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Accounting and Bookkeeping

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Every business, however small, must have a system for tracking revenues and expenses. It is essential to have this system in place at the onset so that when the business grows, it would not become difficult to monitor the finances. Moreover, compliance with local government units and national government agencies will become easier and less stressful.

A true entrepreneur recognizes the limits of his abilities. Thus, if he cannot do the bookkeeping himself, either for lack of time or expertise (or both), he can always opt to have this done by independent accountants. In the Philippines, it is not uncommon to have the bookkeeping function outsourced to either individual accountants or small accounting firms. The usual arrangement involves paying the accountant a monthly retainer fee.

What basic records must be maintained by a small business? Following are the requirements of the Bureau of Internal Revenue:

In addition to the aforementioned, some businesses maintain the following books:


The Journal is a chronological record of transactions reflecting the following information – names of accounts to be debited or credited, the amounts, and any additional information about the transaction (can be a brief explanation of the transaction). A reference to the account code is also sometimes included.

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General Ledger

The General Ledger reclassifies and summarizes, by account, information originally recorded in the Journal. Thus, each item on the balance sheet and income statement covering assets, liabilities, owner’s equity, revenue and expenses is included in the General Ledger. A ledger is used to record every transaction twice based on the idea that each transaction affects at least two accounts. For example, in a transaction involving the purchase of an asset, the increase in fixed assets (debit) is matched with an entry reflecting a decrease in cash (credit).

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Cash Receipts Book

The Cash Receipts Book is used to record all transactions involving the inflow of cash into the business, whether from revenues or other sources. Information recorded include date of transaction, official receipt no., amount, and nature of transaction.

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Cash Disbursements Book

The Cash Disbursements Book is used to record all transactions involving the outflow of cash, whether expenses, purchase of assets or other payments. Information recorded include date of transaction, check or cash Voucher No., check no., amount, and nature of transaction.

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Sales Book

The Sales Book records all transactions involving the sale of goods or services. Information recorded include date, invoice no., amount, customer name and type of transaction – whether cash or credit.

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Purchases Book

The Purchases Book records all transactions related to the acquisition of raw materials or inventory. Information recorded include date of purchase, purchase order No., stock number of item purchased, purchase price, and whether bought on credit or cash.

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Subsidiary Ledgers for Receivables and Payables

Separate accounts for individual customers and suppliers can be maintained in subsidiary ledgers. These subsidiary ledgers provide the details of the amounts posted in the General Ledger.

The Accounts Receivable ledger is useful for monitoring the level of receivables for each customer. The Accounts Payable ledger, on the other hand, keeps track of amounts owed to suppliers/creditors. Knowing the level of the accounts payable and when these are due makes for better cash control and also contributes to establishing a good credit standing with your suppliers and creditor

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