Three Types of Books of Accounts in the Philippines

After registration of your business, you are required to maintain Books of Accounts. Here are the three types of Books of Accounts in the Philippines.

1. Manual Books of Accounts: This is the traditional way of recording daily transactions in journals and ledgers - through handwriting. These must be approved and stamped by the BIR. 

2. Loose-Leaf Books of Accounts:.The loose-leaf books of accounts are used to record transactions by encoding data in a computer and printing copies using the approved loose-leaf format to be bound as the taxpayer's bookkeeping record.

3. Computerized Accounting System (CAS):  It is a digital or computerized accounting system used to record transactions, generate reports, and issue receipts/invoices. Before it can be used, the BIR must examine and authorize the computerized accounting system.

Pros and Cons: Manual Books vs. Loose-leaf  Books vs. CAS

Manual Books

Pros

1. Easy to use.  You just have to write-down your daily transactions.

2. Not necessarily be submitted on an annual basis. However, make sure you submit and obtain a new journal/ledger before you use all of the pages.

Cons

1. Handwritten. 

2. Time-consuming.

3. Prone to error especially for companies with voluminous transactions

4. Daily updating. It must be updated religiously on a daily basis. Prone to penalty if not updated.

5. Must be maintained in the vicinity of the registered office.

6. Difficult to audit.

Loose-leaf Books (LLBOA)

Pros

1. Easy to maintain

2. Time efficient

3. Cost efficient. Mainly, MS Excel is needed.

4. Promotes collaboration. Multiple persons/departments can get involved on the preparation of data.

5. Easy to audit.

6. Previous year’s filed LLBOA must be maintained in the vicinity of the registered office. Daily updating is not necessary.

Cons

1. Additional processing in getting a permit is required.

2. Need to submit on an annual basis.

Computerized Accounting System (CAS)

Pros

1. Ideal for big and multinational companies.

2. Easy to generate voluminous

3. Time efficient

4. Easy to audit.

Cons

1. Costly

2. Obtaining approval can be complicated.

3. Difficult to maintain. Usually need dedicated IT.

4. Need to save a backup file regularly.

With all the foregoing, what do you think best applies for your company? Need assistance?