Starting a business in the Philippines is exciting, but managing your finances can be challenging. Still, proper bookkeeping is important not only for financial management but also to ensure compliance with BIR regulations. To help you choose a bookkeeping system that suits your business, we’ll explain what bookkeeping is, explore the different methods available, and provide a sample template.
What is Bookkeeping?
Bookkeeping is the process of recording, organizing, and managing a business’s financial transactions. These transactions include sales, purchases, payments, and receipts. In the Philippines, bookkeeping is a legal requirement for businesses registered with the Bureau of Internal Revenue (BIR). The BIR mandates businesses to maintain accurate financial records to comply with tax laws, such as the Value Added Tax (VAT) or Percentage Tax, depending on your business type.
Bookkeeping involves tracking income and expenses, maintaining ledgers, and preparing financial statements like income statements and balance sheets. This might mean recording daily sales or tracking supplier payments for small businesses. For larger enterprises, it includes payroll, inventory, and depreciation schedules.
How to Begin Bookkeeping for Your Business
Bookkeeping in the Philippines follows a systematic process. Here’s a step-by-step guide:
- Register with the BIR: Before starting, register your business with the BIR to obtain a Taxpayer Identification Number (TIN) and choose your tax type (VAT or non-VAT). This determines the bookkeeping requirements, such as maintaining Books of Accounts (e.g., Cash Receipts Book, Cash Disbursements Book, General Journal, and General Ledger).
- Choose a Bookkeeping System: Decide between manual bookkeeping (using physical ledgers), digital spreadsheets, or specialized bookkeeping software. Manual bookkeeping and digital spreadsheets are good choices for smaller enterprises. Medium to large businesses should consider using specialized software or working with a professional bookkeeping service.
- Record Transactions Daily: Log all financial activities, including sales, expenses, and payments. For example, record daily payments to suppliers for a restaurant. Use official receipts or invoices as supporting documents.
- Categorize Transactions: Group transactions into categories like revenue, operating expenses, or taxes. This makes it easier to prepare financial statements and BIR reports, such as the Monthly Percentage Tax Return (BIR Form 2551M) or Quarterly VAT Return (BIR Form 2550Q).
- Reconcile Accounts: Regularly compare your records with bank statements to ensure accuracy. This helps catch errors, like unrecorded expenses or duplicate entries.
- File and Store Documents: Keep receipts, invoices, and other documents organized, either physically or digitally, for at least three years, as required by the BIR.
Bookkeeping can often be done by trained staff for smaller businesses. However, as your business grows, consider working with a professional bookkeeping service as your transactions become more numerous and complex.
Bookkeeping Sample Template
This template tracks financial transactions using the double-entry system, ensuring every transaction affects at least two accounts (debit and credit) for accurate record-keeping.
| Date | Description | Account | Debit | Credit |
| 01/01/2025 | Office Supplies | Supplies Expense | ₱1,500.00 | ₱0.00 |
| 01/01/2025 | Office Supplies | Cash | ₱0.00 | ₱1,500.00 |
| 01/02/2025 | Client Payment | Cash | ₱10,000.00 | ₱0.00 |
| 01/02/2025 | Client Payment | Revenue | ₱0.00 | ₱10,000.00 |
| 01/03/2025 | Utility Bill | Utilities Expense | ₱1,200.00 | ₱0.00 |
| 01/03/2025 | Utility Bill | Cash | ₱0.00 | ₱1,200.00 |
Instructions:
- Record each transaction with the date and description.
- Identify the accounts affected (e.g., Cash, Revenue, Expenses) and categorize as Debit or Credit.
- Ensure each transaction has equal Debit and Credit amounts to maintain balance.
- Review regularly to verify accuracy and ensure debits equal credits.
- Compute Balance and Cash Balance in a separate ledger or spreadsheet. Bookkeeping software will automatically compute the balance.
This is a simple template fit for smaller businesses. Templates for larger businesses may include additional fields like account codes, tax categories, or departments involved to handle more complex financial tracking.\
Example of Bookkeeping
Below is a sample scenario for a small service-based business, “Maria’s Graphic Design,” and how its transactions are recorded using double-entry bookkeeping.
Scenario:
Maria’s Freelance Graphic Design has the following transactions:
- July 1: Purchases ₱5,000 worth of design software using cash.
- July 25: Completes a large design project for a client, receiving ₱20,000 in cash.
- July 28: Pays ₱1,500 in cash for internet subscription to support online work.
Bookkeeping Records:
| Date | Description | Account | Debit | Credit |
|---|---|---|---|---|
| 07/01/2025 | Purchase of Software | Software Expense | ₱5,000 | ₱0.00 |
| 07/01/2025 | Purchase of Software | Cash | ₱0.00 | ₱5,000 |
| 07/25/2025 | Client Design Project | Cash | ₱20,000 | ₱0.00 |
| 07/25/2025 | Client Design Project | Service Revenue | ₱0.00 | ₱20,000 |
| 07/28/2025 | Internet Subscription | Utilities Expense | ₱1,500 | ₱0.00 |
| 07/28/2025 | Internet Subscription | Cash | ₱0.00 | ₱1,500 |
This example shows how Maria’s Graphic Design records transactions to comply with PFRS and BIR standards. Each transaction affects two accounts (e.g., Cash and Service Revenue), ensuring debits equal credits. For larger service-based businesses, the records can be expanded with accounts like Accounts Receivable or VAT Payable.
Balances, including the Cash Balance, are typically computed in a separate ledger or account register. If she uses bookkeeping software, it will automatically calculate these balances for her. If she enlists one, a professional bookkeeping service can assist with recording and computation.
Summary
Bookkeeping may seem challenging, but choosing a system that fits your business needs becomes manageable. Small businesses can record transactions manually in ledgers or use digital spreadsheets. Larger businesses, on the other hand, often require a professional bookkeeping service to ensure compliance with stricter BIR regulations. Employers also benefit from understanding bookkeeping, as it helps them see how their business’s financial health is and make better decisions for the future.
Are You Looking for a Professional Bookkeeping Service? You Can Find Expert Assistance Here
Proper bookkeeping is necessary for Philippine businesses to stay organized, manage cash flow, and ensure compliance with BIR regulations. Recording transactions accurately, keeping documents in order, and preparing tax reports can be challenging, especially for businesses without a dedicated bookkeeping team.
Thankfully, Business Registration Philippines offers professional support for your business, including bookkeeping, payroll outsourcing, auditing, and other accounting outsourcing tasks. Our team specializes in accounting and compliance-related services, ensuring your internal records are thorough and aligned with Philippine regulations.
Contact us today to schedule an initial consultation with our experts.
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