If you’re a registered taxpayer—whether you're a freelancer, MSME owner, or corporate accountant—understanding how to prepare and maintain ledgers is key to staying compliant and confident when the BIR comes knocking.
This guide explains what ledgers are, how they fit into your accounting system, and how to properly maintain them in line with BIR requirements.
What Are Ledgers?
Ledgers are the core books where transactions are summarized and organized by account. They allow you to see the complete financial history of each category (e.g., Cash, Sales, Rent Expense) in one place.
There are two main types:
1. General Ledger (GL)
The master book that contains all major accounts of the business—assets, liabilities, equity, income, and expenses. Every financial transaction eventually ends up here.
2. Subsidiary Ledger (SL)
Provides detailed information for specific accounts in the general ledger. For example:
Accounts Receivable Ledger (per customer)
Accounts Payable Ledger (per supplier)
Inventory Ledger (per item)
Why Are Ledgers Important?
Required by the BIR
Ledgers are among the books that must be registered and maintained under Philippine tax laws. They are mandatory for:
VAT-registered taxpayers
Non-VAT businesses with substantial activity
Any taxpayer required to file audited financial statements
Foundation of Financial Reports
Trial balances, income statements, and balance sheets are all derived from ledgers.
Essential During BIR Audits
BIR examiners review ledgers to verify your tax returns. Missing, incomplete, or inconsistent ledgers can lead to findings and penalties.
How to Prepare a General Ledger
Each general ledger account should include:
Account Name (e.g., "Cash on Hand")
Account Number (optional but recommended for coding)
Beginning Balance (start of the year or accounting period)
Date, Description, Reference (e.g., Journal Entry No.)
Debit and Credit Columns
Running Balance
Sample GL Entry – Cash Account
| Date | Description | Ref. | Debit | Credit | Balance |
|---|---|---|---|---|---|
| 01/01 | Beginning Balance | - | ₱50,000 | - | ₱50,000 |
| 01/05 | Sales Income | JE-001 | ₱10,000 | - | ₱60,000 |
| 01/08 | Rent Payment | JE-002 | - | ₱5,000 | ₱55,000 |
Each account (e.g., Cash, Utilities Expense) will have its own ledger.
How to Prepare a Subsidiary Ledger
Subsidiary ledgers break down large or complex GL accounts into individual sub-accounts.
Example: Accounts Receivable – Subsidiary Ledger
| Customer: Maria Santos |
| Date | Invoice No. | Description | Debit | Credit | Balance |
|---|---|---|---|---|---|
| 01/05 | INV-1001 | Website Development | ₱20,000 | - | ₱20,000 |
| 01/15 | OR-2001 | Payment Received | - | ₱10,000 | ₱10,000 |
Maintain one SL per customer, supplier, or item, depending on the account you're detailing.
BIR Requirements for Ledgers
To comply with BIR regulations:
Register your ledgers
Before using them, have them stamped and approved by the BIR (for manual books) or secure approval via Form 1900 (for loose-leaf or computerized).
Maintain ledgers regularly
Update ledgers in real time or at least monthly. No backdating or post-editing without audit trail.
Retain records for 10 years
As per the Tax Code, keep both GL and SL copies—whether printed or digital—for at least a decade.
Submit ledgers if required
For loose-leaf and computerized books, you must submit printed copies annually, within 15 days after the end of the taxable year.
Common Mistakes to Avoid
Only keeping journals (No GL = incomplete records)
Failing to reconcile ledger balances with journal entries
Missing or duplicate SL entries
Not registering new ledgers after filling up old ones
No audit trail for computerized adjustments
Best Practices for Ledger Maintenance
Close your books monthly – Reconcile GL balances with trial balances and reports.
Cross-check journals and ledgers – Ensure consistency across books.
Organize SLs by name, item, or code – Easier retrieval and audit response.
Back up computerized ledgers – Store copies offsite or in the cloud for security.
Final Thoughts
General and subsidiary ledgers are the backbone of your accounting system. They don’t just help you stay BIR-compliant—they empower you to manage your business with clarity and control.
Whether you're doing things manually or using a computerized system, proper ledger maintenance can mean the difference between smooth sailing and serious penalties during tax season.
Need help formatting your ledgers or switching to a digital setup? Contact a BIR-accredited accountant or message us—we’ll guide you through setup, registration, and best practices tailored to your business.
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