Philippine businesses must keep books of accounts that are registered with the BIR, in manual, loose-leaf or computerised form. Computerised accounting systems follow a separate BIR accreditation process. Records must be preserved for the retention period in the Tax Code and produced when a Revenue Officer examines you.
Every business registered with the BIR must keep books of accounts that record its transactions in an orderly way. For a small trader this may be a journal, a ledger and subsidiary books for sales and purchases. For a larger company it is a full set of ledgers kept in a computerised system.
The books must be registered with the BIR, kept at the registered place of business, and be complete enough to support the returns you file. A set of books assembled the week before an examination rarely survives close reading.
The Tax Code recognises manual bound books, loose-leaf books and computerised books, though each has its own registration steps. Manual books are numbered and registered before use. Loose-leaf and computerised books are typically printed and bound periodically, with the BIR rules setting out how.
A computerised accounting system is not just spreadsheet software. The BIR has a process for registering such systems, with documents describing the software, its audit trail and its outputs. If your accountant uses a registered system, ask for the reference so you can show it during an examination.
Books are only as good as the documents behind them. Invoices, receipts, bank statements, contracts and payroll records should be filed in a way that lets you trace any ledger entry back to its source. Philippine businesses commonly receive these across email, Viber groups and chat apps, which leads to missing paperwork at year end.
Agree a chart of accounts with your CPA at the start. It should separate income by VAT treatment, record withholding tax receivable from Form 2307 certificates, and distinguish deductible from non-deductible expenses. Changing the structure midyear forces restatements that auditors find hard to follow.
Books and supporting records must be kept for the retention period in the Tax Code and BIR regulations. Because the assessment window can stretch to ten years for unfiled or fraudulent returns, many companies keep records that long. Store them where they will survive a fire, a flood or a laptop failure, and keep a copy at a separate location.
When a letter of authority arrives, log the date, check the period and tax types it covers, collect the records, and give the examining officer a single contact person. Keep a record of what you hand over, with dates, because later disputes often turn on what was provided.
A restaurant that records daily sales from the point-of-sale report, deposits cash intact the next morning, keeps supplier invoices in monthly folders and reconciles the bank statement at month end can answer an examiner in an afternoon. A restaurant that records sales only when cash is deposited, pays suppliers from the till and keeps invoices in a shoebox cannot, however honest its returns.
The difference is not sophistication but discipline. Write the routine down: who posts sales, who files invoices, who reconciles the bank, and by what day of the month.
At year end the books are closed, adjusting entries are posted for depreciation, accruals and prepayments, and financial statements are drawn up. Corporations also need audited statements for the SEC, and the BIR expects the income tax return to agree with them.
A CPA who has seen your books during the year will close faster and more accurately than one who gets a box of documents in March. Share access to records monthly, even if the closing happens once a year.
Large buyers often withhold a percentage of your invoice and send a Form 2307 certificate, which you later credit against your income tax. Record the withholding as a receivable at the time of collection, and chase certificates promptly, because an uncollected certificate is a lost credit.
Keep a register of certificates received, with payer, period, amount and the invoice it relates to. At filing time that register supports the credit you claim in the income tax return.
Examiners commonly cite sales missing from the books, expenses without valid invoices, input VAT claimed on invoices that name another company, unregistered books, unreconciled differences between returns and ledgers and unsupported related-party transactions. Each of these is avoidable with routine controls.
Run a quarterly self-check: pick ten sales and trace them from invoice to ledger to bank, then pick ten expenses and trace them from ledger back to valid invoices. Fix what you find while the explanation is still fresh.
A micro business does not need a complex system, but it still needs complete records. A cash book, a sales register, a purchases register and a file of source documents, kept up to date and registered where required, satisfy more examiners than an advanced system that is not maintained.
If your accountant offers cloud software, ask whether it can produce the registers and reports the BIR expects in an orderly form and how it handles the audit trail of changes.
4softerp.net is a multi-company financial ERP that can hold your own accounting records, and 4invoices.net keeps a PDF invoice archive that supports the sales side. These tools help you organise records for your accountant, but the ecosystem does not provide a BIR-registered computerised accounting system and does not register your books or file returns.
Before you adopt any software as your formal book of account, ask your Revenue District Office what registration is required, and keep the confirmation with your compliance file.
Source documents — invoices, receipts, bank statements — are scattered across email threads, Viber groups and spreadsheets. The accounting firm demands them piecemeal before every filing deadline.
Collect invoices, receipts and bank statements in one place and share them with your CPA firm as you agree. 4invoices keeps a PDF invoice archive; documents are not auto-categorised for the accountant.
The chart of accounts in the existing system does not map to BIR's prescribed account categories, requiring time-consuming manual reclassification at year-end.
Agree the chart of accounts with your CPA firm and set it up in 4softerp yourself. There is no ready-made BIR-CAS chart and no BIR-registered CAS; registration and return schedules are dealt with outside the products.
The company changes accounting software mid-year and cannot show a continuous record of the earlier months.
Export complete ledgers, journals and subsidiary records from the old system, confirm the new setup with the BIR where registration is required, and keep both sets together.
Books of accounts are the formal records of a business's transactions, typically journals, ledgers and subsidiary records for sales, purchases, cash receipts and disbursements. They may be kept manually, in loose-leaf form or in a computerised system, but the BIR expects them to be registered and kept in a consistent way. They are the first thing a Revenue Officer asks for in an examination.
The Tax Code and BIR regulations set the retention period. Many practitioners plan for ten years, because the assessment period can run that long when a return was not filed or was fraudulent, and a pending case can extend it further. Confirm the current rule with the BIR or your adviser, and keep both paper and electronic copies in a protected location.
A business that keeps its books in a computerised accounting system generally has to register that system with the BIR under its rules. The exact conditions vary by taxpayer type, so ask your Revenue District Office what applies to you. Using a system that is not registered, when registration is required, can cause the BIR to reject the books during an examination.
A letter of authority names a period and tax types. The examining officer asks for books, invoices, returns and supporting records, and then compares them with your returns and third-party data. Respond within the deadlines, provide copies rather than originals where you can, and ask your adviser to attend. Unreconciled differences between returns and records are the usual source of assessments.
Electronic copies are widely used, but acceptance depends on the form of the document, how it was issued and the BIR rules on electronic records. Keep the issued PDF together with the underlying data and your register, and ask the BIR whether any original format is required. Never rely on a file that can be edited without trace as your only evidence.
A multi-company financial ERP for your bookkeeping. BIR registration of books is done with BIR.
