Delano M. Valera Law Office

January 23, 2008 BIR RULING [DA-028-08] Rev. Regs. Nos. 5-87 & V-1; RMC 39-95 Delano M. Valera Law Office Rm. 104, Penthouse, Macdonton Bldg. 768 EDSA corner East Avenue Quezon City Attention: Delano M. Valera S i r : This refers to your letter dated September 21, 2007, requesting in behalf of your client, YAKULT MARKETING CORPORATION (YAKULT, for short) legal opinion on whether or not Sales Centers of YAKULT are required to keep their respective Sales Journal aside from the computer-generated sales register for each of the Sales Centers which are printed at the Head Office. It is represented that YAKULT maintains its Sales Centers in various parts of Metro Manila; that every time that these Sales Centers are inspected by the BIR, said Sales Centers are oftentimes being assessed for non-keeping of subsidiary sales journal which according to the BIR inspectors are to be registered with the RDO that has jurisdiction over the sales center; that to date, there are proposed penalties/assessments from different RDOs which have been disputed by your client on the basis that they are using a Computerized Accounting System (CAS) and with this system, recording of its sales centers are centralized at its Head Office where sales registers of various sales centers are printed monthly; that these computer generated sales were registered at RDO # 33, which has jurisdiction over the Head Office and it was the same RDO which issued and approved permit for the Head Office to use computerized accounting system; that some RDOs accept your argument, however, other RDOs do not consider your explanation and insist on their findings and even cite provisions about Bookkeeping Regulations provided for by the NIRC. ACaDTH In reply, please be informed that there is no distinction between the audit concepts applicable to Electronic Data Processing (EDP) System and those applicable to manual system. When computers are introduced, generally accepted auditing standards and their interpretations, legal liabilities and basic concept of gathering evidence remained unchanged. However, the specific methods appropriate for implementing the basic audit concepts do change with the introduction of EDP System. The most important effect of EDP on audit results from changes is the company's organization and the information available for auditors to examine. The establishment of an EDP Unit brings the data gathering activities of different segments of the organization into one department. Such change has the advantage of centralizing data. (RMC # 38-86) Nevertheless, Republic Act (RA) No. 8792, otherwise known as the Electronic Commerce Act of 2000 mandates all government offices, including the BIR to perform governmental functions using electronic documents. EcHaAC Thus, the BIR in compliance with the mandate of the E-Commerce Act of 2000, adopted among others, the Computerized Accounting System (CAS). CAS is the integration of different component system to produce computerized Books of Accounts and computer generated accounting records and documents (RMO 29-2002). It is a manner/system of how to keep or produce books of accounts and other accounting records through electronic means. Its components are: 1) General Journal and other subsidiary records; 2) Sales Books, Purchase Books, Accounts Receivable Book, Accounts Payable Book, Inventory Book, Payroll Ledgers, Subsidiary Ledgers and other accounting records, among other things. The same RMO 29-2002 further provides that all applications for CAS, whether by the Head Office or branches, shall be filed by the Head Office at LTAD-I or LTAD-II and RDO having jurisdiction over the Head Office, and those outsourced to an accounting firm shall be required to keep and maintain copies of its books of accounts (whether in soft or hard copies) and other related accounting records and documents in its place of business. cCAIDS In short, CAS is simply the system to produce computerized books and computer generated accounting records and documents. Thus, if the taxpayer is using the Computerized Accounting System (CAS), all the recording will be done by the head office, consequently, the taxpayer is not required to maintain an additional manual Books of Accounts. Accordingly, the Sales Center of Yakult are not required to keep their respective Sales Journal in their place of business/branch since the computer-generated sales register is printed for each and every sales center at the Head Office. This ruling is being issued on the basis of the facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. cDHCAE Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service