I got my COR . . . Yay!

Weds, Jan 25, 2012

Hi! I wrote to you last month thanking you for your freelancers' guide. I got my COR* early this month! Yay! I was intimidated by the process, but thanks to your guide. I was able to register smoothly! Thanks again!

I have follow-up questions though. How do we use the accounting books? I know samples are included in your guide; however, there are some stuff that are still not clear to me. I was able to update my cash receipt book just by following the sample on your site. But I don't get how to fill out the cash disbursement, journal, and ledger.

This is how I understood the three books:

Cash disbursement is a purchase book where all purchases must be recorded. This will include the TIN and OR number of where I bought my purchased items, right? Do I have to indicate the VAT from these purchases?

Ledger is where I will balance all transactions found on cash receipt and cash disbursement. But since my cash disbursement book is empty, I have not written anything there.

As for journal, I'm guessing this is similar to ledger but with a detailed description. Is that right?

I have no one else to ask, so I'm asking you. I hope you can help explain these things to me. The BIR officers of the day in my area were no help at all.

Please and thank you!

Oh, and how important is it to get a business permit (mayor's permit)?

Mai

*Certificate of Registration from the Bureau of Internal Revenue

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Mon, Jan 30, 2012

Hello Mai,

Thank you for writing, and you're very welcome. Congratulations too for accomplishing the registration of your freelance business. Remember to post your COR (you may photocopy it and keep the original) in your work area (the wall beside your PC table, perhaps?). Pasensya na po, ngayon lang ako nakasagot.

What I remember is that the BIR-RDO personnel encouraged me to fill out my accounting books based on what I know. The BIR personnel's reason for telling me that must be I'm a a small income earner/freelancer (earning a much smaller amount compared to, uh, Hacienda Luisita, for instance :D). That's good, you have done your research. Continue your good work. I'm sure, you'll find more comprehensive examples. If you can write something about your findings, then do share it with us, your fellow freelancers. :)

How do we use the accounting books?

Now, that must be such an oppressive question for many of us. :D The books certainly contain the basics (e.g., particulars, debit, credit, etc.). As long as you can explain the items you've written in your accounting books, then you're on the right track. So in my case, the cash disbursement book is most detailed, based on my journal accounting of day-to-day business transactions. My cash receipt book is a record of all the money I earn from my freelance work. If in case I receive money from other means indirectly related to my freelance work, then I still record the total amount I earn from such work in the cash receipt book. Now, the ledger is something I must have reinvented because it contains a summary of business transactions by quarter. So, this is the book I use when preparing my quarterly tax report (Form 1701Q).

That must be the excellent way to do it, Mai. Keep up the good work! ;)

As for journal, I'm guessing this is similar to ledger but with a detailed description. Is that right?

Probably. :) The journal records your day-to-day business transaction. Say, for instance, you bought a computer unit. What are the things or factors involved in your purchase? You have the date, the item, and the amount. So you will write there the headings: Date, Particulars (or Description), and Debit/Credit (for the two columns opposite the Particulars.

Oh, and how important is it to get a business permit (mayor's permit)?

Acquiring a business permit or mayor's permit is very important. But the need to get one will depend on the type of service/product you deliver. My previous response to a fellow freelancer might help enlighten you on the matter: DTI and mayor's permit.

I hope I have brought you smile today--if not the solution to the onerous task of filling out accounting books. Do give yourself some time, and you'll get by.

I wish you the best, Mai. A blessed new year to you and your family!

Sincerely,