Under RR 7-2024, which emphasizes the accrual basis of accounting, businesses need to understand the proper documentation for different stages of a transaction. On an accrual basis, revenue is recognized when it is earned, not necessarily when payment is received. Here’s what to issue upon collection of payment:
Receipt to Issue Upon Collection of Payment
- Sales Invoice (SI):
- When to Issue: A Sales Invoice should be issued at the point when the sale is made, i.e., when the goods are delivered or services are rendered, regardless of whether payment has been received.
- Purpose: It serves as the primary document that records the sale and is used for accounting purposes to recognize revenue on an accrual basis.
- Official Receipt (OR):
- When to Issue: An Official Receipt is issued when the payment is actually received from the customer.
- Purpose: It serves as proof of payment received and is important for recording the actual collection of cash or equivalents. This helps in reconciling accounts receivable.
Steps to Follow
- Issue Sales Invoice at the Time of Sale:
- For goods sold, issue a Sales Invoice when the goods are delivered to the customer.
- For services provided, issue a Sales Invoice when the service is completed or delivered.
- Record the Revenue in Your Accounting System:
- Recognize the revenue in your books of accounts based on the Sales Invoice, as per the accrual basis of accounting.
- Issue Official Receipt Upon Payment Collection:
- When the customer makes a payment (either in full or part), issue an Official Receipt to acknowledge the receipt of payment.
- Ensure that the Official Receipt includes all necessary details, such as the date of payment, amount received, and references to the corresponding Sales Invoice.
- It must have "THIS DOCUMENT IS NOT VALID FOR CLAIMING INPUT TAXES".
Key Details on Official Receipt
According to Section 237 of the Tax Code and relevant BIR regulations, the Official Receipt should include:
- Name and address of the customer.
- Date of payment.
- Description of the goods or services for which the payment is made.
- Amount received.
- VAT details (if applicable).
- TIN of the seller.
- Serial number of the receipt.
- Indication of full or partial payment.
- Any applicable deductions such as withholding tax.
Compliance with RR 7-2024
- Supplementary Documentation: Ensure that all Sales Invoices and Official Receipts are BIR-approved and contain the necessary information to comply with the latest regulations.
- Timely Issuance: Issue Sales Invoices promptly upon earning the revenue and Official Receipts immediately upon receiving payments.
- Record Keeping: Maintain accurate records of all issued Sales Invoices and Official Receipts for audit and reconciliation purposes.
By following these steps and understanding the specific requirements of RR 7-2024, businesses can ensure proper documentation and compliance with the BIR regulations under an accrual accounting system. This will help in accurate financial reporting and adherence to local tax laws.
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