If you’re running a micro, small, or medium enterprise (MSME) in the Philippines, keeping your books in order isn’t just good business practice—it’s a legal requirement. The Bureau of Internal Revenue (BIR) mandates all registered businesses to maintain books of account that properly reflect their financial activities.
But what exactly are these books? Do all businesses need the same ones? And what happens if you get it wrong?
This guide breaks down which books of account you need, why it matters, and how to stay compliant—specifically tailored for Filipino MSMEs.
What Are Books of Account?
Books of account are official records of your business’s financial transactions. These include:
Sales
Purchases
Receipts
Expenses
Assets and liabilities
They form the basis of your tax returns and are your first line of defense in the event of a BIR audit.
Do Small Business Owners Really Need Them?
Yes. If you're registered with the BIR—whether as a sole proprietor, partnership, corporation, or freelancer—you are required to keep books of account, regardless of how small your business is.
Even Barangay Micro Business Enterprises (BMBEs) and online sellers earning over ₱250,000 annually must maintain proper records.
Types of Books and Who Needs What
The type and complexity of books you need depends on two main factors:
Your business size or structure
Your tax type
Here’s a simple breakdown:
1. For Non-VAT Registered MSMEs (Percentage Tax Payers)
These are businesses with gross sales below ₱3 million annually.
Required Books:
General Journal
General Ledger
Cash Receipts Book
Cash Disbursements Book
Optional:
Sales and Purchases Books (if needed for tracking)
Best method: Manual or Loose-Leaf
Pro tip: Manual books are easier to start with and more affordable.
2. For VAT-Registered MSMEs (₱3M and up in annual sales)
If your sales exceed ₱3 million annually, you must register as a VAT taxpayer.
Required Books:
General Journal
General Ledger
Sales Journal
Purchases Journal
Cash Receipts & Disbursements Books (for cash flow tracking)
Best method: Loose-leaf or Computerized
VAT taxpayers are usually subject to more detailed BIR inspections.
3. For Freelancers, Professionals, and Online Sellers
If your annual income exceeds ₱250,000 and you're issuing receipts or invoices:
Required Books (similar to non-VAT businesses):
General Journal
General Ledger
Cash Receipts Book
Cash Disbursements Book
Best method: Manual books (low-cost and low volume)
Even if you’re a one-person business, these rules apply.
How to Register Your Books with the BIR
Here’s a simplified step-by-step guide:
Step 1: Register Your Business
Make sure you already have:
BIR Certificate of Registration (Form 2303)
Tax Identification Number (TIN)
Official Receipts or Invoices (ATP)
Step 2: Buy the Right Books
Buy bound columnar or ledger notebooks (not loose or spiral-bound). If you're going for loose-leaf or computerized, you'll need additional BIR approvals.
Step 3: Submit for BIR Stamping
Visit your RDO with:
BIR Form 1905
List of books to register
Your Certificate of Registration
The physical books for stamping
BIR will stamp and date your books—this makes them officially valid.
When to Register or Update Your Books
You must register new books when:
You start your business
Your books are full (manual)
You switch from one bookkeeping method to another
You change your tax type (e.g., from non-VAT to VAT)
Why This Matters
Failing to maintain or register your books properly can lead to:
Fines of up to ₱50,000
Disallowed business expenses
Audit issues and legal trouble
And if you ever apply for loans, grants, or BIR clearances—your books will be reviewed.
Benefits of Keeping Proper Books
Aside from staying compliant, maintaining proper books can help you:
Track your profit and losses
Prepare for tax deadlines with less stress
Prove your income when applying for funding
Understand which areas of your business need improvement
Good books help you make better business decisions.
Final Thoughts
As a small business owner, keeping books of account might sound intimidating—but it doesn’t have to be. Start with what’s required, stay consistent, and don’t hesitate to ask for help when needed.
With proper bookkeeping, you’re not just staying legal—you’re laying the foundation for long-term success.
Need help choosing or registering your books? Drop your questions below or talk to a certified public accountant (CPA) who can guide you every step of the way.
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