General Ledger book
Now, its nowhere stated in our tax laws, that your manual bookkeeping should consist of four books that must be used for the purposes stated above, that you should for example assign a book exclusively for purchases, another for sales, etc. Your books would actually depend in the needs of your business, if you have very few purchases, then it wouldn't be practical to have one book reserved for it. The only thing that matters is that all your business transactions are completely recorded. Then, for your sanity, you need to do the recording in a systematic and orderly manner. The four books prescribed above follow the best practice for manual bookkeeping so following them would be the best decision, specially if your business is new and you have yet to know what books would work best. Below is an infographic of how these four books are related to each other.
A reason why the purchases and sales books are separate is because these are typically maintained by different persons. Let's take for example in a small grocery store. The Sales book is updated by the cashier so this book should be kept near the cashier's work station. The purchases book would be kept by those in charge of refilling the shelves and ordering new stocks. The Journal, which contains the summary of the purchases and sales and entries for all other transactions, will be held by the bookkeeper or accountant. Lastly, the general ledger which contains a summary of all accounts and the reports would be kept by the owner. The separation of responsibilities created here is important for check and balance and mitigating risks.
To get a visual of how your books would look like, refer to the samples below (click to enlarge):
Manual bookkeeping is applicable for:
But since manual books is the easiest to register in BIR, There's a lot of small businesses that still opt to register for manual bookkeeping even when they have no intention of using a manual bookkeeping system. What they do is to record their transactions using spreadsheets or accounting software and then by the end of the month/year, they transfer these transactions into the books for BIR compliance sake.
Now, there's another option when manually writing transactions in manual books would be crazy (one example is businesses that are VAT registered). And generally would want a bit of automation in the process but is not yet ready to go thru the long, expensive and complicated process of registering a computerized accounting software. This other option is called the loose leaf bookkeeping. This we will tackle in a another blog post.