What is Book of Accounts And Who Needs It?

book of accounts compilation of journals

Are you a bookkeeper or business owner who is looking for a better understanding of what the book of accounts is? If so, you’re in luck, because in this blog post we will explore everything you need to know about this important document. We’ll discuss what it is and what role it plays in keeping your business finances in order. Plus, we’ll provide some tips on how to use it to your advantage. So, whether you’re just getting started with bookkeeping or are looking for ways to improve your current system, be sure to read on!

What is a Book of Accounts?

These are the accounting books used to record all business transactions. It is kept by bookkeepers and accountants to help keep track of the money that comes in, goes out, and stays in the company.

In other words, it’s your business’ book of financial health! But if you want to be extra sure about your book of accounts, then you have to look towards the Book Of Accounts BIR (Bureau of Internal Revenue). This government agency helps make sure that businesses are complying with all the relevant accounting guidelines when it comes to calculating taxes and tracking expenses.

Related: Bookkeeping vs Accounting: Which One Do You Need?

Types of Book of Accounts

Depending on the size and nature of a business, bookkeepers, and accountants can choose from different types of books of accounts. There are three types of books of accounts:

Manual

It is kept manually, with the help of pen and paper. This book provides an in-depth view of every transaction, but it can be time-consuming to create and maintain.

Computerized

This book is maintained with the help of computers, which makes it easier to keep track of your business transactions. It also enables you to generate detailed reports quickly.

Related: The Best Bookkeeping Softwares In The Philippines

Cloud-based

This book is hosted on a secure cloud platform, making it easy for bookkeepers and accountants to access it from anywhere in the world. It also provides real-time updates of all expenses and income, helping businesses stay up-to-date with their financial health.

Loose-Leaf

It is a combination of manual bookkeeping and computerized bookkeeping. This book has two parts: the bookkeeper part, which contains all the information about the book of accounts; and the accountant part, which gives an in-depth analysis of all financial transactions.

Kinds of Book of Accounts

Different businesses have a different books of accounts. Here are some of the books of accounts that bookkeepers and accountants can use:

General Ledger Book

This book contains all the financial transactions related to a business, including assets, liabilities, income, and expenses.

Sales Journal Book

This book tracks all the sales made by a business regularly. It provides information about customers, products sold, pricing details, payment modes used, etc.

Purchase Journal Book

This book tracks all purchases made by a business on regular basis. It provides detailed information about vendors and suppliers who provide goods or services to the company.

Cash Receipts Book

This book contains information about money received from customers in exchange for products or services.

Cash Disbursement Book

This book contains information about money spent by a business, including payments made to vendors and suppliers, salaries paid to employees, etc.

Related: The Ultimate Guide to Bookkeeping For Beginners 2022

Importance of Book of Accounts

Staying up-to-date with books of accounts is vital for bookkeepers and accountants.

Recording of Business Transactions: Helps bookkeepers and accountants record all business transactions accurately.

Meeting Tax Obligations: Provides bookkeepers and accountants with useful information to calculate taxes due on income earned or expenses incurred.

Preparation of Financial Statements: This book contains all the necessary data required for bookkeepers and accountants to prepare financial statements for their clients.

Analyzing Performance: Analyzing it will help bookkeepers and accountants get an insight into the overall performance of a business, which in turn helps them make better decisions about its future.

Related: 15 Common Bookkeeping Mistakes Filipino Business Owners Make – And How to Avoid

Tips When Preparing Book of Accounts

It is an important book that bookkeepers and accountants should take seriously. Here are some tips to keep in mind when preparing a book of accounts:

Ensure Accuracy: Make sure all entries are accurate, complete, and up-to-date.

Organize Data: Classify data into different categories to make it easier to find information quickly.

Stay Updated: Keep track of changes in the book of accounts bir so bookkeepers and accountants remain compliant with laws and regulations.

Keep Records Secure: Store the book of accounts securely and back it up regularly for disaster recovery purposes.

Follow Standard Guidelines: Comply with standard bookkeeping guidelines like Generally Accepted Accounting Principles (GAAP) or Malaysian Financial Reporting Standards (MFRS).

Related: 10 Tips To Make Your Business More Profitable With Proper Bookkeeping

FAQs on Book of Accounts

Q: How often should bookkeepers and accountants review books of accounts?

A: Bookkeepers and accountants should review the book of accounts regularly to ensure accuracy and compliance with laws and regulations. They should also check for any changes in the book of accounts bir.

Q: Where to get the book of accounts?

A: It can be purchased from bookstores or online stores. It is also available for free download on some websites. After that, you need to register these books with the BIR.

Q: Can I use a book of accounts without BIR stamps?

A: No. It must have BIR stamps to be considered legal and valid.

Q: Is there a penalty if I lost my book of accounts?

A: Yes, it may be subject to fines between 500 to 50,000 pesos depending on the gross sales or receipts.

Q: What if there’s a mistake in recording the transaction in the book of accounts?

A: If there are any mistakes, make necessary corrections as soon as possible. They should also inform the BIR if they find out that the book of accounts has been tampered with or altered in any way.

Q: How many books of accounts should I register with the BIR?

A: It should be registered with the BIR if it is used for any purpose other than bookkeeping. The number of books of accounts depends on the size and scope of your business operations. The minimum requirements must have the general journal, cash disbursement journal, cash receipt journal, and ledger.

Q: How long can I use the book of accounts?

A: It is recommended that bookkeepers and accountants use the book of accounts for at least five years to maintain a record of all transactions. It should also be updated regularly under changes in laws and regulations.

Conclusion

Keeping a book of accounts is vital for bookkeepers and accountants to record, analyze, and report financial information. By following the tips above, bookkeepers and accountants can ensure that their book of accounts is accurate, organized, secure, and up-to-date with current laws and regulations. This allows them to better serve their clients by providing accurate financial insights promptly.

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