Top Ten Accounting Mistakes

Top Ten Accounting Mistakes of Small & Medium Enterprises (SMEs)

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business documents….

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1. RECEIPTS !!

RECEIPTS !!


not saving receipts
Receipts are basically the supporting documents for many

expenses.
Expenses lower your income tax to be paid.
Expenses without supporting documents put you in a possible exposure to BIR which can lead to not allowing your expenses to be deductible in your income tax computation.
So, keep your receipts !!!

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2. REIMBURSE YOUR PURSE !!!
failure to include all reimbursable expenses
Small and medium enterprises (SMEs) business owners

usually pay for some office items out of their personal credit card or thru their personal cash from their pockets. After that, they forget to include these as their business expenses. These needs to be reimbursed from the business funds.
Track all things you have paid for !

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3. BOOKED IT IN THE BOOKS !
not maintaining BIR required manual book of accounts
Some businesses encode their transactions in computers in excel







files. Others buy unlicensed accounting software where they do their records. Remember, unless you have a licensed accounting software and your application to the BIR for a computerized accounting system has been approved, you are required to maintain and update the manual book of accounts (journals, etc) because your registration falls under a manual accounting system. BIR checks on the manual books. Update your books !

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Records……

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4. Differences TWO RECORDS, TWO VERSIONS ! in BIR Returns versus company books



Others fail to keep company books that are tied-up with BIR

Returns submitted.
Variances between books & that of the BIR Forms submitted are target areas during tax examination.
Variances can be due to reclassification, errors in filing up the BIR Return or mathematical errors.
Key thing is to ensure to keep records where tracing can be done from books to the information declared in the BIR form/return. http://accountingservicesphilippines.blogspot.com/

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5. INCOMPLETE IS NOT NEAT !
Incomplete BIR filings
As there are various BIR Forms/Returns, usually, one is confused

as to which BIR Form he has to submit. There is BIR Form 1601E, BIR form 1701-Q, BIR Form 1604-E, & a lot more BIR Forms.
Even if you don’t have a transaction in a particular month that fall under those BIR Returns that you are required to submit, you still need to submit those BIR Forms to be stamped received by the BIR.
It is sad to hear stories of business owners who thought they are in compliance with the BIR, only to find out that they miss to submit other BIR Forms due to lack of knowledge that they are required to do so. http://accountingservicesphilippines.blogspot.com/

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the business owner….

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6. ALL-KNOWING BEING !
You as a one-Man Team
Some SMEs do their bookkeeping & BIR filings by themselves.

They said, it’s for cost saving purposes.
After few years, they receive letters from the BIR to check on their records. Records are found out to be incomplete & not reconciled with the BIR Returns submitted. Wrong application of BIR rules and regulations were made. Time now to pay for much bigger costs....penalties and interests to the BIR for these findings.
It is a fact that competent CPAs can maintain your books more efficiently. Competent CPAs know the BIR rules and regulations and they can also make suggestions in going about your records. http://accountingservicesphilippines.blogspot.com/

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Double-check…

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7. DOUBE CHECK TO AVOID THE HECK !
Incorrect Filling up of BIR Forms


BIR Forms submitted are in BIR database & if you are

audited, any incorrect filing up of BIR form can be seen.
Let’s say a business owner filed a return on April 2009 for its taxable year 2008 income tax but he erroneously filled up taxable year 2009 in the BIR Form. In effect, the company has not filed its taxable year 2008 BIR Form.
Or it can be that the Tax Identification Number (TIN) has been erroneously put or amounts are mistakenly reported. Things like these happen so business owners should ensure that BIR Forms are filled up appropriately. http://accountingservicesphilippines.blogspot.com/

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Deadlines….

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8. FAILURE TO BEAT THE DATE !
Failure to meet submission deadlines dates
April 15 is the due date for the annual Income tax return. Fixed date

yet many companies still miss this deadline.
Reasons include: late preparation of Financial Statements & Income Tax Return; no Certified Public Accountant (CPA) to sign the financial statements; not have planned the funding for the tax payment; or the messenger being late in the submission due to long queue of people in the BIR offices.
Prepare and finalize the submissions early on or before April 15.
Remember, you will be penalized even for a day of late submission!

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9. RECONCILE !!!
Cash internal records not reconciled with bank

statements
Every month, it is highly recommended that you reconcile company’s cash internal records versus the bank statements. Many companies do not do this.
This causes errors like unrecorded bank charges, interest income and being unaware that there are some checks that are outstanding.

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10.

BEHOLD !! WITHHOLD !!


Not withholding appropriate taxes!
Whenever you pay for services rendered to you, you should

withhold appropriate tax so that the expense you paid for can be deductible in income tax computation purposes.
Withholding tax can be 2%, 5% or 10% depending on the services. Ask your Accountant on this.
Should you have not withhold the tax, it’s a tax exposure to the BIR and you will be held accountable for it.

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SUMMARY Top Ten Accounting Mistakes 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Receipts ! Receipts ! Reimburse your purse Booked it in the books Two records, Two Versions Incomplete is not Neat All-knowing being Double check to avoid the Heck Failure to beat the Date Reconcile ! Behold ! Withhold !

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For any accounting needs – feel free to call 0916-593-1601

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