Thursday, July 5, 2012

Bookkeeping Regulations - Part 3

20(4). PROCEDURE IN THE ISSUANCE OF AUTHORITY TO INVESTIGATE AND LETTERS OF CONFIRMATION. —
xxx                    xxx                    xxx
SUBJECT:        Amendments to Field Circular No. V-157, as amended by Revenue Memorandum Order No. 22-64.
To all internal revenue officers and others concerned:
It has been observed by this Office in the present procedures of the issuance of authorities to investigate and the corresponding letters of confirmation in Regional Offices Nos. 4, 5 and 6 that there are loopholes and defects which lead to ineffective control and supervision. In order, therefore, to achieve tighter control and closer supervision in the assignment, investigation and reporting of income tax returns and to achieve uniformity in procedure in all inspection districts, the following amendments to Field Circular No. V-157, as amended by Revenue Memorandum Circular No. 22-64, are hereby promulgated for the guidance of all concerned:
Section 1.         Paragraph 3.d. of Field Circular No. V-157, as amended by Revenue Memorandum Circular No. 22-64, is hereby amended to read as follows:
"3d.      Letters of Authority to Investigate shall be issued only by the following officials:
(1)        The Chief Revenue Officer of Inspection Districts for the fieldmen under his jurisdiction.
(2)        The Regional Director for the fieldmen of the Investigation Branch and the Alcohol & Tobacco Tax Branch.
(3)        The Chiefs of the Investigation Division, Withholding Tax Division and Narcotic Drugs Division for the fieldmen of their respective divisions.
(4)        The Director, Office of International Operations for the fieldmen under his jurisdiction.
(5)        The Chief, Assessment Department for the fieldmen under special groups in the Department or those directly assigned by the Commissioner of Internal Revenue.
(6)        For the fieldmen of inspection districts under the jurisdiction of Regional Offices Nos. 4, 5 and 6, the following procedure should be followed in the issuance of the authority to investigate.  
xxx                    xxx                    xxx
Section 2.         Paragraph 10 of Field Circular No. 157, as amended by Memorandum Circular No. 22-64, is hereby further amended to read as follows:
"Henceforth, fieldmen will no longer sign the books of accounts upon termination of the investigation. Instead, a confirmation of the investigation should be sent to the taxpayer within thirty (30) days from the termination of the investigation. The confirmation letter to the taxpayer should contain information, informing the taxpayer that the corresponding report of investigation of his tax liabilities has been submitted and that the recommended discrepancies and deficiency tax, if any, are under consideration. This procedure will prevent or minimize unauthorized investigations as well as those conducted without any corresponding report of investigation being submitted. It will also obviate the signing of books of accounts of taxpayers by impostors.
The form prescribed shall be prepared in triplicate and should bear the same number as the authority to investigate. The original shall be sent to the taxpayer, the duplicate shall be attached to the report and the triplicate shall serve as the file copy.
The confirmation letter should be prepared by the Assistant Chief Revenue Officer for signature of the Assistant Regional Director and should be initialed by the Chief Revenue Officer before being forwarded to the Regional Office. In Inspection Districts where there is no Assistant Chief Revenue Officer, the confirmation letter should be prepared by the Chief Revenue Officer likewise for the signature of the Assistant Regional Director.
For cases handled by fieldmen in the Regional Office, the confirmation letter should be prepared by the Assistant Chief of the Branch, initialed by the Chief of the Branch and signed by the Assistant Regional Director. In the National Office, the confirmation letter should be prepared by the Assistant Chief of the Division concerned for the signature of the Chief of the Division. Confirmation letters for cases emanating from the Assessment Department should be prepared for the signature of the Assistant Revenue Operations Head. For cases handled by the Office of International Operations, the confirmation letter should be prepared by the Assistant Director for Audit, for signature of the Director.
The confirmation letter prepared in the inspection district should be forwarded immediately to the Administrative Branch of the regional office for recording. The latter should immediately forward the report to the Assistant Director for the signature of the confirmation letter, after which the docket should be returned to the Administrative Branch for the release of the original of the confirmation letter. Upon release of the original, the docket, together with the duplicate copy of the confirmation letter, should be forwarded immediately to the Income and Business Tax Branch for review and preparation of the demand. The triplicate copy of the confirmation letter should be forwarded to the Regional Director for attachment to his file copy of the authority to investigate.
The confirmation letter should be treated as an accountable form and the person authorized to prepare the same should be held accountable for all issuance of confirmation letters. He is required to keep a register in order to determine the letters of confirmation issued by his office.
Section 3.         This Memorandum Circular supersedes all orders, circulars, instructions or portions thereof which are inconsistent herewith.
Section 4.         This Revenue Memorandum Circular shall take effect upon approval. (Rev. Memo. Circular No. 35-65, dated Oct. 12, 1965).
20(5). EXAMINATION OF BOOKS WHERE OFFICE AND PLACE OF BUSINESS TRANSACTIONS ARE IN DIFFERENT PLACES. — Where a corporation has an office in Manila but all its manufacturing, selling and other transactions are conducted in Quezon City, the place of its business is deemed to be in the latter city. Accordingly, Regional District No. 4, Quezon City, has the authority to examine its books of accounts and other accounting records, it being necessary that said books and records be kept in the place of business of the corporation. (B.I.R. Ruling No. 92, s. 1961).
20(6). JURISDICTION TO INVESTIGATE BOOKS OF ACCOUNTS WHERE TAXPAYER'S BUSINESS IS LOCATED IN ONE PLACE AND THE PRINCIPAL OFFICE IN ANOTHER. — A corporation was incorporated in the Philippines with principal office in Manila for purely trading purposes. Later on, said corporation established a manufacturing division with factory in Quezon City, where at the same time sales of its manufactured products are conducted. The factory is deemed to be a separate business establishment and, therefore, must be provided with a separate C-14 privilege tax receipt. It must also register a separate business name in Quezon City for purposes of Section 203 of the Tax Code. Sales invoices originally registered by the corporation in Manila may be superimposed with its address in Quezon City when used in the latter City.   
While the controlling books are registered and kept in Manila, the factory in Quezon City must keep such books and records as would clearly reflect all the transactions effected therein. All such records, such as the subsidiary ledger should be registered in Quezon City may be consolidated and returned for the percentage tax by the main office in Manila. (B.I.R. Ruling No. 7, s. 1962).
Where the taxpayer's factory is located in Makati, Rizal, and its "sales office," wherein most of its transactions are consummated in Manila, Regional Offices of Manila has jurisdiction to examine its books of accounts, provided that said books are kept in the "sales office." (B.I.R. Ruling No. 272, s. 1961).
20(7). COLLECTION AGENTS, POWERS AND DUTIES. — A collection agent can inquire or determine whether or not a taxpayer has paid the corresponding privilege taxes, such as the C-13, B-9, etc. However, he does not have the power to seize or confiscate goods subject to specific tax even if the tax has not been paid thereon.
A collection agent can seize defective instruments of weights and measures (Sec. 284, Tax Code). However, pursuant to paragraph III-8, Memorandum Circular No. 3, dated August 15, 1960 of the Department of Finance, the duties and responsibilities of collecting, among others, weights and measures, fees, repose with the local treasurers. He (collection agent) has also the power to apprehend bus conductors for not issuing tickets or receipts to passengers, such act being a patent violation of internal revenue law (Sec. 14, Tax Code). (B.I.R. Ruling No. 362, s. 1961).
Approves and registers books of accounts and invoices presented by taxpayers for their use and keeps records thereof, in accordance with Revenue Regulations No. V-1, except in cities and towns where the Provincial Revenue Offices are located. (Revenue Administrative Order No. 3-62, May 31, 1962).
Collection Agents are not internal revenue officers in the strict sense such that they cannot, under any circumstances perform, directly or indirectly, the functions, duties, and or legal prerogatives of Agents and Examiners or their assistants, unless delegated by the commissioner of Internal Revenue or the Secretary of Finance. They shall perform only such other duties and functions as were previously conferred upon Municipal and City Treasurers in the collection of internal revenue taxes in accordance with Republic Act No. 2665, (except collection of taxes on imported articles) and those otherwise not included and described under Memorandum Circulars Nos. 3 and 4 of the Secretary of Finance dated March 21, 1961 and August 15, 1961, respectively. However, with respect to fees, fines, forfeitures, costs and other moneys paid to the Justice of the Peace and Municipal Courts, the same should be collected by the Collection Agents and Clerks because the collection thereof is entrusted to the Commissioner of Internal Revenue. (Secs. 93 and 94, R.A. No. 296; Judiciary Act of 1948; B.I.R. Ruling No. 415, s. 1961; Division Memo. Circular No. 5, dated Nov. 10, 1961)
20(8). EXAMINATION OF BOOKS OF ACCOUNTS. — As a rule, the examination of a taxpayer's books of accounts is undertaken once only for each taxable period. However, there is no prohibition against further examination of said books if the circumstances so warrant.
The yearly examination of books of accounts is not only necessary but a duty which the Bureau of Internal Revenue must perform. In conducting such examination reference to other books kept within the five-years period immediately preceding the date of examination may be had. (B.I.R. Ruling No. 126, s. 1960).
Books of accounts are open to examination and inspection by internal revenue officers when properly authorized by the Commissioner of Internal Revenue, Director, or Provincial Revenue Officer (now Chief Revenue Officer). Said examination and inspection may be conducted in the taxpayer's place of business or outside thereof. In the latter case, however, the internal revenue officer concerned must issue a receipt. (B.I.R. Form No. 19.14) therefor. (B.I.R. Ruling No. 141, 1960).
20(9). INSPECTION OF BOOKS PREPARATORY TO ASSESSMENT. — As the inspection of books of accounts is a step preparatory to assessment and the power to assess internal revenue taxes belongs exclusively to the Bureau of Internal Revenue, municipal treasurers (now collection agents) may not inspect books of accounts, they not being empowered to assess (but only to collect) internal revenue taxes. (B.I.R. Ruling No. 215, s. 1960).
20(10). RE-EXAMINATION OF BOOKS OF ACCOUNTS. — Internal revenue officers, when duly authorized by their superiors, can re-examine the books of accounts of a taxpayer only where, subsequent to the previous examination, information is received indicating fraud, malfeasance, concealment or misrepresentation of material facts. (B.I.R. Ruling No. 315, s. 1960).   HTDcCE
20(11). ADOPTION OF BOOKKEEPING SYSTEM. — Any bookkeeping system authorized under existing law or regulations may be adopted by a taxpayer. If any system is not understandable to the fieldmen of the Bureau of Internal Revenue, the taxpayer should explain it. If notwithstanding the explanation, the fieldmen cannot understand its operations, they may disregard the bookkeeping records kept by the taxpayer and resort to the best evidence available reflecting his operations. (B.I.R. Ruling No. 572, s. 1959).
20(12). WHERE TO EXAMINE BOOKS OF ACCOUNTS OF TAXPAYERS. — An internal revenue officer can examine a taxpayer's books of accounts and other accounting records either at the latter's place of business or establishment or outside thereof. Should the examination be done, outside the taxpayer's place of business, the internal revenue officer is duty bound to issue a receipt. (B.I.R. Form No. 19-14) for the books and records taken by him, and such examination can be undertaken only in his office, not elsewhere. (B.I.R. Ruling No. 552, s. 1959).
20(13). RIGHT OF REFUSE EXAMINATION. — A taxpayer has a right to refuse examination of his books of accounts where the revenue officer is not provided with the required letter of authority or where said officer fails or refuses to show, upon request of the taxpayer, his identification card, or where the examination is conducted in the presence of unauthorized persons. (B.I.R. Ruling No. 486, s. 1959).
20(14). WHEN BOOKS OF ACCOUNTS ARE TAKEN OUTSIDE OF TAXPAYER'S ESTABLISHMENT. — Internal revenue officers may examine the books of accounts of taxpayers in or outside the latter's place of business. But, when said officers take the books of accounts of taxpayer for purposes of examination outside the latter's place of business, they should issue a receipt on the required internal revenue form (B.I.R. Form No. 19.14). As a general rule, books of accounts of taxpayers should not be retained by internal revenue officers for more than sixty (60) days except (1) when the books, records or papers constitute the evidence of this Office in an unsettled case; (2) in case such records and papers pertain to a case pending in courts; (3) in all cases where fraud is evident and the records and papers must accompany the fieldman's report for evaluation purposes; and (4) in all cases where the records and papers have been seized by virtue of a search warrant and the court has not ordered their return to the taxpayer. (Sec. 20, Rev. Regs. No. V-1; Field Circular No. V-88)
The taxpayer's proof that his books of account has been examined by internal revenue officers is the certification or notation to the effect made by said officers on the inner side of either cover of the books examined.
As a matter of policy, this Office undertakes the examination of the books of accounts of taxpayers covering a particular period, only once. However, there is no prohibition on the re-examination of said books. Accordingly, books of accounts which were previously examined may be examined for the second time or more, if and when the subsequent examinations are duly authorized and the circumstances surrounding the case so warrant. (B.I.R. Ruling No. 87, s. 1959): (B.I.R. Ruling No. 486, s. 1959).
20(15). EXAMINATION OF BOOKS OF ACCOUNTS. — Internal Revenue Agents and Examiners may not examine a taxpayer's books of accounts and other accounting records without the necessary letter of authority. A letter of authority is a request to the taxpayer to permit the bearer thereof to conduct the necessary examination of said books and records, and signed either by the Commissioner of Internal Revenue, Deputy Commissioner of Internal Revenue, Chief, Investigation Division, or the Regional Director, Assistant Director or Provincial Revenue Officer (now Chief Revenue Officer) of the regional district concerned. (B.I.R. Ruling No. 640, s. 1959).
20(16). EXAMINATION CAN BE CONDUCTED ANY DAY OR TIME. — Books of accounts can be examined by the agents and examiners of the Bureau of Internal Revenue even on Sundays and holidays or after office hours, provided that they have been authorized to do so by the Commissioner of Internal Revenue or by their other superiors. (B.I.R. Ruling No. 388, s. 1959).
20(17). HOW EXAMINATION OR INVESTIGATION OF BOOKS OF ACCOUNTS IS CONDUCTED. — Fieldmen of this Bureau are provided with B.I.R. identification cards. Before conducting an examination or investigation, said fieldmen are required to show their identification cards to the taxpayer concerned in order to give the latter an opportunity to take note or copy, if he so desires, the name, designation and identification number of the investigating agent. Should an agent or examiner refuse to show his B.I.R. identification card, the taxpayer has the right to refuse examination. (Field Circulars Nos. V-48 and V-70).
The examination or investigation of taxpayers undertaken by virtue of the authority issued by the officers mentioned in paragraph 2 hereof is confined within the scope of said authority. (Field Circular No. V-89).
No fixed number of examiners are assigned in a given community or to a particular store. Agents or examiners may examine any store or business establishment within their respective districts when so ordered. (B.I.R. Ruling No. 87, s. 1959).
20(18). BRANCH ESTABLISHMENTS REQUIRED TO KEEP BOOKS OF ACCOUNTS. — Where a branch establishment need not keep and use the regular books of accounts, however, it is under obligation to keep such books and records as will clearly reflect the transactions being effected therein. (B.I.R. Ruling No. 373, s. 1959).
A branch establishment, the activities of which are limited to buying, storing and preparing copra for sale is, although said sales are perfected by the main office, under obligation to keep the use the necessary books of accounts. (B.I.R. Ruling No. 233, s. 1959).
Pursuant to section 20 of the Bookkeeping Regulations, all books registers and other records, and vouchers and other supporting papers required by said regulations shall be kept at all times at the place of business of the taxpayer. However, in the case of branch establishment, there shall be kept in that establishment such books and records as would clearly reflect all the transactions effected therein. Accordingly, where a sawmill has its principal office in Quezon City and a field office in another place where its sawmill is located, a complete set of books of accounts need not be kept in the latter office, it being enough that it keeps such books and records as would clearly reflect all the transactions effected therein. (B.I.R. Ruling No. 286, s. 1959).
20(19). WHERE TO KEEP BOOKS OF ACCOUNTS. — All books of accounts shall be kept at all times at the place of business of the taxpayer, subject to inspection of any internal revenue officer, and upon demand, the same must be immediately produced and submitted for inspection. When required by the inspecting officer, the owner, bookkeeper, or manager shall give the necessary explanations regarding the items in the entries contained in said books. (B.I.R. Ruling No. 163, s. 1958).  
20(20). ISSUANCE OF RECEIPTS (B.I.R. FORM NO. 19.14) FOR SEIZED DOCUMENTS, BOOKS, PAPERS AND ARTICLES. — It has been observed by this Office from the reports submitted by fieldmen that seizure of tax receipts, licenses, books, documents, papers and/or articles from taxpayers or persons with whom they have official dealings is not in accordance with the provisions of Field Circular No. V-19 dated October 28, 1947. Seizures are made with plain paper as receipts or with the required form (B.I.R. Form No. 19.14) but no reports on the results of the investigation are submitted. An inspection of the offices of Chief Revenue Officers and Regional Directors show that there are plenty of seized books, papers and other articles which are just lying around with no proper inventory and which pile up from year to year without any disposal thereof being made. Even if the case had been terminated, the seized articles remain in the custody of the Regional Director and Chief Revenue Officer to the extent that complaints have been received from taxpayers that articles seized from them have not been returned although the corresponding case had been terminated.
In view thereof and in order to insure an effective control in the seizure of articles from taxpayers and to pinpoint responsibility the following procedure is hereby promulgated for the compliance of all concerned:
1.         Effective immediately all Chief Revenue Officers, Assistant Chief Revenue Officers, Group Supervisors, Examiners, Inspectors and other fieldmen authorized to investigate books of accounts are hereby enjoined to see to it that no other receipt except B.I.R. Form No. 19.14 is issued for seized tax receipts, licenses, books, documents, papers and/or articles from taxpayers or persons with whom they have official dealings.
Upon receipt of this Revenue Memorandum Circular sufficient number of receipt books should be requisitioned from the Property Division to last for a period of one (1) year for distribution to the fieldmen under their respective jurisdiction. In the National Office requisitions should be made by the Division Chiefs who have fieldmen conducting investigating work.
An inventory should be taken by the Chief Revenue Officer, Chief of Branch or Chief of Division concerned, of all the booklets of receipts in the possession of the fieldmen within their jurisdiction, which should be forwarded to the Chief Revenue Officer within their jurisdiction, which should be duly listed. Three extra copies of the list should be forward to the following officials:
(a)        Regional Director
(b)        Revenue Operations Head (Assessment or Specific Tax)
(c)        Chief, Property Division
The Chief of the Property Division should determine from the copy of the list forwarded to him whether the booklets issued are all properly accounted for.
As much as possible each fieldmen should be issued a receipt book for which he shall be made accountable. In case there are not enough booklets to distribute, a common receipt book may be kept by the Chief Revenue Officer or Group Supervisor as the case may be, for the use of the district or the group as the needs may arise.
The receipt should be accomplished in triplicate and distributed as follows:
a.         Original — to the Taxpayer.
b.         Duplicate — to the Group Supervisors; if there is no group supervisor in the Unit to the Assistant Chief Revenue Officer; and if there is no Assistant Chief Revenue Officer to the Chief Revenue Officer.
c.         Triplicate — should remain with the booklet.
            All the blank spaces on the face of the receipt should be filled by the issuing officer who should sign his name clearly above his official title which should also be written clearly. Upon the settlement of the case, the blank spaces on the reverse side of the triplicate should likewise be accomplished.
5.         At the end of the month, the revenue official who has supervision over fieldmen issuing the receipts and is in possession of the duplicate copies, should check the duplicates in his possession against the triplicates remaining with the receipt book in the possession of the fieldman, to determine the status of cases apprehended for which receipts have been issued during the month. If the cases have been settled, he should check whether the corresponding reports have been submitted. If there are cases not yet settled, he should, call the attention of the fieldmen to expedite settlement thereof. As soon as all the cases in a booklet have been settled, the receipt book should be surrendered by the fieldman to his immediate superior who shall in turn forward it to the Regional Office for permanent file in the Administrative Branch.
6.         The Chief Revenue Officer or the Chief of Branch in the Regional Office should prepare a monthly report of receipts so issued containing the following information:
1.         Number of receipt
2.         Name of taxpayer
3.         Nature of violation
4.         Issuing Fieldman
5.         Status of the case
The monthly report should also include a summary statement illustrated as follows:
(1)        Number of receipts pending at the beginning of the month          xxxx
(2)        Number of receipts issued during the month                               xxxx
                                                                                                                        ——
(3)        Total Handled During the Month                                                 xxxx
(4)        Number of receipts settled during the month                               xxxx
                                                                                                                        ——
(5)        Balance at the end of the month                                                 xxxx
                                                                                                                        ====
            Copies of this report should be furnished the Regional Director and the National Office.
7.         The official who has custody of the records and articles seized should see to it that in all cases settled or closed, the seized articles composed of books, records, privilege tax receipts and licensees are returned to the owners immediately upon the settling or closing of the case. If the seized articles consist of fraudulent weights and measures, articles subject to specific tax and other similar articles which the law requires to be forfeited in favor of the government instead of returning them to the taxpayer from whom seized, the official concerned should take appropriate action towards disposing the said articles in accordance with law and regulations.
This Revenue Memorandum Circular revokes the provisions of Field Circular No. V-19, dated October 28, 1947 and is effective immediately (Rev. Memo. Circular No. 37-65, dated Oct. 13, 1965).
20(21). TAXPAYERS MAY BE REQUIRED TO PRODUCE THEIR BOOKS OF ACCOUNTS UNDER A SUBPOENA DUCES TECUM. — Section 20 of Revenue Regulations No. V-I (Bookkeeping Regulations) empowers internal revenue officers to take the books of accounts and related records or papers of the taxpayer for purposes of inspection and or examination. On the other hand, under Section 580 of the Revised Administrative Code, internal revenue agents, agent's assistants and examiners may require the production of documents under a subpoena duces tecum or otherwise. Accordingly, said officers, when duly authorized to examine or investigate a taxpayer, can validly order the latter to submit his books of accounts and related records or papers to the office of the former. (B.I.R. Ruling No. 251, s. 1958).  
20(22). PROCEDURE IN THE INVESTIGATION OF BOOKS OF ACCOUNTS OF TAXPAYERS IN THE PROVINCES AND CITIES. — Pursuant to the provisions of field Circular No. V-70, every Fieldman of the Bureau of Internal Revenue assigned to field investigation work is required, before proceeding to a taxpayer to commence investigation, to secure from the Provincial Revenue Officer (now chief revenue officer), if in the province, a letter or memorandum instructing him to examine or investigate such taxpayer. Exception to this requirement are cases that requires immediate action on the spot, such as apprehension of merchants: (1) who do not issue sales receipts or invoices; (2) who keep private books of accounts; (3) who are not provided with the necessary privilege tax receipts; and (4) persons who possess illicit articles on which the specific tax is not paid. (B.I.R. Ruling dated May 23, 1957).
Except in the cases mentioned in Field Circular No. V-70 that requires immediate action, a taxpayer has the right to refuse inspection of his books and other records if and when the agent is not armed with a letter of authority instructing him to examine or investigate said books of accounts and records.
Agents of the Bureau of Internal Revenue are authorized to bring the books of accounts and other records of merchants to the office of the provincial revenue officer (now chief revenue officer) only upon issuance of official receipts showing the receipt of all books and records confiscated after apprehension. (Ibid.)
20(23). EXCLUSIVE POWER TO INVESTIGATE BOOKS OF ACCOUNTS. — The power to investigate, examine and determine tax liabilities of taxpayers devolves exclusively upon the provincial revenue agents (now chief revenue officers), pursuant to Department Order No. 12, dated Sept. 25, 1952). Accordingly, Deputy provincial treasurers (now collection agents) have no authority to require a taxpayer to present his books of accounts for examination. (B.I.R. Ruling dated Jan. 3, 1956; B.I.R. Ruling dated Feb. 18, 1954; March 21, 1956).
Under the provisions of Department Order No. 192, dated September 25, 1952, revoking Department Order No. 134, dated Dec. 5, 1950, provincial and city treasurer and their deputies are not empowered to inspect the books of accounts of merchants. The power to investigate, examine and determine the tax liabilities of taxpayers devolves exclusively upon the provincial revenue agents or examiners. (B.I.R. Ruling dated Feb. 18, 1954).
20(24). PROVISIONS OF SECTION 20, REVENUE REGULATIONS NO. V-I, MANDATORY. — Section 20 of the Bookkeeping Regulations is mandatory and may not be dispensed with for the purpose of bringing the said books by the certified public accountant to the public accounting office for audit purposes. (B.I.R Ruling dated Feb. 28, 1953).
20(25). RETURNS WHERE PERCENTAGE TAXES ARE KEPT. — The books of accounts and other records from which the figures shown in the percentage tax return were based should always be kept on file at the principal place of business of the taxpayer and shall be subject to inspection by the internal revenue officers duly authorized to examine the books of accounts of the said taxpayer.
Invoices, receipts and other supporting papers and documents relating to deductions from sales or receipts should be filed separately, kept and preserved in the manner prescribed by Revenue Regulations No. V-1.
The books of accounts and other records shall be maintained for a period of five years from the date of the last entry in the said books and records. (Revenue Regulations No. 3-64, dated March 10, 1964).
20(26). EXAMINATION OF BOOKS OF ACCOUNTS — WHEN PRODUCTION REQUIRED. —
Books of accounts and other business records of taxpayers are open to examination and inspection by internal revenue officers when properly authorized by the Commissioner, Regional Director, or Chief Revenue Officer. Said examination and inspection may be conducted in the taxpayer's place of business or outside thereof. In the latter case, however, the internal revenue concerned must issue a receipt (B.I.R Form No. 19.14) therefore. Under Section 580 of the Revised Administrative Code, internal revenue agents. Agent's Assistants and Examiners may require the production of books of accounts under a subpoena duces tecum. Accordingly, said officers, when duly authorized to exercise or investigate a taxpayer, can validly order the latter to submit his books of accounts and related records to the office of the former. (B.I.R. Ruling No. 251, s. 1958; Section 20, Rev. Regs. No. V-1; Field Circular No. V-88; B.I.R. Ruling No. 38, s. 1965).
SECTION 21.    Preservation of Books of Accounts and Other Records. — All the books, registers, records, vouchers, and other supporting papers and documents prescribed in these regulations, and other records kept by taxpayers at their option, shall be preserved intact, unaltered, and unmutilated for at least five years from the date of the last entry in each book or from the date of the last transaction, and the same shall be kept at all times in the place of business of the taxpayer, who shall produce them for examination or deliver the same or any of them for inspection outside of his place of business upon demand of any internal-revenue officer.
21(1). PRESERVATION OF "GIFT CERTIFICATES". — Where the gift certificates issued by a taxpayer constitutes part of its accounting records, the same should be preserved for a period of at least five (5) years. Microfilms of said certificate cannot take the place of the original certificate. (B.I.R. Ruling No. 336, s. 1960).
21(2). PRESERVATION OF BOOKS OF ACCOUNTS COUNTED FROM THE DATE OF LAST ENTRY. — The period of five (5) years within which books of accounts, invoices, receipts and other accounting records should be preserved is counted from the date of last entry, in case of books of accounts, registers and other accounting records, and from the dates appearing thereon, in the case of invoices and receipts. However, as entries in the books of accounts have to be supported with the corresponding invoices, receipts or vouchers, it is advisable to preserve said invoices; receipts and vouchers for five (5) years from the date of last entry of the book in which they have been entered. (B.I.R. Ruling No. 130, s. 1959).
Sales invoices, vouchers, journal vouchers and receipts supporting the entries or postings in entries of at least five years counted not from the dates of accomplishment or issuance thereof but from the date of last entry in the books to which they relate. (Ibid.)
21(3). PERSONS RETIRING FROM BUSINESS. — The obligation to preserve the books and other accounting records of a taxpayer for a period of at least five (5) years from the date of last entry in each book applies to persons who have retired from business and whose books and other records had already been examined. (B.I.R. Ruling No. 130, s. 1959).
21(4). PERIOD WITHIN WHICH THE BUREAU MAY EXERCISE THE RIGHT TO EXAMINE BOOKS OF ACCOUNTS OF TAXPAYERS. — The right of the Bureau of Internal Revenue to examine and/or inspect books of accounts and other accounting records of taxpayers does not prescribe. Accordingly, the books of accounts and other accounting records of a factory which ceased to operate on Dec. 31, 1954 may be examined or inspected by authorized internal revenue officers any time. However, Section 337 of the Tax Code provides that books of accounts and other accounting records of taxpayers shall be kept for a period of at least five (5) years from the date of last entry and shall be subject to examination and inspection at any time by internal revenue officers. Hence, taxpayers cannot be compelled to preserve the said books and accounting records for a period of over five (5) years. (B.I.R. Ruling No. 414, s. 1959).
21(5). MEANING OF THE PHRASE, "LAST ENTRY". — The term, "last entry," as used in section 337 of the Tax Code, refers to a particular business transaction or an item thereof that is entered or posted last or latest in the books of accounts when the same was closed. (B.I.R. Ruling No. 401, s. 1958).
The phrase "last entry" has no reference to a particular business transaction or an item thereof that is entered or posted last or latest in the book when the name was closed. For purposes of determining the period of at least five years within which the books shall be kept, the same shall be recorded from the date of the last entry in said books. (Ibid.)
21(6). WHERE TO KEEP BOOKS OF ACCOUNTS. — The provisions of section 21 of the Bookkeeping Regulations, requiring that all books of accounts and other records of taxpayers be kept at all times in his place of business is mandatory. (B.I.R. Ruling dated Jan. 24, 1956).
21(7). PRESERVATION OF BOOKS OF ACCOUNTS AND OTHER RECORDS. — Preservation of microfilm copies of books of accounts does not satisfy the requirements of section 337 of the National Internal Revenue Code. Said section implies that the records to be preserved by taxpayers for a period of five (5) years from date of last entry made therein must be originals thereof. This requirement is necessary for the reason that the originals of the books of accounts are the best evidence to prove the entries made therein. (B.I.R. Ruling dated Feb. 20, 1954).  
21(8). BOOKS OF ACCOUNTS CANNOT BE AUDITED OUTSIDE OF TAXPAYER'S ESTABLISHMENT. — A certified public accountant, in the exercise of his profession, particularly in auditing the books of accounts of a taxpayer, cannot bring such books outside the business establishment of his client without violating section 21 of the Bookkeeping Regulations. The law does not provide any exception to these requirements. (B.I.R. Ruling dated April 16, 1953).
21(9). KEEPING OF RECORDS. — The books of accounts and other records from which the figures shown in the percentage tax return were based should always be kept on file at the principal place of business of the taxpayer and shall be subject to inspection by internal revenue officers duly authorized to examine the books of accounts of the said taxpayer.
Invoices, receipts and other supporting papers and documents relating to deductions from sales or receipts should be filed separately, kept and preserved in the manner prescribed by Revenue Regulations No. V-1.
The books of accounts and other records shall be maintained for a period of five years from the date of the last entry in the said books and records.
(Revenue Regulations No. 3-64, March 10, 1964, re Filing of monthly percentage tax return and payment of tax due thereon.)
21(10). PRESERVATION OF BOOKS OF ACCOUNTS, PENALTY FOR FAILURE TO KEEP THE SAME. — Besides being a violation of section 4 of Act No. 3292, which provides that the merchants' books and records "shall be preserved by them for a period of at least five years from the date of the last entry in each Book" and "shall be subject to examination and inspection at any time by internal revenue officers," is penalized by section 2741 of the Administrative Code, which does not refer exclusively to rules and regulations issued by the Bureau of Internal Revenue, but to any lawful regulation of the Bureau of Internal Revenue whether issued by the same or by the Department of Finance. (People of the Phil. Is. vs. Alberto Tan Chaco, CA No. 44133, Nov. 28, 1936; Off. Gaz., Vo. XXXV pp. 1773, Aug. 21, 1937).
SECTION 22.    Submission of Books and Records Upon Retirement. — All taxpayers required by these regulations to keep books of accounts or other records who retire from business or cease to pursue their calling shall, within ten (10) days from the date of such retirement, or within such period of time as may be allowed by the Commissioner of Internal Revenue in special cases upon application therefor in writing, submit their books of accounts and other records pertaining to their business, including the translation thereof, to the city treasurer or the deputy provincial treasurer (now Collection Agents) for examination. The city treasurer or the deputy provincial treasurer shall keep all such books and records in a secure place and notify the corresponding provincial revenue agent of the receipt hereof within forty-eight hours after the receipt of such books and other records. An examination of such books of accounts and records shall be conducted immediately by an internal-revenue officer to ascertain if all the taxes due from the taxpayer have been paid.
22(1). RULES GOVERNING THE DISSOLUTION OF THE PARTNERSHIP RELATION TO THE APPLICATION AND ENFORCEMENT OF THE BOOKKEEPING REGULATIONS, (ETC.; FACTS. — "A, B, C, D, and E" formed and operated a registered general partnership on June 30, 1956 which was to continue for a period of ten (10) years for the business of buying and selling of general merchandise. On June 30, 1959, partners "C" and "E", decided to quit from the partnership, so a Deed of Dissolution was executed among all the partners and, at the time, new articles of partnership was formed and executed by the remaining partners "A" and "B" with the admission of a new partner "F", in order to take over and continue the business of the dissolved partnership under the same business name and location with the understanding that the new partnership shall assume all the assets and liabilities of said dissolved partnership. Both instruments were duly registered with the Securities & Exchange Commission. . . . The books of accounts of the dissolved partnership were not closed, neither inventory was taken, nor income tax return was filed for the period covering from January 1, 1959 to June 30, 1959. However, the new partnership filed its income tax return for 1959 showing all the transactions covering the period from January 1, 1959 to December 31, 1959 in accordance with the stipulated provision of the new Articles of Partnership which took effect on January 1, 1959.
RULING: (1) The old partnership was considered dissolved on June 30, 1959. (Art. 1830(1) (c), New Civil Code. 'It is a well established general rule that an existing partnership is dissolved and a new partnership is formed whenever a partner retires or a new one is admitted." (40 Am. Jur. 298). Therefore, the privilege tax receipt secured by the said partnership for 1959 was deemed retired on the date of its dissolution, pursuant to Section 181 of the National Internal Revenue Code. 
2)         The dissolved partnership should file its income tax return covering the period from January 1, 1959 to June 30, 1959 within thirty (30) days after the approval of the resolution authorizing its dissolution in accordance with Section 244 of the Income Tax Regulations. The filing of the income tax returns covering the period from Jan. 1, 1959 to Dec. 31, 1959 by the new partnership which assumed the assets and liabilities of the old partnership was not in conformity with the aforesaid Regulations for those two partnerships have distinct and separate juridical personality.
3)         The new partnership violated Section 3 of Revenue Regulations No. V-1, otherwise known as the Bookkeeping Regulations for not adopting a new set of books of accounts. The books of accounts of the dissolved partnership cannot be used by the new partnership. The provisions of Section 22 of the aforesaid Regulations provide that all taxpayers required by these regulations to keep books of accounts and other records who retire from business or cease to pursue their calling shall, within ten (10) days from date of such retirement, or within such period of time as may be allowed by the Commissioner of Internal Revenue to submit their books of account and other records to the Bureau of Internal Revenue.
4)         A partnership which neglects to make a return at the time or times specified by the Tax Code shall be liable to a fine of not exceeding P20,000.00 (Sec. 74, Tax Code; Sec. 240, Income Tax Regulations). Failure of the new partnership to provide itself with a new set of books of accounts is punishable by a fine of not more than P300.00 or by imprisonment for not more than six months, or both. (Sec. 352, Tax Code).
5)         Assuming that the old partnership was dissolved on December 31, 1959, the basis of the privilege tax receipt (C-13) to be secured by the new partnership for 1960 is not the gross annual sales realized by the former. The latter shall be liable only for P10.00 for the same year as initial graduated fixed annual tax prescribed by Section 182 (A)(2) of the Tax Code. The reason being that the two partnerships are distinct juridical persons regardless of the fact that the business of the new partnership is but a continuation of the business of the old partnership.
6)         Assuming again that the old partnership was dissolved on December 31, 1959, the basis of the payment of additional residence tax (C-1) for 1960 by the new partnership is not the total receipts or earnings of the dissolved partnership for the same reason adduced in No. 5. (B.I.R. Ruling No. 96, s. 1963).
22(2). REQUISITES UPON RETIRING FROM BUSINESS. — Persons who retire from business are required to submit to the Bureau of Internal Revenue, within ten (10) days from such retirement or within such period as may be allowed by the Commissioner of Internal Revenue, their books of accounts and other accounting records for examination. And in case of transfer of ownership of the business, the transferor should submit to the Bureau within thirty (30) days from the date of transfer an inventory of the stocks on hand at the time of such transfer. (B.I.R. Ruling No. 610, s. 1959).
SECTION 23.    Return of Books and Records. — The books of accounts and other records mentioned in the preceding section shall not be returned until after the taxes, charges and penalties found to be due, if any, shall have been paid unless authority to do so shall have been first secured from the Commissioner of Internal Revenue. Furthermore, in case a violation of
MISSING PAGES 86-87
VI(1). FALSE OR FICTITIOUS ENTRIES. — Any person who shall knowingly make false or fictitious entries in the books of accounts or accounting records of persons subject to internal revenue tax or who shall abet or aid in any manner in the making or writing of said entries shall be liable to a fine of not less than P500.00 nor more than P5,000.00 or to an imprisonment for a period of not less than six months and one day nor more than five years or both such fine and imprisonment. The same penalty applies in the case of false or fictitious entries in sales invoices and receipts. (B.I.R. Ruling No. 548, s. 1959).
VI(2). SCHEDULE OF COMPROMISES. — General Circular No. V-240, March 15, 1957 — Subject: — Prescribing schedules of compromises for violations of the penal provisions of the laws on taxes on business and occupation, documentary stamp tax, mining taxes, amusement taxes, firearms tax, and weights and measures, fees, provides in part, as follows:
xxx                    xxx                    xxx
"UNDER SCHEDULE "C" —
(a)        Engaging in business without first securing                                            10.00
                        tax receipt for every capital investment of P2,500.00
                        or fractional part thereof, penalty not to exceed.                                     300.00
(b)        Failure to post privilege tax-receipt in a conspicuous place                       10.00
(c)        Failure to record daily sales or receipts
                        for every P1,000.00, or fractional part thereof, of
                        unrecorded gross sales or receipts, penalty not to exceed                      300.00
(d)        Failure to render return of gross sales of receipts
                        correctly or within the time allowed:
i.          When voluntarily rendered                                                            10.00
                                    for every P100.00 or fractional part thereof of the
                                    regular tax assessed, penalty not to exceed P5,000.00.
ii.          When rendered upon demand of an internal revenue officer           20.00
                                    for every P100.00, or fractional part thereof of the regular
                                    tax assessed, penalty not to exceed P10,000.00
(e)        Failure to produce books of accounts or other                                        300.00
                        records upon demands of an internal revenue officer
                        for every capital investment of P2,500.00 or
                        fractional part thereof, penalty not to exceed P300.00.
(f)         Failure to register privilege tax receipt or business name
                        within the time prescribed by law                                                               5.00
                        for every capital investment of P2,500.00 or fractional
                        part thereof, penalty not to exceed P300.00.
(g)        Failure to inform the Bureau of Internal Revenue
                        of retirement from business:
i.          When voluntarily presented                                                             5.00
                                    for every capital investment of P5,000.00, or
                                    fractional part thereof, penalty not to exceed                              P300.00.
ii.          When discovered by an internal revenue officer                              10.00
                                    for every capital investment of P5,000.00, or
                                    fractional part thereof, penalty not to exceed                              P300.00.
(h.)       Failure to record in the sales invoices or repurchaser in
                        the case of sales, receipts or transfers in
                        the amount of P50.00 or more                                                                    10.00
(i)         Failure to keep books of account and other records in the
                        establishment or office of the taxpayer for every capital
                        investment of P100.00, or fractional part thereof, penalty
                        not to exceed P300.00.                                                                              10.00

UNDER SCHEDULE "D"
(a)        Engaging in the practice of an occupation
                        without first securing tax-receipt                                                                 10.00
(b)        Failure to register the name of style as
                        prescribed under Section 203 of the Tax Code                                            10.00
xxx                    xxx                    xxx

SECTION 24.    Penalty for Making False Entries or Writing False or Fictitious Names in Books or Records. — Any person who knowingly makes any false entry or writes any false or fictitious name in his books of accounts or other records, or who abets or aids in the making or writing thereof, is punishable under section 355 of the National Internal Revenue Code by a fine of not less than P500 nor more than P5,000 or by imprisonment of not less than six months and one day nor more than five years, or both. 
In order to obviate the possibility of entering false or fictitious name in their books, taxpayers should require persons to whom they have transactions which should be entered in their books exhibit their residence certificates, if subject thereto, and take note of their number and the date and place of issue.
A person who fails to keep the books or records mentioned in section 334 of the National Internal Revenue Code in a native language, English, or Spanish, or to make a true and complete translation of books kept in other languages into a native language, English, or Spanish, or whose books or records kept in a native language, English or Spanish are at material variance with books or records kept by him in another language, is liable to a fine of not less than P2,000 nor more than P10,000, or imprisonment for not less than two nor more than six years, or both.
24(1). PAYMENT OF COMPROMISE PENALTY FOR FAILURE TO KEEP BOOKS AND OTHER ACCOUNTING RECORDS. — One cannot be compelled to produce books of accounts which he failed to keep and for which failure he was already made to pay a compromise penalty. (B.I.R. Ruling No. 447, s. 1960).
SECTION 25.    Penalty for Violation of Other Provisions of These Regulations. — Any person who shall violate any provision of these regulations for which violation the National Internal Revenue Code or any other law does not provide any specific penalty shall be penalized, under section 352 of the aforesaid Code, by a fine of not more than P300 or by imprisonment of not more than six months, or both.
25(1). COMPROMISE PENALTIES FOR VIOLATIONS OF THE BOOKKEEPING REGULATIONS. — Effective Feb. 16, 1957, taxpayers who violate any of the provisions of the Bookkeeping Regulations shall be liable to the compromise penalty prescribed by General Circular No. V-236 (as amended by General Circular No. V-240). (B.I.R. Ruling No. 188, s. 1960).
25(2). PENALTY FOR FAILURE TO PRESERVE BOOKS OF ACCOUNTS. — The penalty imposable on taxpayers who fail to keep their books of accounts for a period of at least five (5) years from the date of last entry and to produce said books upon demand made within the said period by an authorized internal revenue officer is a fine of not more than P300.00 or imprisonment of not more than six (6) months, or both, regardless of whether or not the same books have been previously examined by internal revenue officers. (B.I.R. Ruling No. 248, s. 1958)
SECTION 26.    Repealing Provisions. — Regulations Nos. 34, 48, 58, 84, 91, 101, 105 and 108 of the Department of Finance and other regulations inconsistent herewith are hereby repealed.
SECTION 27.    Date of Effectivity. — These regulations shall take effect upon their promulgation in the OFFICIAL GAZETTE.
27(1). PUBLICATIONS OF THE BOOKKEEPING REGULATIONS (REVENUE REGULATIONS) IN THE OFFICIAL GAZETTE. —
1)         No. V-1, 43, O.G. No. 11, p. 4563, November, 1947
2)         No. V-13, 47 O.G. No. 8, p. 4048, August, 1951
3)         No. V-20, 48 O.G. No. 1, p. 13, January, 1952
4)         No. V-35, 49 O.G. No. 1, p. 11, January, 1953
5)         No. V-43, 52 O.G. No. 3, p. 1234, March, 1956
6)         No. V-45, 52 O.G. No. 4, p. 1876, April, 1956
7)         No. V-58, 53 O.G. No. 19, p. 6486, Oct. 15, 1957
8)         No. V-77, 58 O.G. No. 6, p. 1086, Feb. 5, 1962
9)         No. 5-62, 58 O.G. No. 45, p. 7359, Nov. 5, 1962
"A" — Explanatory note for the RECORD OF DAILY SALES AND CASH RECEIPTS
(Form No. 1, Appendix I)
All transactions concerning SALES and SERVICES RENDERED and MONIES RECEIVED, including those received as investment and other income, shall be entered in this Record. The amount of every transaction shall be entered under two money columns, first under a column on the left side of "Explanation," second under a column on the right side. The total of the columns on the left side must equal the total of the columns on the right side.
DATE — correspondents to the date of the transaction.
EXPLANATION — refers to a brief statement of the nature of the transaction, such as total cash sales, credit sale with the name of the customer, other income, payment for previous credit sale with the name of the customer and any other explanation which may be necessary.  
INVESTMENT IN CASH shall be entered first under "Cash Received" and second under "Other Credits."
CASH SALES for the day shall be entered in total only, first under "Cash Received" and second under "Sales," classified according to privilege tax receipt.
CREDIT SALES shall be entered individually, by invoice if sales invoices are issued therefor, first under "Due from Customers" and second under "Sales," classified according to privilege tax receipt.
SERVICE RENDERED and OTHER INCOME — by total for the day — shall be entered first under "Cash Received" and second under "Other Credits."
PAYMENT FOR PREVIOUS CREDIT SALES shall be entered individually first under "Cash Received" and second under "Received for Credit Sales."
The columns designed on this form may be increased into such number as the needs of each particular business may require.

"B" — Explanatory note for the RECORD OF DAILY PURCHASES, EXPENSES AND CASH DISBURSEMENTS
(Form No. 2, Appendix II)

All transactions concerning PURCHASES, EXPENSES, and MONIES disbursed, including those for payments for previous purchases on credit and as withdrawals of investment, shall be entered in this Record. The amount of every transaction shall be entered under two money columns also, first under a column on the left side of "Explanation," second under a column on the right side. The total of the columns on the left side must likewise equal the total of the columns on the right side.
DATE — corresponds to the date of the transaction.
EXPLANATION — refers to a brief statement of the nature of the transaction, such as total purchases without invoices, purchases on credit with the name of the creditor, payment for previous purchases on credit with the name of the creditor, nature of the expenses incurred, withdrawal of investment and any other explanation which may be necessary.
WITHDRAWAL OF CASH INVESTMENT shall be entered first under "Cash Disbursed," second under "Other Debits."
CASH PURCHASES without invoices or receipts for the day shall be entered by the total first under "Cash Disbursed," second under "Purchases," classified according to privilege tax receipt.
PURCHASES ON CREDIT shall be entered individually first under "Payable to Creditors," second under "Purchases," classified according to privilege tax receipt.
EXPENSES shall be classified and entered by the classification indicated under "Explanation" first under "Cash Disbursed," second under "Expenses."
PAYMENTS FOR PREVIOUS PURCHASES ON CREDIT shall be entered first under "Cash Disbursed," second under "Payment to Creditors."
OTHER DISBURSEMENT shall be entered first under "Cash Disbursed," second under "Other Debits."
The columns designed on this form may be increased into such number as the needs of each particular business may require.

Form No. 4                                                                                                                   Appendix IV
SUMMARY OF TRANSACTIONS
Accomplish this Record by using the data shown on Form No. 3, Appendix III and Statement of Net Worth for the past year.
CASH ON HAND
Cash on hand at beginning of the year (z)                                   Pxxxx
Add: (1) Cash received during the year                                       Pxxxx
Total cash on hand at beginning of the year
            and received during the year                                                                  Pxxxx
Less (6) Cash disbursed during the year                                                             xxxx
            (a) Cash on hand at end of the year                                                        Pxxxx
DUE FROM CUSTOMERS
Unpaid sales at beginning of the year (z)                                                Pxxxx
Add: (2) Sales on credit during the year                                      xxxx
Total receivables from customers                                                                       Pxxxx
Less: (3)           Payments received from
                        customers during the year                                                          xxxx
            (b)        Due from Customers at end of the year                                      Pxxxx
PAYABLE TO CUSTOMERS
Unpaid accounts at beginning of the year (z)                              Pxxxx
Add: (7)            Obligation incurred during the year                                 xxxx
Total payables to creditors                                                                                Pxxxx
Less:    (9)        Payments made to creditors during the year                               Pxxxx
            (c)        Payable to Creditors at the end of the year                                 Pxxxx
OTHER ASSETS
Total (11) other debits during the year                                         Pxxxx
Less: Withdrawals of investment during the year                         xxxx
Other assets acquired during the year                                                                 Pxxxx
Add: Other assets at beginning of the year (z)                                                    xxxx
            (d)        Other assets at end of the year                                                  Pxxxx
OTHER LIABILITIES
Total (5) Other credit during the year                                           Pxxxx
Less: Investments made during the year                                     xxxx
            (f)         Other income during the year                             xxxx
Other liabilities incurred during the year                                                               Pxxxx
Add: Other liabilities at beginning of the year                                                      xxxx
            (e)        Other liabilities during the year                                                   xxxx
OTHER INCOMES
Total (5) Other Credits during the year                                         Pxxxx
Less: Investments made during the year                                     xxxx
            Other liabilities incurred during the year                           xxxx
            (f)         Other incomes during the year                                                    Pxxxx
SALES
Sales (3-a) under first privilege tax receipt                                  Pxxxx
Sales (3-b) under second privilege tax receipt                             xxxx
Sales (3-c) under third privilege tax receipt                                  xxxx
            (g)        Total Sales during the year                                                         Pxxxx
PURCHASES
Purchases (8-a) under first privilege tax receipt                           Pxxxx
Purchases (8-b) under second privilege tax receipt                      xxxx
Purchases (8-c) under third privilege tax receipt                          xxxx
            (h)        Total Purchases during the year                                                 Pxxxx
EXPENSES
Distribute          (j-1) Salaries, wages, etc.                                  Pxxxx
                        (j-2) Rents and taxes                                          xxxx
                        (j-3) Sundries                                                     xxxx
            (j)         Total Expenses during the year                                                  Pxxxx
            (z)         Statement of Net Worth for past year.                                        Pxxxx


Form No. 5                                                                                                       Appendix V
YEARLY STATEMENTS
STATEMENT OF NET WORTH
as of ____________

(a)        Cash on hand                                                                                        Pxxxx
(b)        Due from Customers (Unpaid Sales)                                                      xxxx
(x)        Merchandise at end of the year                                                              xxxx
(d)        Other Assets                                                                 Pxxxx
            Less: Estimated Depreciation                                        xxxx                 xxxx
TOTAL ASSETS
            Less:    (c) Payable to Creditors (Unpaid Obligations)     Pxxxx
                        (e)        Other liabilities                                      xxxx
TOTAL LIABILITIES                                                                                            xxxx
NET WORTH AS OF                                                                                          Pxxxx

STATEMENT OF OPERATIONS
For the year ending ________
(g)        Total Sales                                                                    Pxxxx
(x)        Inventory at end of the year                                           xxxx
            Total                                                                                                     Pxxxx
(h)        Total Purchases                                                            Pxxxx
(y)        Inventory at the beginning of the year                             xxxx
            Total                                                                                                     Pxxxx
GROSS INCOME FROM OPERATIONS                                                              Pxxxx
Less: Deductions
            (j-1)       Salaries, wages, etc.                                         Pxxxx
            (j-2)       Rents and taxes                                                xxxx
            (j-3)       Sundries                                                           xxxx
(j)         Total expenses                                                              Pxxxx
            Add:     Estimated Depreciation                                     xxxx
TOTAL DEDUCTIONS                                                                                        xxxx
NET INCOME FROM OPERATIONS                                                                    Pxxxx
Add: (f) Other Income                                                                                        xxxx
NET INCOME FOR THE YEAR                                                                           Pxxxx
NOTE:
            (x)        See inventory sheet for the present year.
            (y)        See inventory sheet for the past year.
The depreciation expenses is not taken up in the bookkeeping records. It is estimated and shown only in these statements. REVENUE REGULATIONS No. V-13.

ANNEX "B"
COMPARATIVE PROFIT & LOSS STATEMENT

                                                                  Ending December31, 19 A)   (Ending December 31, 19 B
Gross sales                                                                  P100,000                      P150,000
Less returned sales and allowances                                      1,000                           1,200
                                                                                    —————                    ————
Net Sales                                                                        P99,000                      P148,800
Less cost of goods sold:
            Inventory — finished goods, begin.        P10,000                        P15,000
            Add cost of goods manufactured                        50,000                          80,000
                                                                        ————                       ————
                        Total                                         P60,000                        P95,000
            Deduct inventory —finished goods, and   10,000     50,000            20,000    75,000
                                                                                        ———                         ———
Gross profit on sales                                                        P49,000                       P73,000
Deduct selling expenses:
            Advertising                                           P3,000                          P5,000
            Salesman's salaries                               10,000                         15,000
            Salesman's traveling expenses                 2,000                            3,000
            Insurance                                                 1,000                            1,000
            Taxes                                                        500                               700
            Misc. selling expense                              1,000     17,500             2,000      24,700
                                                                        ———     ———           ———     ———
Net profit on sales                                                         P31,500                         P49,100
Deduct general and
            administrative expenses:
            Office salaries                                       P2,000                          P2,000
            Officers' salaries                                      3,000                           3,000
            Stationery & printing                              200                                300
            Office supplies                                     300                                500
            Telephone & telegraph                           200                                200
            Misc. general expense                           100                                 200
            Bad debts                                           1,000                              2,000
            Depreciation — of. equip                       200         7,000                200         8,400
                                                                    ———      ———              ———     ———
Net profit on operations                                              P24,500                          P40,700
Deduct net financial expenses:
            Bond interest                                   P1,000                          P1,000
            Interest on notes payable& bank loans   300                               500
            Discount on sales                                 500                               700
                                                                   ———                            ———
            Total                                                P1,800                           P2,200
            Less:
                        Int. on notes receivable              (200)                             (400)
                        Discount on purchases              (600)                             (800)
                                                                    ———      ———           ———        ———
Net income                                                                  P23,500                         P39,700
            `                                                                       ======                                    ======

"ANNEX A"
1.         15-Minute Simplified Bookkeeping Records (Sari-sari)
2.         Drugstore Simplified Bookkeeping Records
3.         Farmer's Simplified Accounts & Tax Record
4.         Professional's Simplified Accounts & Tax Records
5.         General Simplified Accounts & Tax Record (Retail and Wholesale)
6.         P. U. Operator's Simplified Accounts & Tax Record
7.         Gasoline Service Station Simplified Accounts & Tax Record
8.         Rice-Corn Mill Simplified Accounts & Tax Record including Mill Office Record
9.         Restaurant-Hotel Simplified Accounts & Tax Record
10.        Dressmaker-Milliner-Embroiderer's & Tailor's Simplified Accounts & Tax Record
11.        Beauty Parlor & Barber Shop's Simplified Accounts & Tax Records
12.        Manufacturer's Simplified Accounts & Tax Record
13.        Poultry-Livestock Accounts & Tax Record
14.        Fishermen's-Fishpond's Accounts & Tax Record
15.        Broker's and Dealer's Simplified Accounts and Tax Record

"Annex A" of Rev. Reg. No. 5-62.
REGULATIONS NO. V 58
Footnotes
1.       The designations of the chief and the assistant chief of the Bureau of Internal Revenue have been changed from Collector of Internal Revenue and Deputy Collector of Internal Revenue, respectively, in the classification of positions by the Wage and Position Classification Office (WAPCO). BIR General Circular No. V-266, dated Jan. 14, 1958.

CHAPTER III
1.       Repealed by implication by Republic Act No. 3704. Operators or owners of rice or corn mills are now subject to an annual graduated fixed tax based upon the total capacity per machine used and not on the percentage tax imposed by section 189 of the National Internal Revenue Code.

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TRAIN LAW: INCOME PAYOR / WITHHOLDING AGENT’S SWORN DECLARATION

Here is the form to be submitted by Payor or Withholding Agent to the BIR for the individual payee with no withholding tax or 5% with...