Among the most complicated things entrepreneurs have to deal with are tax issues. Tax regulations, often very complex and very technical, usually boggle the mind of non-accountants. That’s why preparing the books of accounts—those records of financial transactions required of a business when filing income taxes—could be a very daunting task for most entrepreneurs.
Books of accounts, of course, are not for tax-fling purposes alone. They also serve as guides for management decisions and as data sources required by regulatory agencies, the company’s stakeholders, and other parties in the business.
According to Grace Perez, an accountant with the accounting firm Calabig Dy Perez Yao & Company, one of the most common mistakes is making undated or inaccurate records in the books. Another is failing to have the books registered with the Bureau of Internal Revenue (BIR) or discarding them before they are examined.
“Inaccurate entries or those without supporting documents could cause the books not to tally with the company’s other financial statements, and could cause problems later,” she says.
Perez suggests these 10 things to remember when preparing the books of accounts:
1. Know the books that a taxpayer should maintain. These are the general ledger, journal, cash receipts, cash disbursement, and sales and purchases.
2. Depending on the type of your business and the volume of your transactions, choose between maintaining manual books and maintaining computerized books. Manual books can be bought from bookstores, while computerized books—usually spreadsheet programs—are usually off-the-shelf packages that you can buy. Alternately, you can have computerized books customized by a competent software developer.