Books of Accounts: BIR Registration & Maintenance
Updated June 13, 2026
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Definition
Books of Accounts are the journals, ledgers and other bookkeeping records that every person required to pay internal revenue taxes must keep under Section 232 of the Tax Code. They must be registered with the BIR and must show all transactions so that the taxes due can be readily and accurately determined.
Books of Accounts are the base records behind every tax return a business or professional files. Section 232 of the Tax Code, as amended by the TRAIN Law, requires all corporations, partnerships and persons required to pay internal revenue taxes to keep a relevant and appropriate set of bookkeeping records in which all transactions are shown and from which the taxes due can be readily and accurately determined. Those whose gross annual sales, earnings, receipts or output exceed ₱3,000,000 must have their books audited each year by an independent Certified Public Accountant. A typical set includes a General Journal, General Ledger, Cash Receipts Book, Cash Disbursements Book, Sales Book and Purchase Book, with subsidiary books kept as the business needs them (Section 233). Books may be manual, loose-leaf or computerized; loose-leaf and computerized books require prior authority from the BIR. Books are registered with the BIR before use and must be preserved for five years under Section 235, as amended by the EOPT Act. Failure to keep required records costs ₱1,000 for each failure, up to ₱25,000 a year (₱500 and ₱12,500 for micro and small taxpayers) under Section 250, and willful failure is a criminal offense under Section 255.
Detailed explanation
Definition
Books of Accounts are the official financial records that every taxpayer required to pay internal revenue taxes must keep and register with the Bureau of Internal Revenue (BIR). Under Section 232 of the National Internal Revenue Code, as amended by RA 10963, all corporations, companies, partnerships and persons required by law to pay internal revenue taxes must keep and use a relevant and appropriate set of bookkeeping records in which all transactions and results of operations are shown and from which all taxes due can be readily and accurately determined at any time of the year.
Legal Requirement
Section 232(A) also requires those whose gross annual sales, earnings, receipts or output exceed ₱3,000,000 to have their books audited and examined yearly by independent Certified Public Accountants, with an Account Information Form accompanying their income tax returns. Books must be registered with the BIR before use. Failure to keep required records is penalized under Section 250, and willful failure is a crime under Section 255.
Components of Books of Accounts
Standard books of accounts typically include: (1) the General Journal, which records transactions in chronological order; (2) the General Ledger, which classifies transactions by account; (3) the Cash Receipts and Cash Disbursements Books; (4) the Sales Journal; (5) the Purchases Journal; and (6) subsidiary ledgers for accounts receivable, accounts payable, and inventory. Section 233 allows taxpayers to keep subsidiary books as their business requires, and these form part of the accounting system subject to the same rules as the journal and ledger.
Registration Process
Taxpayers register their books of accounts with the Revenue District Office that has jurisdiction over the place of business before using them, normally at the time of business registration. Manual books are presented to the RDO for registration. Taxpayers who want to use loose-leaf or computerized books must first apply for authority with BIR Form 1900.
Maintenance and Retention
Books of accounts are kept at the registered place of business, where they are available for examination by internal revenue officers. Under Section 235, as amended by RA 11976 (EOPT Act), books of accounts, subsidiary books and other accounting records must be preserved for five years, counted from the day after the deadline for filing the return, or from the filing date if the return was filed late, for the taxable year when the last entry was made.
Computerized Systems
The BIR accepts computerized books of accounts as an alternative to manual records once it grants authority to use the system. The application, filed with BIR Form 1900 before use, describes the system and the books and reports it produces. The taxpayer must keep the records for the full retention period under Section 235.
Penalties for Non-Compliance
Each failure to keep a required record costs ₱1,000, up to ₱25,000 in a calendar year (NIRC §250); micro and small taxpayers pay ₱500 per failure, up to ₱12,500 (RA 11976). A person who willfully fails to keep required records can be fined not less than ₱10,000 and imprisoned for one to ten years (NIRC §255). If the taxpayer's income cannot be determined from the books, the Commissioner may assess tax on the best evidence obtainable (NIRC §6(B)), and the deficiency carries a 25% surcharge and interest at 12% a year (NIRC §248, §249).
Special Considerations for Different Business Types
Sole proprietors, partnerships and corporations all keep books of accounts. Professionals such as doctors, lawyers, and accountants must keep books documenting their professional income and expenses. Self-employed individuals on the 8% income tax rate do not attach financial statements to their annual return, but the bookkeeping and invoicing rules still apply to them (RR 8-2018). Businesses with gross annual sales of ₱3,000,000 or less are not required to have their books audited by an independent CPA, but they must still keep and register books.
Why it matters
The BIR uses books of accounts to verify reported income, substantiate deductions, and detect underreporting. When a taxpayer has no proper books, the Commissioner can assess tax on the best evidence obtainable, which often produces a higher figure than the taxpayer's actual income (NIRC §6(B)). Any resulting deficiency carries a 25% surcharge and interest at 12% a year. Proper books let you prove your actual income and expenses.
How it works
Register Books with the BIR
Register your books with the Revenue District Office before using them, normally as part of business registration. Manual books are presented to the RDO for registration. Loose-leaf or computerized books require prior authority, applied for with BIR Form 1900. New books must be registered when you start a new set or change your system.
Record All Transactions Systematically
Enter every business transaction (sales, purchases, expenses, receipts) in the appropriate journal and ledger in chronological order, so that the taxes due can be determined at any time of the year. Keep the supporting documents (invoices, vouchers, contracts) for each entry.
Maintain Books at Your Principal Place of Business
Keep books of accounts at your registered place of business, where they can be examined by BIR officers. If using a computerized system, ensure it produces the books and reports covered by the BIR authority and keeps a record of changes.
Retain Records for Five Years
Preserve books of accounts and other accounting records for five years, counted from the day after the deadline for filing the return (or from the actual filing date, if filed late) for the taxable year of the last entry. During that period they are subject to examination by internal revenue officers (NIRC §235, as amended by RA 11976).
Examples
Salaried employee with sideline business
Juan dela Cruz earns ₱600,000 annually as an employee and operates a small online retail business with ₱400,000 in annual sales. He must register books of accounts for the retail business with the BIR, recording all sales, cost of goods sold, and operating expenses. His books support the ₱150,000 net income he reports from the business on his annual income tax return (NIRC §232).
Professional practice, doctor with clinic
Dr. Maria Santos operates a private medical clinic with annual professional fees of ₱800,000. She must maintain books of accounts recording all patient fees, medical supplies purchased, clinic rent, utilities, and staff salaries. These books substantiate her deductible expenses and support her reported net professional income when filing her annual income tax return (NIRC §34).
Small retail store owner
Anna Reyes owns a sari-sari store with annual gross receipts of ₱2,500,000. She registers her books of accounts with the BIR and maintains a Sales Journal, Purchases Journal, Cash Book, and General Ledger. During a BIR audit, her books and supporting invoices prove her actual cost of goods sold of ₱1,800,000, so the examiner works from her records instead of estimating her income from other evidence (NIRC §6(B), §232).
Partnership with computerized accounting system
A partnership of three accountants keeps its books in accounting software. Before using it, the partnership applies for authority to use computerized books with BIR Form 1900. The system produces the journals, ledgers and financial statements covered by the authority, and the partnership preserves the records for the five-year period under Section 235.
Non-compliance and BIR assessment
Pedro Gonzales operates a hardware store but keeps no registered books of accounts. During an audit, the BIR cannot verify his reported taxable income of ₱500,000 and, using the best evidence available, sets his taxable income at ₱750,000. His income tax rises from ₱42,500 to ₱92,500, a deficiency of ₱50,000, plus a 25% surcharge of ₱12,500 and interest at 12% a year until paid. He also faces the ₱1,000 per failure penalty for not keeping records (NIRC §6(B), §248, §249, §250).
Common misconceptions
- Myth: Small businesses earning less than ₱3,000,000 annually do not need to register books of accounts with the BIR.
- Fact: All persons required to pay internal revenue taxes must keep and register books of accounts, regardless of income level. The ₱3,000,000 figure only decides whether the books must be audited each year by an independent CPA (NIRC §232(A), as amended by RA 10963).
- Myth: Handwritten books of accounts are no longer acceptable; all businesses must use computerized systems.
- Fact: The BIR accepts manual, loose-leaf and computerized books of accounts. Manual books must be registered before use, and loose-leaf or computerized books require prior authority from the BIR (NIRC §232).
- Myth: Once registered, books of accounts do not need to be updated or re-registered if the business changes its accounting method.
- Fact: If a taxpayer changes from manual to computerized or loose-leaf books, it must obtain BIR authority before using the new system. Using unregistered books exposes the taxpayer to penalties for failure to keep required records (NIRC §250).
- Myth: Books of accounts only need to be kept for three years after the last entry.
- Fact: Books of accounts and other accounting records must be preserved for five years, counted from the day after the deadline for filing the return for the taxable year of the last entry. The BIR may examine records during this entire period (NIRC §235, as amended by RA 11976).
- Myth: If the BIR cannot find errors in your books of accounts, you cannot be assessed for tax deficiency.
- Fact: Even if books of accounts are properly maintained, the BIR may assess additional taxes if it determines that reported income is understated or deductions are overstated based on other evidence, such as bank deposits or industry comparisons (NIRC §248).
Questions people ask
What is the penalty for failing to register books of accounts with the BIR?
Failure to keep required records costs ₱1,000 for each failure, up to ₱25,000 in a calendar year, or ₱500 and ₱12,500 for micro and small taxpayers (NIRC §250, RA 11976). Willful failure to keep records is a crime punishable by a fine of not less than ₱10,000 and imprisonment of one to ten years (NIRC §255). If the BIR cannot verify your income, it may assess tax on the best evidence obtainable, with a 25% surcharge and 12% annual interest on the deficiency (NIRC §6(B), §248, §249).
Can I use a computerized accounting system instead of manual books of accounts?
Yes. You must first obtain authority from the BIR to use computerized or loose-leaf books, by filing BIR Form 1900 with the RDO before you use them. The system must produce the books and reports covered by the authority, and you must preserve the records for the period required by Section 235.
How long must I keep my books of accounts and supporting documents?
Books of accounts and other accounting records must be preserved for five years, counted from the day after the deadline for filing the return for the taxable year of the last entry, or from the filing date if the return was filed late (NIRC §235, as amended by RA 11976). During that period they are subject to examination by internal revenue officers.
What happens if the BIR finds errors or discrepancies in my books of accounts during an audit?
If the BIR finds errors, it may assess additional taxes based on the corrected figures, with a 25% surcharge and 12% annual interest on the deficiency (NIRC §248, §249). If the return is willfully false or fraudulent, the surcharge is 50% (NIRC §248(B)), and willful attempts to evade tax can be prosecuted (NIRC §254).
Do I need to register my books of accounts if I am a self-employed professional such as a doctor or lawyer?
Yes, all persons engaged in the practice of a profession must register books of accounts with the BIR (NIRC §232). Your books must record all professional fees received and all deductible business expenses. These records support your annual income tax return and protect you from BIR estimates if your income cannot be verified.
Can I change my books of accounts format or accounting system without notifying the BIR?
No. If you change from manual to computerized or loose-leaf books, you must first obtain BIR authority through BIR Form 1900, and a new set of manual books must be registered before use. Books that were not properly registered are weaker evidence of your actual income in an audit.
What is the difference between books of accounts and supporting documents?
Books of accounts are the official journals and ledgers that record all transactions in summary form. Supporting documents are the original invoices, receipts, vouchers, and contracts that provide evidence for each transaction recorded in the books. Both must be maintained for five years and produced on demand by the BIR (NIRC §235).
If my business earns ₱3,000,000 or less a year, do I need audited books?
No CPA audit is required at that level, but you must still keep and register a relevant and appropriate set of bookkeeping records. Only those whose gross annual sales, earnings, receipts or output exceed ₱3,000,000 must have their books audited each year by an independent CPA and attach audited financial statements to their income tax return (NIRC §232(A), as amended by RA 10963).
In practice
- Sole proprietors and partnerships register their books of accounts as part of business registration, before they start using them; operating with unregistered books exposes the owner to penalties for failure to keep required records.
- During a BIR audit, the taxpayer is asked to present books of accounts and supporting documents; if they are not produced, the BIR may assess tax based on the best evidence obtainable (NIRC §6(B)).
- Computerized books of accounts are common among medium and large businesses; they may be used once the BIR grants authority on an application filed with BIR Form 1900.
- Businesses with gross annual sales of ₱3,000,000 or less still keep registered books but are not required to have them audited by an independent CPA each year.
- Books of accounts are the primary evidence in tax disputes; taxpayers without proper books face the burden of proving their income through alternative means, such as bank statements or third-party documents, which are often less favorable.
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Sources & References (2)
Primary sources and the laws, regulations, and official issuances this page relies on. Links open the recorded source documents or references.
- LawPhil Project (Arellano Law Foundation). “NIRC §232 (keeping of books): full text.” lawphil.net. NIRC of 1997 (RA 8424), Sec. 232. Source checked .
- Bureau of Internal Revenue. “BIR: Registration of books of accounts.” bir.gov.ph. Bureau of Internal Revenue, Registration / Books of Accounts. Source checked .