Simplified Guide to Processing Loose Leaf Books of Account for BIR Compliance

In the realm of taxation and financial compliance, the Bureau of Internal Revenue (BIR) in the Philippines requires all registered taxpayers, whether engaged in a profession, business, or self-employment, to maintain meticulous accounting records of their financial transactions. These records are collectively known as the “books of accounts.” Complying with this essential aspect of taxation is crucial for meeting BIR requirements.

 

The Books of Accounts encompass the General Ledger and General Journal as primary components, with the option to maintain Subsidiary Ledgers or Special Journals such as the Cash Disbursement Journal, Sales Journal, and Purchase Journal. In this article, we’ll delve into the intricacies of processing Loose Leaf Books of Account for BIR compliance, a choice that offers flexibility and convenience to taxpayers.

Understanding the Types of BIR Registered Books

Before delving into the process of handling Loose Leaf Books of Account, it’s essential to grasp the various types of BIR registered books that taxpayers can choose from:

1. Manual Books

Manual Books are widely favored, particularly by Micro, Small, and Medium Enterprises (MSMEs), owing to their simplicity and ease of registration with the BIR. These books comprise columnar ledgers that can be readily obtained from office supply stores. 

 

After procuring them, taxpayers must register or have them stamped at the Revenue District Office (RDO) corresponding to their registration. Subsequently, all business transactions must be diligently recorded in these books. It’s essential to know proper bookkeeping and accounting practices to keep these records completely accurate.

2. Loose Leaf Books

Loose Leaf Books of Account, while less conventional, are gaining traction due to their versatility. These books utilize software like Microsoft Excel or equivalent alternatives to log financial transactions. 

 

To initiate the use of Loose Leaf Books, taxpayers must first secure a Permit to Use from their respective BIR RDO. Once this permit is granted, transactions are to be regularly recorded throughout the year. At the end of the calendar year, these records need to be printed for hard binding and submission to the BIR RDO by January 15 of the following year.

3. Computerized Books

Computerized Books are typically favored by large-scale taxpayers, but an increasing number of self-employed individuals, professionals, and MSMEs are adopting them. As of Revenue Memorandum Circular (RMC) 5-2021, obtaining a Permit to Use for computerized books is no longer necessary. 

 

Instead, taxpayers are required to fulfill a checklist of requirements and submit them to the BIR RDO where they are registered. Annual submission of hardbound copies of computerized accounting records must be made by January 30 of the subsequent calendar year.

Processing Loose Leaf Books of Account: Here’s How

If you opt for Loose Leaf Books of Account and have already obtained a Permit to Use, here is a step-by-step guide on how to process them for BIR compliance:

1. Printing Ledgers and Journals

Begin by printing all the ledgers and journals for the covered year, encompassing transactions from January 1, 20YY to December 31, 20YY. This should include the following books:

– General Ledger

– General Journal

– Cash Disbursement Journal

– Cash Receipt Journal

– Purchase Journal

– Sales Journal

2. Hard Binding

After printing, hard bind all the Loose Leaf ledgers and journals with appropriate paper or hard covers. Ensure that the cover includes crucial information such as the Company Name, Name of the Book, and the Period Covered.

3. Prepare Required Documents

Gather the necessary documents for submission, including:

– A completed BIR Form 1905 (Application for Registration Information Update/Correction/Cancellation) with specific sections filled out.

– A notarized sworn statement with volume and pages.

– A copy of the most recent filed and paid Annual Registration Fee or BIR Form 0605.

– A copy of the Certificate of Registration (BIR Form 2303).

– A copy of the Loose Leaf Books submitted in the previous year, along with a photocopy of the first page stamped received by the BIR.

– A notarized Special Power of Attorney (if you are a Sole Proprietor) or Secretary Certificate (if you are a Corporation) for authorized representatives, if applicable.

– Hardbound books of account for the current year.

4. Submission to the BI

Once you have gathered all the required documents, submit them to the BIR RDO where you are registered. Make sure that the submission of requirements is made on or before January 15 of the following calendar year. Keep in mind that if the deadline falls on a weekend or holiday, it will be moved to the next working day. Failing to meet this deadline may result in penalties.

5. Proper Storage

It is imperative to ensure the safekeeping of the registered Loose Leaf Books, along with any other attachments received from the BIR RDO.

 

Processing Loose Leaf Books of Account for BIR compliance is a manageable endeavor that offers flexibility and convenience for taxpayers. With the right documentation, timely submission, and following BIR regulations, you can navigate the complex world of taxation and financial compliance with ease. Should you require assistance, do not hesitate to reach out to our accounting services. Our team of CPAs are readily available to help you maintain tax compliance and financial accuracy.

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