Fast facts
An upcoming BIR audit is a problem only if you're not ready. You need to check if your accounting books and supporting documents are in order and on hand. If you're not ready, you need to request for time to prepare. For most business owners, the lesson is the same: always keep your books current and accurate, and complies with the latest rules and requirements.
How to prepare your accounting books and documents for a BIR audit
The BIR wants to check if your business is aboveboard. If you're ready, then there's no need to worry.
Q: I started a business five years ago and have been paying and filing my income taxes on time. Recently, I received an audit notice from the BIR that it will be sending a representative to examine my books of accounts and other accounting records for all internal revenue taxes from January 1, 2001 to December 31, 2001. What exactly does this mean?
— M. Castillo, Teachers Village, QC
First of all, you must have the following books covering the period in question:
An upcoming BIR audit is a problem only if you're not ready. You need to check if your accounting books and supporting documents are in order and on hand. If you're not ready, you need to request for time to prepare. For most business owners, the lesson is the same: always keep your books current and accurate, and complies with the latest rules and requirements.
How to prepare your accounting books and documents for a BIR audit
The BIR wants to check if your business is aboveboard. If you're ready, then there's no need to worry.
Q: I started a business five years ago and have been paying and filing my income taxes on time. Recently, I received an audit notice from the BIR that it will be sending a representative to examine my books of accounts and other accounting records for all internal revenue taxes from January 1, 2001 to December 31, 2001. What exactly does this mean?
— M. Castillo, Teachers Village, QC
First of all, you must have the following books covering the period in question:
- General and special journals: This contains records of your daily business transactions and adjusting entries.
- General and subsidiary ledgers: This contains the journal entries transferred to specific accounts, like cash on hand and cash in bank, accounts receivable, inventories, accounts payable, loans payable, sales or its equivalent, and specific expenses.
- Cash receipts book: This contains records of cash or check payments received.
- Disbursements book: This contains records of cash and checks issued by your business.
- Stock and transfer book : For partnerships and corporations only: this contains the capital contributed by the owners of the business, which includes you.
The amounts recorded in these books must be supported by their source documents:
* Sales invoices and official receipts, for revenues; and
* Cash and journal vouchers, for amounts received and disbursed.
Second of all, you must have the following documents to support the figures reflected in your balance sheet and income statement:
If all of the books and documents are in order and on hand, you don't have to worry. The BIR wants to check if your business is aboveboard. If you don't have some of these documents, then you will have to ask the BIR for time — about three to six months — to prepare.
What's the moral of the story? Ask your accountant to keep abreast of new BIR rules and regulations. Ask your accountant to attend relevant tax seminars. If you think training is expensive, try ignorance.
“SmallBiz Clinic” is a joint project of EYP and the UP Institute for Small-Scale Industries (UP ISSI) that aims to provide free online consultancy and information services to small and medium-scale enterprises. A team of expert consultants from UP ISSI answers questions sent in by SME readers and advises them on general actions to take to better manage their businesses.
The UP ISSI is a training and research organization created in 1966 to help promote the development of small enterprises in the country. It has trained generations of successful Filipino entrepreneurs via comprehensive development programs in management, marketing, and finance, as well as other innovative development strategies such as the training of small business consultants.
UP ISSI brings to the “SmallBiz Clinic” over 35 years of frontline expertise in the day-to-day challenges and issues of running a Philippine-based enterprise.
* Sales invoices and official receipts, for revenues; and
* Cash and journal vouchers, for amounts received and disbursed.
Second of all, you must have the following documents to support the figures reflected in your balance sheet and income statement:
- Worksheet of ledger accounts: This shows debit or credit balances, including beginning and ending balances.
- Working papers: This shows the formula for arriving at the income, expense items, and/or withholding taxes due.
- Schedules of taxes and licenses: This shows the kind of tax, the date and number of the official receipt, and the amount paid.
- Schedules of expanded and final withholding tax: This shows the names of the payees, amount paid, tax withheld, nature of payment, date and number of the official receipt, and amount remitted to the BIR (BIR Form 1604E).
- Schedules of export sales and "zero rated sales" : If your company is "zero rated," then you should have a certification from the BIR.
- Schedules of importations : This shows the breakdowns of the composition of landed cost, tax base, VAT payment, and the number and date of the official receipt.
- Lapsing schedule for depreciation: This shows the depreciation of machinery and equipment and amortization of pre-operating expenses.
- Inventory list: For both December 31, 2007 and 2008.
If all of the books and documents are in order and on hand, you don't have to worry. The BIR wants to check if your business is aboveboard. If you don't have some of these documents, then you will have to ask the BIR for time — about three to six months — to prepare.
What's the moral of the story? Ask your accountant to keep abreast of new BIR rules and regulations. Ask your accountant to attend relevant tax seminars. If you think training is expensive, try ignorance.
“SmallBiz Clinic” is a joint project of EYP and the UP Institute for Small-Scale Industries (UP ISSI) that aims to provide free online consultancy and information services to small and medium-scale enterprises. A team of expert consultants from UP ISSI answers questions sent in by SME readers and advises them on general actions to take to better manage their businesses.
The UP ISSI is a training and research organization created in 1966 to help promote the development of small enterprises in the country. It has trained generations of successful Filipino entrepreneurs via comprehensive development programs in management, marketing, and finance, as well as other innovative development strategies such as the training of small business consultants.
UP ISSI brings to the “SmallBiz Clinic” over 35 years of frontline expertise in the day-to-day challenges and issues of running a Philippine-based enterprise.
No comments:
Post a Comment