SPECIAL JOURNALS, SUBSIDIARY
LEDGER AND THE VOUCHER SYSTEM
Special Journals
• Sales Journal
• Purchase Journal
• Cash Receipts Journal
• Cash Disbursement Journal
• Voucher system (Purchase and CD
Journal in one)
Subsidiary Ledger
• Accounts Receivable Subsidiary
Ledger
• Accounts Payable Subsidiary Ledger
Special Journal
- Specialized list of financial
transaction records.
- In contrast to a general journal, each
special journal records transactions
of a specific type, such as sales or
purchase.
Purpose
- To accommodate business having
moderate to heavy volume of
transaction
- To simplify the recording process for
frequently recurring transactions
- Permits division of labor.
- Reduces recording time because
there is no need to prepare routinary
explanations for the entries
- Reduces the time needed to post the
entries from the journal to the ledger.
-
Every month, the total sales figure in
the sales journal is posted in the
sales and account receivable
accounts in the general ledger
Cash Receipts Journal
- Used to record all transactions
involving cash receipts
- The information of each receipt is
obtained from various source
documents like the official receipts,
cash register tapes, cash slips, and
bank credit memorandum.
- Individual items is the accounts
receivable column are posted daily
to the accounts receivable
subsidiary ledger.
- Every month, the total cash, sales
discounts, accounts receivable and
sales figure in the cash receipts
journal are posted in their respective
accounts in the general ledger.
• Cash investment of the proprietor
• Cash sales
• Collections from outstanding
customer accounts
• Proceeds from borrowing from
banks, financial institutions, or other
third parties
• Collections of income from nonoperating sources
• Proceeds from sale of investments
and other fixed assets
• Collection of loans from customers,
employees, or other third parties
TAKE NOTE!!
Sales Journal
- Used to record all the credit sales for
the month, especially sales of
merchandise on account
- The information of each sale is
obtained from the source document
named sales invoice.
- Amounts recorded in the sales
journal are posted daily in the
subsidiary ledger
A Schedule of Account Balances in the
Subsidiary Ledger is usually prepared at the
end of each accounting period to verify that
the subsidiary ledger agrees with the related
control account.
Purchase Journal
- Used to record all transactions
involving purchases of merchandise,
supplies, and other assets on
account
- The information of each purchase is
obtained from the receiving report
- Individual items in the accounts
payable column are posted daily to
the accounts payable subsidiary
ledger
- Every month, the totals of the
merchandise inventory, supplies,
other assets, and accounts payable
are posted in their respective
accounts in the general ledger.
Cash Disbursement Journal
- Used to record all transactions
involving cash payments
- The information of each purchase is
obtained from the check issued by
the company or the petty cash
voucher
- Individual items in the accounts
payable column are posted daily to
the accounts payable subsidiary
ledger.
- Every month, the totals of the cash,
purchases, purchase discount,
accounts payable, and other assets
and expenses are posted in their
respective accounts in the general
ledger.
•
•
•
•
•
Payments for expenses
Payments to suppliers and other
trade creditors
Cash withdrawals of the proprietor
for his personal use
Payments of matured loans and
other obligations to banks, financial
institutions, and other third parties
Payments for acquired investments
and other fixed assets
•
Loan granted to customers,
employees, and other parties
TAKE NOTE!!
A Schedule of Account Balances in the
Subsidiary ledger is usually prepared at the
end of each accounting period to verify that
the subsidiary ledger agrees with the related
control account
TAKE NOTE!!
When special journals are used,
transactions that cannot be recorded
appropriately in a special journal are
recorded in the general journal
e.g. merchandise return, depreciation, ADA
and certain non-cash transactions.
•
•
•
•
•
Non-cash investments and
withdrawals
Acquisition and disposal of fixed
assets on account
Issuance or receipt of a promissory
note as temporary settlement of an
outstanding account.
Returns of and/or allowances on
goods bought or sold that do not
involve a cash refund
Adjusting, closing, and reversing
journal entries.
TAKE NOTE!!
After all postings shall have benn made, the
following items should have equal amounts
1. Debit and Credit balances of all
accounts in general ledger
2. Accounts receivable control
accounts (GL) and the total of all
individual accounts receivable
subsidiary ledger
3. Accounts payable control account
(GL) and the total of all individual
accounts payable
Subsidiary Ledger
- Group of similar accounts, normally
classified as customers and
suppliers, whose combined balances
equal the balances in a specific
general ledger (control account)
Purpose
- To accommodate business with
multiple suppliers and customers
- To easily bill or mail statements to
customers, answer inquiries about
balances or make collection efforts
- To easily make payment to supplier
- Permits division of labor
- Reduces recording time because
there is no need to prepare routinary
explanations for the entries
- Reduces the time needed to post the
entries from the journal to the ledger
Voucher System
- A formalized process of verification
and approval of payments that
serves as a control for purchase and
cash disbursement
- In this system, check may only be
drawn upon a written authorization in
the form of voucher approved by the
responsible official.
Voucher
- A serially numbered form that
identifies the name and address of
the payee, due date, terms,
description, invoice amount, and
officer’s signature for approval
- Should be prenumbered so they can
be accounted for and referred to
easily
- Copies of the Purchase order,
Invoice, and Receiving Report
should be attached to the voucher,
and these documents will comprise
the Voucher Package.
Is recorded in the book of original
entry called the voucher registry
Voucher Register
- This is the registry where all
approved vouchers are recorded
- Approved vouchers are entered in
the voucher register in numerical
sequence
- Some companies use the voucher
registry in place of the purchase
journal
Unpaid Voucher File/ Open Voucher File
- After vouchers have been entered in
the voucher register, they are filed in
the order of required date of
payment
- In the voucher register, the absence
of any entry in the payment date and
check number columns indicate that
such voucher is unpaid
- On the due date, the voucher
package is removed from the unpaid
voucher file and forwarded to the
disbursing officer for final approval.
Check Register
- A simplified form of the cash
disbursement journal
- A record of all check payments
- Checks are entered in the register in
numerical sequence.
TAKE NOTE!!
To safeguard against irregularities, the
voucher package should be canceled by the
disbursing officer before the voucher is
returned to the account department. The
department is now responsible for the
recording if the check payment in the check
register and the voucher register.
ACC 03 TAXATION
Taxation, Defined
- The inherent power by which the
sovereign, through its law-making
body, raises income to defray the
necessary expenses of government
from among those who in some
measures are privileged to enjoy its
benefit and must bear its burden.
Inherent Powers of the State
- From the moment a state is born, it
automatically possesses these
powers to impose upon its
inhabitants.
Inherent Powers
1. Eminent Domain
2. Police Power
3. Taxation
Eminent Domain
- Is the power of the nation or a
sovereign state to take, or to
authorize the taking of, private
property for public use without the
owner’s consent, conditioned upon
payment of just compensation.
Police Power
- Is the plenary power vested in the
legislature to make, ordain, and
establish wholesome and
reasonable laws, statures and
ordinances, no repugnant to the
Constitution, for the good and
welfare of the people.
- Exercise by the legislative
department
Taxation
- Is the inherent power of the
sovereign, exercised through the
legislature, to impose burdens upon
subjects and objects within its
jurisdiction for the purpose of raising
revenues to carry out the legitimate
objects of government.
Inherent Power of Sovereignty
- It is considered inherent in a
sovereign State because it is a
necessary attribute of sovereignty.
Without this power, no sovereign
State can exist nor endure
- The power to tax proceeds upon the
theory that the existence of a
government is a necessity.
- The power to tax is an essential and
inherent attribute of sovereignty,
belonging as a matter of right to
every independent State.
- No sovereign State can continue to
exist without the means to pay its
expenses, and for those means, it
has the right to compel all citizens
and property within its limits to
contribute; hence, the emergence of
power to tax.
QUESTION:
May the congress enact laws t raise
revenue despite of any provision in the
Constitution ranting the power?
ANSWER:
YES. Because taxation is an inherent
power.
QUESTION:
Can the city of Mandaue pass an ordinance
imposing a tax not provided under the local
government or other laws?
ANSWER:
Due it is an inherent power; it is only
exercise by the Congress. Except, if the
Congress delegates such power to LGUs.
Which is seen in the Local Government
Code, where they can impose tax that are
not contrary to the tax law of the country as
long, they are enacted by the legislative
power in LGUs (SB Member) Province
(Board Members).
Legislative in Nature
- Taxes are imposed to people, and
the imposition must be made by the
immediate representatives of the
peoples.
General Rule
- Power of Taxation cannot be
delegated
Exemptions
- Local taxes by LGUs thru the Local
Government Code
- Flexible Tariff Clause (adjust by
President)
- Administrative Regulation (not itself
an imposition of tax)
QUESTION:
Can the President of the Philippines or his
Cabinet Members impose a tax burden
upon the citizens?
ANSWER:
No, only be made by Congress
Subject to Limitations
- Even the power to tax is unlimited
the following limits this power.
Inherent Limitations
- Public Purpose
- Exemption of Government
- Non-delegation of Powers
- International Comity
- Situs/Territoriality
Constitutional Limitations
Basis of Taxation
- Different theories underlying the
power to tax
Lifeblood Doctrine
- Taxes are life blood of the
government and should be collected
without hindrance. It is said that
taxes are what we pay for a civilized
society, without taxes, the
government will be paralyzed for the
lack of motive to operate.
Manifestation
- Non delegation of the power of
taxation
- State can select the object and
subject of taxation
- No injunction in the collection of
taxes (preliminary injunction by DOJ)
- Could not be subject to set-off
- Taxation is an unlimited and plenary
power.
Necessity Theory
- The existence if a government is a
necessity therefore there is a need
to levy and impose taxes for the
countenance of the state, to defray
the expenses.
Benefits-Received Theory
- There exist reciprocal duties of
protection:
o Supports by the taxpayers,
and
o Protection and benefits from
the government
Symbiotic relationship and partnership
between the taxing authority and the subject
of taxation is enough to justify the imposition
of tax power.
Qualifications of benefit-received principle
- It does not mean that only those who
are able to pay taxes can enjoy the
privileges and protection given to a
citizen. He cannot object or resist
payment of taxes.
- The government renders no special
or commensurate benefit toa ny
particular property or person. The
only benefit the taxpayer os entitled
is the derived from his enjoyment of
the privileges of living in an
organized society.
QUESTION:
Can I say that I am not required to pay
taxes because I do not receive any direct
benefit from the government
Answer:
No, we might not feel it directly but we have
benefited from the government through its
public projects and works.
Purpose of Taxation
- Why do we pay taxes
Primary Purpose
1. Revenue Raising
o By collecting finds or property
to promote the general
welfare and protection of its
citizens.
Secondary/Sumptuary Purposes
1. Regulation
2. Promotion of general welfare
3. Reduction of social inequalities
(the less you have in life, the
more you have in law)
4. Encouragement of economic
growth
5. Protectionism (encouraging
people to use and buy local
goods, instead of foreign goods)
Marshall Dictum
- Taxation power is the power to
destroy
- Taxation power is used validly as an
implement of police power in
discouraging certain acts and
enterprises inimical to public welfare
Holmes Dictum
- The power to tax is not the power to
destroy so long as this court sits.
There is way to reconcile the two Dictum.
The power to tax, though unlimited, must
not be exercised in an arbitrary manner.
Taxpayers may seek redress before the
courts in case of illegal imposition of taxes
and irregularities.
Scope of Taxation
- Taxation is the most powerful among
the 3 inherent powers of the state
- Police power is the most superior
o Unlimited
o Comprehensive (can cover
anything)
o Plenary (law is complete,
give remedies if BIR are
having trouble in collecting
taxes)
o Supreme (strongest power,
yet)
Aspects of Taxation
o Levy
▪ impact of taxation
o Assessment
▪ incident of taxation,
exercised by BIR
o Collection
▪ incident of taxation,
exercised by BIR
o
Payment
▪ incident of taxation,
exercised by BIR
Levy/Imposition
- refers to the enactment of a law by
Congress.
- The power to levy taxes which
involves tax policy is essentially
legislative in character, although it
may be delegated to executive
agencies with respect to
administrative matters, provided that
adequate guidelines or safeguards
prescribes are followed in the
administration of tax laws.
Fiscal Adequacy
- The taxes envisioned to be collected
must be sufficient for government
expenditures and other public needs
- It also means that the revenues
should be elastic or capable of
expanding or contracting.
Administrative Feasibility
- Tax law must be capable of
convenient, juts, effective and
efficient enforcement and
administration
- Assessment and collection must not
be more costly than what can eb
collected and assessed.
Assessment
- The purpose od assessment is to
determining the tax liability. It
determines whether or not there are
deficiencies or delinquencies in the
payment of taxes.
- Self- Assessment
o It is the taxpayer who will
compute his tax liability.
Theoretical Justice
- Means that the tax burden should be
distributed in proportion to the
taxpayer’s ability to pay. Similarly
situated taxpayers should pay equal
taxes, while those who have more
should pay more.
- Rule of taxation must be uniform and
equitable.
Collection and Payment
- Process or method of implementing
the tax laws for the purpose if
satisfying the tax obligations, as
when money actually taken from the
taxpayers.
- This is the compliance of the
taxpayer of his tax liability
- The mode of payment should be in
money.
Taxes, defined
- Enforced proportional contributions
from persons and property levied by
the law-making body of the state by
virtue of its sovereignty for the
support of the government and all
public needs.
o Enforced contribution
o Generally payable in money
o Proportionate in character
o Levied on person, property or
in the exercise of a right or
privilege
o Levied by the state which
has jurisdiction over subject
or object of taxation.
Basic Principles of a Sound Taxation
System
1. Fiscal Adequacy
2. Administrative Feasibility
3. Theoretical Justice
Classifications of Taxes
1. As to Subject Matter or Object
Personal, Poll or Capitation tax
o Tax of fixed amount imposed
on persons residing within a
specified territory, whether
citizens or not, without regard
to their property or the
occupation of business which
they may be engaged
(sedula).
Property tax
o Tax imposed on property,
real or personal, in proportion
to its value or in accordance
with some other reasonable
method of apportionment.
Excise Tax
o A chare imposed upon the
performance of an act of
enjoyment of the privilege or
engagement on an
occupation.
2. As to Who Bears the Burden
Direct
o Tax for which the taxpayer is
directly or primarily liable or
which he cannot shift to
another (income tax)
Indirect
o Tax which is demanded from
one person in the
expectation and intention that
he shall indemnify himself at
the expense of another
(VAT)
3. As to Determination of Amount
Specific
o A specific tax is a tax of a
foxed amount imposed by
the head or number, or by
some standard of weight or
measurement.
Ad Valorem
o Is a fixed proportion of the
value of the property with
respect to which tax is
assessed.
4. As to Purpose
General, Fiscal or Revenue
o Tax imposed for the general
purposes of the government
and to raise revenue for
governmental needs.
Specific or Regulatory
o Tax imposed for a special or
sumptuary purpose.
5. As to Scope of Authority Imposing
Tax
National Tax
o Imposed by the national
government. To be specific, it
is imposed by the legislative
department and implemented
by the executive department
through the BIR.
Local tax
o It is provided for in the Local
Government Code and
imposed by the governing
body of the local government
6. As to Graduate or Rate
Proportional
o Based on a fixed percentage
of the amount of property
income or other basis to be
taxed.
Progressive
o Tax rate increases as the tax
base increases
Regressive
o
Tax rate decreases as the
base increases.
Degressive
o Starts out as a progressive
rate, the becomes
proportional when you reach
a certain level of income.
Other Impositions of Government
- In a strict sense, these are not
considered taxes.
1. License Fee
o A charge imposed to rant a
special privilege or authority
to do a lawful act, without
such otherwise would make it
unlawful.
2. Toll Fee
o A sim of money for the use of
something
3. Compromise Penalty
o Sanctions imposed as a
punishment for violation of a
law or act deemed injurious.
4. Special Assessment
o A charge imposed lands
especially benefited by public
works or improvement
financed by the government.
5. Debt
o Obligation generally based
on a contract
6. Subsidy
o A sum of money granted by
the government or a public
body to assist and industry or
business so that the price of
a commodity or service may
remain low or competitive.
7. Revenue
o Include taxes but necessarily
limited to such
8. Customs Duties
o Taxes imposed on goods
exported from or imported
into a country.
9. Tariff
o Customs duties, toll, or
tributes payable upon a
merchandise to the
government.
Inherent Limitations
- It must be for Public Purpose
- Government is Generally Exempted
from taxation
- Non-delegation of Legislative power
of taxation
- International Comity
- Situs/Territoriality
1. Public Purpose
o Public money can only be
spent for public purposes
o It must be used for the
support of the government,
any of the recognized objects
of the government, and to
promote the welfare of the
community.
o Although private individuals
are directly benefited, the tax
would still be valid, provided
such benefit is only
incidental.
2. Exemption of Government
o The exemption applies only
to governmental entities
through which the
government immediately and
directly exercise its sovereign
powers.
o If the entity is performing
governmental function,
exempted. If the entity is
performing proprietary
function, taxable.
3. Non-Delegation of Legislative Power
o The power of taxation is
peculiarly and exclusively
legislative, therefore, it may
not be delegated
o Exempted
▪ Delegation to the
president
▪ Delegation to the
local government
units
▪ Delegation to
administrative units.
4. International Comity
o The Philippines adopts the
generally accepted principles
of international laws as part
of the law of the land
o Property of a Foreign
Government is not taxed in
the Philippines because of
(1) sovereign equality among
states and (2) immunity from
suit of a state without its
consent.
5. Situs/Territoriality
o Persons or property must be
within the jurisdiction of the
taxing power
o The territoriality rules does
not merely relate to
“geographical” location, but
to the rural concept or nexus
or bond between the taxing
authority and the taxpayers.
QUESTION:
What happens if a tax statute violates the
inherent limitations of taxation?
ANSWER:
It is tantamount to the violation of due
process of law.
Constitutional Limitations
- These are the limitations of taxation
power enshrined in the 1987
Constitution of the Philippines.
Source of Tax Laws
- Constitution
- Statutes
- Revenue regulations
- BIR Rulings
- Decisions of the Supreme Court
- Provincial, City, Municipal, And
Barangay Ordinance subject to the
limitations set forth by the Local
Government Code
- Treaties and International
Agreements.
Construction
- Tax laws are construes strictly
against the government and in favor
of the tax payers.
- Tax exemptions are construed
strictly against the taxpayer and
liberally in favor of the government.
QUESTION:
What is the difference between TAX
EVASION and TAX AVOIDANCE?
ANSWER:
Tax evasion is illegal, Tax avoidance is not.
Tax Laws vs. GAAP
- There are income and expense
items considered as earned and
incurred in GAAP but are not
considered taxable and deductions
under tax laws.
The Bureau of Internal Revenue
- BIR functions under the supervision
of the Department of Finance
- It was created by CA 466, however it
was revised and codified to be part
of the National Internal Revenue
Code.
- “To collect taxes efficiently and
effectively, for and at the east cost to
the government, through impartial
and consistent enforcement of
internal revenue laws, and
convenient and honest services to
taxpayers.
Powers and Duties
- Assessment and collection of all
national internal revenue taxes, fees
and charges
- Enforcement of all forfeitures,
penalties, and fines.
- Execution of judgements in all cases
decided in its favor by CTA and
ordinary courts
- Administration of supervisory and
police powers conferred to it
Powers of the CIR (Commissioner of
Internal Revenue) - Caesar Dulay
- Interpret tax laws and decide tax
cases;
- Obtain information, and to summon,
examine and take testimony of
persons’;
- Make assessments and prescribed
additional requirement for tax
administration and enforcement;
- Delegate powers vested in him by
the code to aby subordinate officer
with rank equivalent to a division
chief or higher;
- Suspend business operations of
taxpayers;
- Compromise, abate and refund or
credit taxes.
Income and Income Taxes
Income, Defined
- Income in its broad sense, means all
wealth, which flows into the taxpayer
other than mere return of capital
(puhonan); return on capital (profit)
- The words “income from any source”
disclose a legislative policy to
include all income note expressly
exempted from the class of taxable
income in our laws.
Income Tax, Defined
- A tax on all yearly profits arising
from property, profession, trade or
business, or is a tax on a person’s
income, emoluments, profits and the
like.
Classification of Individual Income
Taxpayers
- Resident citizen
-
Non-resident citizen
Individual
Resident citizen
Non-resident citizen
Resident alien
Non-resident alien
Source of Income
Within the
Without the
Phils
Phils
YES
YES
YES
NO
YES
NO
YES
NO
Gross Income
- All income derives from whatever
resources
-
Resident alien
-
Non- resident alien
Types (CGGIRRDAPPP)
1. Compensation for services
2. Gross income derived from conduct
of trade or business
3. Gains derived from dealings in
property
4. Interest
5. Rents
6. Royalties
7. Dividends
8. Annuities
9. Prizes and winnings
10. Pensions
11. Partner’s distributive share from the
net income of GPP.
Compensation Income
- All remuneration for services
performed by an employee for his
employer under an employeremployee relationship
- 0%-35% Graduated Income Tax
rates
o
o
-
Engaged in trade or business
Not engaged in trade or
business
Special Employees
Estates and Trusts
Business Income
- Arises from self-employment of
practice or profession
- 0%-35% Graduated income tax
rates or the 8% gross income
taxation in lieu of the GITR and the
3% Business taxes, subject to the
qualification.
Passive Income
- Are subject to a separate final tax.
- Income derived from sources
wherein there is no active
participation in the earning process.
- Rates provided for in the table for
final tax rates.
Capital Gains
- (a) from the sale of Real property;
(b) from sale of shares of stock
- 9a) 6% on the higher of selling price,
zonal value or assessed value; 9B0
0.60% of 1% of value of listed and
traded stock, or 15% of the gain of
not listed and not traded stocks
Fringe benefits
- Means any goods, service or other
benefit furnished or granted by an
employer on cash or in-kind addition
to basic salaries, to an individual
employee occupying managerial or
supervisory position.
- 35% of Grossed-Up monetary value
The Graduated Income Tax Table
Train Law (Tax Reform for Acceleration and
Inclusion)
- That the personal and additional
exemption for individuals, the
deductions for premiums paid on
health and/or hospitalization
insurance are already removed
under this law.
Notes for Problem Solving
• If compensation income,
o Minimum wage, tax exempt
o Graduated tax rate table
•
o
If business income (self employed,
or business owner)
o Can be subject to 8% lieu for
less than 3,000,000
▪ (Gross receipt +
gross sale – 250,000)
x 8%
•
o
If 8% is not applied then
▪ Deduct cost of sale
and operating
expenses from gross
sales
▪ Add non operating
income
If more than 3,000,000
▪ Use graduated tax
rate table
▪ Deduct cost of sale,
operating expenses
and add additional
income
If both compensation and business
income
o For less than 3,000,000
▪ No 250,000 for 8%
lieu deduction since it
is only for purely self
employed individuals
▪ If 8% used,
compensation income
should be calculated
separately using the
tax table; and the
business income is
determine by (GR
+NI) x 8%
▪
o
o
If 8% is not used
simply add the total
taxable income for the
compensation and
business, then used
the tax table
NOTE: 90,000 MAX FOR
NONTAXABLE BENEFIT
If business income exceed
3,000,000
▪ Use the second
alternative to add the
taxable income for the
2 then use tax table