How to Record Transactions in Your Books of Accounts
Ogie Galicia· March 24, 2026 · Updated May 20, 2026 · 14 min read
How to Record Transactions in Your Books of Accounts
If you’ve already registered your business with the BIR and read our guide on what books of accounts you need to keep, you know the requirements. But knowing which books to maintain is one thing. Actually recording transactions in them is another.
This guide walks you through how to write entries in each book, with real examples for both VAT-registered and non-VAT businesses.
Key Takeaways
- VAT-registered: 6 books (General Journal, General Ledger, Cash Receipts, Cash Disbursements, Subsidiary Sales, Subsidiary Purchases)
- Non-VAT: 4 books (the same minus the two subsidiary journals)
- Every transaction starts in the General Journal with a debit and credit entry, then gets posted to the General Ledger
- VAT at 12% under the National Internal Revenue Code (BIR, as amended through R.A. 11976; retrieved March 2026) flows from your sales journal to your BIR Form 2550Q return at quarter-end
- The Subsidiary Sales total should match Output VAT in your General Ledger and what you file with the BIR
Which books do you actually need?
VAT-registered businesses need 6 books. Non-VAT businesses keep the same set minus the two subsidiary journals, for a total of 4. The split tracks how the BIR audits you: VAT taxpayers have to prove input and output VAT line by line, so the subsidiary Sales and Purchases journals exist to back up BIR Form 2550Q. Non-VAT taxpayers file percentage tax on Form 2551Q, which keys off gross receipts already captured in the Cash Receipts Journal, so the subsidiary journals are not required. Here is how the books break down by registration type:
| Book | VAT | Non-VAT | Purpose |
|---|---|---|---|
| General Journal | Yes | Yes | Records all transactions in chronological order |
| General Ledger | Yes | Yes | Summarizes transactions by account |
| Cash Receipts Journal | Yes | Yes | Tracks all cash coming in |
| Cash Disbursements Journal | Yes | Yes | Tracks all cash going out |
| Subsidiary Sales Journal | Yes | No | Details all sales transactions |
| Subsidiary Purchases Journal | Yes | No | Details all purchase transactions |
Let’s go through each one.
How do you record entries in the General Journal?
The General Journal is your master record. Every transaction gets recorded here first, in the order it happens. Think of it as a diary of your business finances.
Each entry has a date, the accounts affected, and whether the amount is a debit or credit.
Example: You bought office supplies worth ₱5,000 on credit
| Date | Account Title | Debit | Credit |
|---|---|---|---|
| 03/01 | Office Supplies | 5,000 | |
| Accounts Payable | 5,000 |
Example: A client pays ₱20,000 for your services (VAT-registered)
| Date | Account Title | Debit | Credit |
|---|---|---|---|
| 03/05 | Cash | 22,400 | |
| Service Revenue | 20,000 | ||
| Output VAT (12%) | 2,400 |
Example: A client pays ₱20,000 for your services (non-VAT, percentage tax)
| Date | Account Title | Debit | Credit |
|---|---|---|---|
| 03/05 | Cash | 20,000 | |
| Service Revenue | 20,000 |
For non-VAT taxpayers, there’s no output VAT to record. The 3% percentage tax is recorded separately when you file it.
How does the General Ledger work?
The General Ledger takes the entries from your General Journal and organizes them by account. Instead of seeing transactions in order of date, you see all activity for a specific account in one place.
Each account gets its own page or section.
Example: Cash account ledger
| Date | Description | Debit | Credit | Balance |
|---|---|---|---|---|
| 03/01 | Beginning balance | 50,000 | ||
| 03/05 | Service revenue received | 22,400 | 72,400 | |
| 03/10 | Rent payment | 15,000 | 57,400 | |
| 03/15 | Client payment | 11,200 | 68,600 |
Example: Accounts Payable ledger
| Date | Description | Debit | Credit | Balance |
|---|---|---|---|---|
| 03/01 | Beginning balance | 10,000 | ||
| 03/01 | Office supplies purchased | 5,000 | 15,000 | |
| 03/20 | Paid supplier | 5,000 | 10,000 |
The General Ledger is where you check your balances. If someone asks “how much cash do we have?” or “how much do we owe?”, this is where you look.
What goes in the Cash Receipts Journal?
This book records every time cash comes into your business. That includes payments from clients, loan proceeds, owner contributions, or any other source.
Example entries for a VAT-registered business
| Date | Description | Cash (Debit) | Sales | Accounts Receivable | Output VAT | Other |
|---|---|---|---|---|---|---|
| 03/05 | Service to Client A | 22,400 | 20,000 | 2,400 | ||
| 03/10 | Collection from Client B | 11,200 | 11,200 | |||
| 03/18 | Owner’s additional capital | 100,000 | 100,000 |
Example entries for a non-VAT business
| Date | Description | Cash (Debit) | Sales | Accounts Receivable | Other |
|---|---|---|---|---|---|
| 03/05 | Service to Client A | 20,000 | 20,000 | ||
| 03/10 | Collection from Client B | 10,000 | 10,000 | ||
| 03/18 | Owner’s additional capital | 100,000 | 100,000 |
The difference is straightforward: VAT-registered businesses need an Output VAT column.
What goes in the Cash Disbursements Journal?
This is the opposite of the Cash Receipts Journal. It records every time cash leaves your business, whether it’s for rent, utilities, salaries, supplies, or paying off a supplier.
Example entries for a VAT-registered business
| Date | Check No. | Payee | Cash (Credit) | Accounts Payable | Input VAT | Other |
|---|---|---|---|---|---|---|
| 03/10 | 001 | Landlord | 33,600 | 3,600 | 30,000 (Rent) | |
| 03/15 | 002 | Meralco | 5,600 | 600 | 5,000 (Utilities) | |
| 03/20 | 003 | Office Depot | 5,000 | 5,000 | ||
| 03/31 | 004 | Employees | 80,000 | 80,000 (Salaries) |
Example entries for a non-VAT business
| Date | Check No. | Payee | Cash (Credit) | Accounts Payable | Other |
|---|---|---|---|---|---|
| 03/10 | 001 | Landlord | 30,000 | 30,000 (Rent) | |
| 03/15 | 002 | Meralco | 5,000 | 5,000 (Utilities) | |
| 03/20 | 003 | Office Depot | 5,000 | 5,000 | |
| 03/31 | 004 | Employees | 80,000 | 80,000 (Salaries) |
Again, the main difference is the Input VAT column. VAT-registered businesses track the VAT they pay on purchases because they can claim it as a credit against their Output VAT.
When do you use a Subsidiary Sales Journal?
This book records every sale your business makes, whether paid in cash or on credit. It’s required only for VAT-registered taxpayers.
Split each sale into vatable sales (subject to 12% Output VAT) and VAT-exempt sales (sales to senior citizens or PWDs, sales of agricultural products in their original state, books, prescription medicines for diabetes and hypertension, and other items listed under Sec. 109 of the NIRC). The split mirrors how you’ll report the same numbers on BIR Form 2550Q.
Example entries
| Date | Invoice No. | Customer | Vatable Sales | Exempt Sales | Output VAT (12%) | Gross Amount |
|---|---|---|---|---|---|---|
| 03/05 | 0001 | Client A | 20,000 | 2,400 | 22,400 | |
| 03/08 | 0002 | Client B | 50,000 | 6,000 | 56,000 | |
| 03/12 | 0003 | Client C | 15,000 | 1,800 | 16,800 | |
| 03/18 | 0004 | Senior Citizen | 10,000 | 10,000 | ||
| 03/22 | 0005 | Client A | 30,000 | 3,600 | 33,600 | |
| Total | 115,000 | 10,000 | 13,800 | 138,800 |
This journal feeds directly into your VAT return. Vatable sales tie to Line 12A and Output VAT to Line 13C of BIR Form 2550Q. Exempt sales tie to Line 12C — they don’t generate Output VAT, but you still have to declare them.
When do you use a Subsidiary Purchases Journal?
This records all your purchases, again whether paid in cash or on credit. Like the Sales Journal, it’s required only for VAT-registered businesses.
Mirror the split you use for sales: vatable purchases (subject to 12% Input VAT you can credit) and VAT-exempt purchases (buys from VAT-exempt sellers, agricultural products in their original state, and other items under Sec. 109 of the NIRC). Only the vatable column produces Input VAT you can credit against Output VAT.
Example entries
| Date | Invoice No. | Supplier | Vatable Purchases | Exempt Purchases | Input VAT (12%) | Gross Amount |
|---|---|---|---|---|---|---|
| 03/01 | S-4521 | Office Depot | 5,000 | 600 | 5,600 | |
| 03/10 | S-7832 | Landlord | 30,000 | 3,600 | 33,600 | |
| 03/15 | S-1290 | Meralco | 5,000 | 600 | 5,600 | |
| 03/20 | S-2105 | Farm Direct | 8,000 | 8,000 | ||
| 03/25 | S-3344 | Globe | 3,000 | 360 | 3,360 | |
| Total | 43,000 | 8,000 | 5,160 | 56,160 |
Your total input VAT here is what you claim as a credit on your VAT return. In this example, you’d owe ₱13,800 (output) minus ₱5,160 (input) = ₱8,640 in VAT for the quarter. The ₱10,000 in exempt sales and ₱8,000 in exempt purchases get declared on the 2550Q but don’t affect this computation.
How VAT flows through your books
If you are VAT-registered, the same sale touches four different books before it lands on your quarterly return. Each book captures the transaction from a different angle, and they all have to reconcile to the peso at quarter-end. Here is how the VAT numbers connect:
- You make a sale for ₱20,000 plus 12% VAT (₱2,400)
- The ₱22,400 total goes into your Cash Receipts Journal (or Accounts Receivable if on credit)
- The sale details go into your Subsidiary Sales Journal with the Output VAT broken out
- The full entry goes into your General Journal with separate lines for revenue and Output VAT
- Each account gets updated in your General Ledger
At the end of the quarter, three numbers must agree: the Output VAT total in your Subsidiary Sales Journal, the Output VAT balance in your General Ledger, and Line 13C on your BIR Form 2550Q. If any of the three differs, the mistake is almost always a missed Subsidiary Sales entry or a VAT figure recorded gross instead of net. Reconcile before you file, not after.
Common mistakes to avoid
Mixing personal and business transactions. If you use a personal bank account for business, separate them in your records. Better yet, open a dedicated business account.
Not recording small cash transactions. That ₱200 grab fare to meet a client? That ₱150 for printer paper? They add up, and they’re deductible. Record them.
Wrong VAT computation. A common error: applying 12% on top of the VAT-inclusive amount. If the total price is ₱11,200, the base is ₱10,000 and the VAT is ₱1,200, not ₱11,200 x 12%.
Forgetting to match invoices to journal entries. Every entry in your books should tie back to a source document: an invoice, a receipt, a contract, or a voucher.
Not posting to the General Ledger regularly. Some businesses record in their journals but forget to update the ledger. Do it at least monthly. Your ledger is what gives you an accurate picture of where you stand.
The most common pattern we see at Libro is founders treating the Cash Receipts Journal and the Subsidiary Sales Journal as duplicates — they aren’t, and the difference is what your VAT return depends on each quarter. Cash Receipts records when money lands. Subsidiary Sales records every invoice you issued, paid or not. They reconcile, but they’re not interchangeable.
FAQ
Do I need to record transactions daily?
Not strictly, but the longer you wait, the harder it gets. A weekly cadence works for most small businesses. For VAT-registered businesses with frequent sales, daily is safer since you’ll need to match each sale to a numbered invoice for your VAT return.
What if I make a mistake in a manual book?
Don’t erase or use correction fluid. Cross out the error with a single line so the original entry is still readable, write the correct figure above or beside it, and initial the correction. The BIR can disallow entries that look like they’ve been tampered with.
Do I record gross or net of VAT in my journals?
Record both. In your Cash Receipts and Sales Journal, the gross amount (₱22,400) goes in the cash/total column, the net (₱20,000) goes in the sales column, and the VAT (₱2,400) goes in the Output VAT column. This split is what lets you reconcile your books to your BIR Form 2550Q VAT return.
What’s the difference between a journal and a ledger?
A journal records transactions in date order (chronologically). A ledger organizes the same transactions by account, so you can see all activity for “Cash” or “Accounts Receivable” in one place. Every transaction starts in a journal, then gets posted to the ledger.
Can I keep my books in a spreadsheet?
Only if you’ve applied for a Permit to Use for Loose Leaf or Computerized Books of Accounts. Manual books require handwritten entries on registered books. See our books of accounts compliance guide for the rules on each format.
Resources
- National Internal Revenue Code (NIRC, as amended through R.A. 11976) — Bureau of Internal Revenue, retrieved March 2026
- BIR Form 2550Q (April 2024 ENCS, PDF) — retrieved March 2026
- BIR Form 2550Q guidelines and instructions (PDF) — retrieved March 2026
- Ease of Paying Taxes Act (R.A. 11976) full text — LawPhil, retrieved March 2026
- BIR memorandum-circular index — search for RMC 29-2019 (books of accounts) and RMC 68-2024 (2550Q revision)
- How to register a business with the BIR
- What books of accounts you actually need
- Closing a business with the BIR under RMC 47-2026
- Register as a BMBE and skip income tax
Written by Ogie Galicia, founder of Libro. We build accounting software for Philippine small businesses — the kind whose books end up being the ones described in this post.
The takeaway
Recording transactions isn’t complicated once you understand the pattern. Cash comes in, record it in the Cash Receipts Journal. Cash goes out, record it in the Cash Disbursements Journal. Every transaction gets a General Journal entry and updates the General Ledger. If you’re VAT-registered, your sales and purchases get their own subsidiary journals too.
The key is consistency. Pick a routine, whether it’s daily or weekly, and stick to it. Your future self (and your accountant) will thank you.