use Loose-Leaf books of account if any
iii. A location map of the place of business
iv. And a photocopy of the Current Registration Fee (BIR Form No. 0605)
3. Sample format of your Loose-Leaf Books of Accounts and the printout to be used
4. A sworn statement to utilize Loose-leaf Books of Accounts in your business stating the following:
i. A stipulation of the books to be used, receipt and invoices as well as other accounting records along with the serial numbers of both principal and supplementary receipt or invoices that are to be printed.
ii. A personal or company commitment to permanently using the loose-leaf forms within fifteen days after the end of each taxable year or until the user wishes to terminate the use of such.
5. Special Power of Attorney if in case the individual or company owner will not personally apply but will send a representative instead.
What must be submitted to the Bureau of Internal Revenue within the 15 day period after the end of each taxable year?
1. BIR issued permit to use Loose-Leaf Books of Accounts;
2. BIR Form No. 1905;
3. Permanently bound (binder or book bound) Loose-Leaf Books of Accounts
4. A notarized affidavit confirming the completeness, correctness, and accuracy of the entries made in the Books of Accounts and the number of loose leaves used over the period covered in the books.
Failure to submit the loose-leaf books of accounts in the given time will result in a penalty fine of P 1,000 per book.
Preserve All Records to Protect Your Business
Noteworthy, all books of accounts and any other accounting records, whether manually recorded or loose-leaf, must be preserved intact and unaltered for a period of not less than ten years after their filing and submission. You have to keep them in your records in case of a BIR audit or investigation.
If you want to avoid any inquiries from the BIR, keep an updated account book to ensure you pay the correct taxes. This will help you avoid penalties from wrong calculations of tax dues. For best results, seek the help of a certified public accountant to evaluate your books of accounts. This is the only way you can secure the fiscal health of your business. Call our team for assistance and take advantage of our free 30 minute consultation.