All Posts by Edna Diano-Verano

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Edna Diano-Verano, Founder of CPA BPOnline

Find out the complete content of RA 10963, the TRAIN law and be prepared of the consequences in your business

We have already seen a lot of infographics going around showing vividly but partially the changes TRAIN law will bring in 2018. So in this blog post, I've prepared something different. The TRAIN law has amended 69 laws, revoked 3 laws and created 8 new laws, only a dozen of these has been touched by the popular infographics.

But since our readers are all accountants or business owners, we need to know the complete content of the TRAIN law so that we can prepare for it in our business. Ignorance of the law won't excuse us. And this burden is heavier for us as business owners and accountants.

So, to help us, we have created a comprehensive list of the contents of the TRAIN law so that you can get a bird's eye view of topics covered by the TRAIN law so you can quickly check if, what or how will your business be affected. Download the pdf by clicking the button below.


On Taxes: Want to prepare your own taxes but you’re frustrated with the process?

Tax season is coming. 


Some of you may have your own accountants, but for the rest who wishes to compute their own taxes this blog post is for you.


First of all note that tax filing is a personal obligation, meaning it is your obligation to compute for your own taxes and pay them to the government as a citizen of the Philippines. It is your responsibility not your accountant's, not your business partner's, not BIR's. Unless you're employed. When you're employed then your employer would bear this responsibility. 


Once you've accepted that you, the business owner need to know how to compute for your own tax, your mind will be less resistant to learning taxation and it will get easier. 


So, how to do this? Read on.


Step 1: Use our free resource to create your customized tax calendar. 

Step 2: You tax calendar should look like the below. A BIR Return form No should be listed on the days these are due. These are the tax returns you should fill up and pay for or just submit. On the right side is a brief description for each deadline, such as if the deadline is for submission, issuance or filing and payment.

For example, on January 15 BIR return forms 1601C and 1601E is listed. this means you will need to remit the taxes you've withheld from your employees and vendors using BIR Return 1601C and 1601E.

 

Knowing the return codes of the taxes you need to pay is very important. You can use this code to easily search in the BIR website, you'll be better understood by BIR personnel if you mention the code and if you're using the eBIRForms app, you won't make the mistake of filing the wrong BIR return.  

Click to Enlarge

Step 3:  Download eBIRForms. Input and save your profile. Select the BIR form under  "list of BIR forms" and fill up. There are guidelines along the way for you to check if you're doing the right thing and the application won't submit until all the data input are validated. I suggest to work on your taxes at least a week before it is due so that you will still have time to ask around if there are items not clear. You can also save the form as a draft while you ask around. 

Step 4:  Use the BIR website to learn about the taxes you need to pay, the base, rates and any exemption. Just type the BIR Return No in the search pane of the BIR website. 

Step 5:  Ask for confirmation. You may show your BIR return drafts and ask questions at our Facebook Support Group. We typically respond to each question late in the afternoon. 

Finally, start early. You have more than 100 days after year end to compute and file your annual income tax before it becomes due. Act on it early, I'll be expecting your questions next year. 

Loose Leaf Bookkeeping: A better option than manual bookkeeping?

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   oose leaf bookkeeping is another BIR prescribed mode of maintaining books of accounts. But unlike the manual books of accounts, you will need to apply for a permit to use (PTU) from your RDO. 


Typically the business owners who use loose leaf use Microsoft Excel spreadsheets for recording their sales, purchases, journals and general ledger the exact set of four books used in manual books of account. Loose leaf is also used by medium and big companies who are currently processing their permit for computerized accounting system (CAS). 


These days there are an abundance of affordable cloud based accounting software available for small businesses. But all of these cloud based accounting software are not yet accredited by BIR. Note that even adding the subscription fees for these software as business expense can be questioned. Since cloud based accounting software is something new, there are still no BIR regulation that can be used as guidance. And since only the small businesses are involved, it would take time for this to get sorted out. Meantime, cloud based accounting users can use loose leaf books of accounts.


There has been a bit of confusion on where the application for the PTU of loose leaf books of accounts should be filed. To address this, BIR has issued RMC no 68-2017 to clarify that loose leaf bookkeeping is to be considered as a computer aided manual bookkeeping. It goes further to advise that the venue for filing the application for permit to use loose leaf books of accounts should be at the RDO office where the business is registered. 


You can download a copy of this memorandum by clicking the button below.  


To register for loose leaf bookkeeping, you need to prepare the following three documents:

1. Duly accomplished BIR Form No 1900

2. Sample Format and sample print out of the books 

3. A Sworn Statement specifying the following:

  • Identify the books to be used, invoices/ receipts  and other accounting records together with the serial numbers of principal and supplementary invoices/receipts to be printed.
  • Commitment to permanently bind the  loose-leaf forms  within 15 days after the end of each taxable  year or upon the termination of its use. 

Sample F​orm No 1900

Sample format and print out

Sample Sworn Statement

It is important to note that if you use loose leaf books of accounts, you are required to print and bind your books for the year then surrender a copy to your RDO, deadline of which is every 15th of the following month after year end close.  


But although using loose leaf bookkeeping is a far better choice than manual bookkeeping, a lot of business still use for manual simply because registering for manual bookkeeping is the easiest. Registration of manual books of accounts can take less than an hour, loose leaf around a day and then for a computerized accounting system, the registration can take at a minimum six (6) months.


Below is a comparison of the three types under 5 categories, where we'll see that among the three, loose leaf books of accounts is the best option. 

Category

Easy to register

Cost

Easy to use

Flexible

Efficient

Average Score

Manual

Loose Leaf

Computerized  Accounting System

What do you think? Do you agree with the ratings above? Let me know by typing your comments below.  

Manual Books of Accounts: What to do with the four books you bought when you registered in BIR

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     hen registering for manual books of accounts, the BIR RDO would request you to buy a set of four books. The instruction to buy the books are very specific and will make you think that buying a 10 column instead of a 14 column would make your books invalid. 
To set things straight, you need at least four types of books for a Non-VAT tax payer. And it wouldn't matter if all your books are 15 columns or 4 column as long as you record all your relevant business transactions. The type of books that are typically prescribed are: 

Purchases book 

Sales book

Journal book

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. 

After recording all your purchases in the "Purchases Book" and all your sales in the "Sales Book" get the daily or monthly total of it and record them in the "Journal Book." Other business transactions such as additional investment, bank loans and other non-operations transaction are also recorded in the journal book. Then contents of the journal book are summarized per account in the "General ledger book".  

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:

  • those using cash basis of accounting
  • those whose business is located in the provinces where there is no internet connection.
  • Those whose transactions are infrequent that it would take longer to boot up the computer than to write down all the transactions in the books. 

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. 

Create Your Own Customized Tax Calendar and Never Miss A Tax Deadline

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've been working as an accountant for the past ten years and I have probably looked at the BIR tax calendar thousands of time by now. But every time I do I still need a moment (could be minutes, depends on the time of the day) to focus  in order to identify the date I'm interested in. Yes even I, still get confused with the BIR tax calendar. So then I realized new business owners trying to file taxes on their own must be getting headaches! No wonder a lot of entrepreneurs just blindly rely on what their bookkeepers/accountants tell them to do. Which is very dangerous by the way.  


But don't get me wrong the BIR tax calendar is clear and very straightforward, the only thing that's making it seem complicated is the long list of all possible deadlines that cover the different processes of filing, payment, submission and issuance.  It's understandable, BIR only issues one version of the tax calendar yearly so it needs to list everything there. 

So then I thought, how wonderful it would be to own a tax calendar which only lists the deadlines that are applicable to my business. A calendar that lays out all my tax deadlines for the entire year, so I can plan my activities around it months in advance. 

I took the time to list all the tax deadlines found at the BIR website, created a questionnaire directed to identify the applicable taxes of the person answering it, then from the answers create an automation that lays out all relevant dates in a calendar. I then shared this to our clients and their response were overwhelming.  Their delight and appreciation was very unexpected. So now, I'm sharing this for free to everyone who can benefit from it. 

When you've received your tax calendar, let me know what you think of it thru the comments section below.  Click the button below to start creating your customized tax calendar. 

UPDATE: We've included all other statutory compliance deadlines, such as SEC, business permit and payroll (Philhealth, SSS and Pagibig).

Which would you rather look at?

Regular Tax Calendar (click to enlarge)

or

Customized Tax Calendar (click to enlarge)

Manage your taxes efficiently, know Tax Planning

What is Tax planning?

It is the process of reviewing previous year expenses and revenues and creating a plan for the current year.

Why Tax planning?

The main goal of tax planning is to ensure there are no over payment of tax and the current accounting practice does not violate any tax law which could lead to tax penalties and interests. Tax planning can also be strategic when the business has an option to choose between different tax models, there will always be a variance between the options. With tax planning you will be able to identify which mode will result to lesser tax. 

Who can benefit from Tax planning?

Every business can benefit from tax planning. Even those that had just opened business in the current year. It is even better for a newly started business to have a tax plan from the start. 

How can I get started with tax planning?

CPA BP Online is currently offering free tax planning consultation. Get a feel of how it works and if it would be beneficial for your business. CPA BP Online is headed by two CPAs who have spent the past ten years helping their employers in tax audits, tax planning, accounting and business partnering.

Not fully trust your CPA? Read about CPA basic code of ethics and know what actions can cost them their license.

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hen I was starting this company, I spoke to dozens of entrepreneurs to get their comments and feedback. Then as a token of my appreciation for their inputs, I would offer them a free tax planning consultation at the end. Now during the end of one of these discussions after I offered my free tax planning consult, I was taken aback by the answer of my interviewee who answered me directly: 
"Why would I trust you? Even if you give me something free, I still would not divulge my numbers simply because I do not know you."  
At first, I felt offended and then annoyed that someone would have doubts and not grab at the chance to get a free tax planning consultation from an experienced CPA when companies are willing to pay thousands for the same service...!
Yes I admit I was naive, idealistic and had that wrong sense of entitlement, the same thing millennials are being accused of nowadays. 
But I really thought that my CPA designation, which I have protected carefully for the past 10 years, would already be enough to earn someone's trust. I was crazy to think that the code of ethics we swore to uphold is as deeply ingrained in everyone else's mind as it was in my mind. Crazy thinking!

Well now, I've gotten over it. Now, I have a wider perspective and understanding of the word "Branding" and I don't get offended easily anymore.

What stayed with me though is the thought of what if everyone knew the code of ethics we as CPAs, abide by, where the consequence of not following them could be suspension or revocation of license? Wouldn't it be easier to earn a potential client's trust then?
 So here I've listed down the basic code of ethics every CPA is required to follow as their duty and responsibility as CPA license holders. Then for each I've given examples of actions in violation of it.   

The CPA code of ethics are divided into three parts, part A applies to all CPAs, part B applies to CPAs in public practice and part C applies to employed CPAs. What is listed below is the part A only, as this applies to all CPA license holders and is most relevant to target audience.

Intro​duction and Fundamental Principles  

Section 100.1 A distinguishing mark of the accountancy profession is

its acceptance of the responsibility to act in the public interest.
Therefore, a professional accountant’s responsibility is not
exclusively to satisfy the needs of an individual client or

employer.

Integrity  

Section 110.1 The principle of integrity imposes an obligation on

all professional accountants to be straightforward and honest in

all professional and business relationships. Integrity also implies fair dealing and truthfulness.

Don'ts

CPAs should not prepare a possibly erroneous tax return and then hand it off for payment. If there are doubts, confirm with the tax laws.

Should not prepare tax returns the night before the deadline when all the needed data has been provided days before. The client should have time to review their tax return. Also this is being reckless, something the code specifically mentions against. 

Objectivity  

Section 120.1 The principle of objectivity imposes an obligation on all professional accountants not to compromise their professional or business  judgment because of bias, conflict of interest or the undue influence of others.

Don'ts

Do not engage in a service where there are bias and/or undue influences that can affect the accountant's professional judgement.

Professional competence and due care  

Section 130.1 The principle of professional competence and due care

imposes the following obligations on all professional accountants:
(a) To maintain professional knowledge and skill at the level
required to ensure that clients or employers receive
competent professional service; and
(b) To act diligently in accordance with applicable technical and
professional standards when providing professional services.

Don'ts

Do not allow skills and knowledge to stagnate. Keep developing

skills and updating knowledge.

Never promise a result that is impossible to deliver due to inherent limitations or  limitations on the CPA's skills and knowledge.

Confidentiality  

Section 140.1 The principle of confidentiality imposes an obligation on

all professional accountants to refrain from:
(a) Disclosing outside the firm or employing organization

confidential information acquired as a result of professional

and business relationships without proper and specific authority

or unless there is a legal or professional right or duty to disclose; 

(b) Using confidential information acquired as a result of 

professional and business relationships to their personal

advantage or the advantage of third parties.

Don'ts

Do not disclose confidential information. Once professional services are being provided to a client, it is as if the accountant and the client has signed a non-disclosure agreement.

Professional Behavior

Section 150.1 The principle of professional behavior imposes an obligation on all professional accountants to comply with relevant laws and regulations and avoid any action that the professional accountant knows or should know may discredit the profession. This includes actions that a reasonable and  informed third party, weighing all the specific facts and circumstances  available to the professional accountant at that time, would be likely to conclude adversely affects the good reputation of the profession.

Don'ts

Do not make demeaning references to or belittle the work of other

accountants.

Do not make exaggerated claims for the services offered. 

Now, the question of whether the code of ethics is being followed by CPAs is a different topic entirely. You may choose to believe that most CPAs DO NOT follow the code of ethics and further condemn them as irredeemable. Or choose to believe that CPAs DO follow their code of ethics and in doing so uplift the profession, promote accountability and most importantly help establish  a stronger sense of professional worth.
It's up to you to believe what you want, but believing the latter would bring out a much better result don't you think?

Anyway, you can always report an erring CPA to the Board of Accountancy. 

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