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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.

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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 1601-
E, 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.

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the business owner….

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for your Accounting needs CALL 0916-593-1601
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.

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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.

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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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Php x,xxx

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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. Receipts ! Receipts !
2. Reimburse your purse
3. Booked it in the books
4. Two records, Two Versions
5. Incomplete is not Neat
6. All-knowing being
7. Double check to avoid the Heck
8. Failure to beat the Date
9. Reconcile !
10. Behold ! Withhold !

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For any accounting needs –

feel free to call 0916-593-1601

your professional & friendly CPA


at your service !!!

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