Your First Entry: A Practical Guide to Recording Business Transactions
Ogie Galicia· March 24, 2026 · 8 min read
Your First Entry: A Practical Guide to Recording Business Transactions
If you’ve read our guide on what books of accounts you need to keep, you know the requirements. But knowing which books to maintain is one thing. Actually recording transactions in them is another.
This guide walks you through how to write entries in each book, with real examples for both VAT-registered and non-VAT businesses.
A quick refresher
VAT-registered businesses need 6 books. Non-VAT businesses need 4. Here’s how they break down:
| Book | VAT | Non-VAT | Purpose |
|---|---|---|---|
| General Journal | Yes | Yes | Records all transactions in chronological order |
| General Ledger | Yes | Yes | Summarizes transactions by account |
| Cash Receipts Journal | Yes | Yes | Tracks all cash coming in |
| Cash Disbursements Journal | Yes | Yes | Tracks all cash going out |
| Subsidiary Sales Journal | Yes | No | Details all sales transactions |
| Subsidiary Purchases Journal | Yes | No | Details all purchase transactions |
Let’s go through each one.
General Journal
The General Journal is your master record. Every transaction gets recorded here first, in the order it happens. Think of it as a diary of your business finances.
Each entry has a date, the accounts affected, and whether the amount is a debit or credit.
Example: You bought office supplies worth P5,000 on credit
| Date | Account Title | Debit | Credit |
|---|---|---|---|
| 03/01 | Office Supplies | 5,000 | |
| Accounts Payable | 5,000 |
Example: A client pays P20,000 for your services (VAT-registered)
| Date | Account Title | Debit | Credit |
|---|---|---|---|
| 03/05 | Cash | 22,400 | |
| Service Revenue | 20,000 | ||
| Output VAT (12%) | 2,400 |
Example: A client pays P20,000 for your services (non-VAT, percentage tax)
| Date | Account Title | Debit | Credit |
|---|---|---|---|
| 03/05 | Cash | 20,000 | |
| Service Revenue | 20,000 |
For non-VAT taxpayers, there’s no output VAT to record. The 3% percentage tax is recorded separately when you file it.
General Ledger
The General Ledger takes the entries from your General Journal and organizes them by account. Instead of seeing transactions in order of date, you see all activity for a specific account in one place.
Each account gets its own page or section.
Example: Cash account ledger
| Date | Description | Debit | Credit | Balance |
|---|---|---|---|---|
| 03/01 | Beginning balance | 50,000 | ||
| 03/05 | Service revenue received | 22,400 | 72,400 | |
| 03/10 | Rent payment | 15,000 | 57,400 | |
| 03/15 | Client payment | 11,200 | 68,600 |
Example: Accounts Payable ledger
| Date | Description | Debit | Credit | Balance |
|---|---|---|---|---|
| 03/01 | Beginning balance | 10,000 | ||
| 03/01 | Office supplies purchased | 5,000 | 15,000 | |
| 03/20 | Paid supplier | 5,000 | 10,000 |
The General Ledger is where you check your balances. If someone asks “how much cash do we have?” or “how much do we owe?”, this is where you look.
Cash Receipts Journal
This book records every time cash comes into your business. That includes payments from clients, loan proceeds, owner contributions, or any other source.
Example entries for a VAT-registered business
| Date | Description | Cash (Debit) | Sales | Accounts Receivable | Output VAT | Other |
|---|---|---|---|---|---|---|
| 03/05 | Service to Client A | 22,400 | 20,000 | 2,400 | ||
| 03/10 | Collection from Client B | 11,200 | 11,200 | |||
| 03/18 | Owner’s additional capital | 100,000 | 100,000 |
Example entries for a non-VAT business
| Date | Description | Cash (Debit) | Sales | Accounts Receivable | Other |
|---|---|---|---|---|---|
| 03/05 | Service to Client A | 20,000 | 20,000 | ||
| 03/10 | Collection from Client B | 10,000 | 10,000 | ||
| 03/18 | Owner’s additional capital | 100,000 | 100,000 |
The difference is straightforward: VAT-registered businesses need an Output VAT column.
Cash Disbursements Journal
This is the opposite of the Cash Receipts Journal. It records every time cash leaves your business, whether it’s for rent, utilities, salaries, supplies, or paying off a supplier.
Example entries for a VAT-registered business
| Date | Check No. | Payee | Cash (Credit) | Accounts Payable | Input VAT | Other |
|---|---|---|---|---|---|---|
| 03/10 | 001 | Landlord | 33,600 | 3,600 | 30,000 (Rent) | |
| 03/15 | 002 | Meralco | 5,600 | 600 | 5,000 (Utilities) | |
| 03/20 | 003 | Office Depot | 5,000 | 5,000 | ||
| 03/31 | 004 | Employees | 80,000 | 80,000 (Salaries) |
Example entries for a non-VAT business
| Date | Check No. | Payee | Cash (Credit) | Accounts Payable | Other |
|---|---|---|---|---|---|
| 03/10 | 001 | Landlord | 30,000 | 30,000 (Rent) | |
| 03/15 | 002 | Meralco | 5,000 | 5,000 (Utilities) | |
| 03/20 | 003 | Office Depot | 5,000 | 5,000 | |
| 03/31 | 004 | Employees | 80,000 | 80,000 (Salaries) |
Again, the main difference is the Input VAT column. VAT-registered businesses track the VAT they pay on purchases because they can claim it as a credit against their Output VAT.
Subsidiary Sales Journal (VAT-registered only)
This book records every sale your business makes, whether paid in cash or on credit. It’s required only for VAT-registered taxpayers.
Example entries
| Date | Invoice No. | Customer | Gross Sales | Output VAT (12%) | Total |
|---|---|---|---|---|---|
| 03/05 | 0001 | Client A | 20,000 | 2,400 | 22,400 |
| 03/08 | 0002 | Client B | 50,000 | 6,000 | 56,000 |
| 03/12 | 0003 | Client C | 15,000 | 1,800 | 16,800 |
| 03/22 | 0004 | Client A | 30,000 | 3,600 | 33,600 |
| Total | 115,000 | 13,800 | 128,800 |
This journal feeds directly into your VAT return. The total output VAT here should match what you report on your BIR Form 2550Q.
Subsidiary Purchases Journal (VAT-registered only)
This records all your purchases, again whether paid in cash or on credit. Like the Sales Journal, it’s required only for VAT-registered businesses.
Example entries
| Date | Invoice No. | Supplier | Gross Amount | Input VAT (12%) | Total |
|---|---|---|---|---|---|
| 03/01 | S-4521 | Office Depot | 5,000 | 600 | 5,600 |
| 03/10 | S-7832 | Landlord | 30,000 | 3,600 | 33,600 |
| 03/15 | S-1290 | Meralco | 5,000 | 600 | 5,600 |
| 03/25 | S-3344 | Globe | 3,000 | 360 | 3,360 |
| Total | 43,000 | 5,160 | 48,160 |
Your total input VAT here is what you claim as a credit on your VAT return. In this example, you’d owe P13,800 (output) minus P5,160 (input) = P8,640 in VAT for the quarter.
How VAT flows through your books
Here’s how the VAT numbers connect across your books:
- You make a sale for P20,000 plus 12% VAT (P2,400)
- The P22,400 total goes into your Cash Receipts Journal (or Accounts Receivable if on credit)
- The sale details go into your Subsidiary Sales Journal with the Output VAT broken out
- The full entry goes into your General Journal with separate lines for revenue and Output VAT
- Each account gets updated in your General Ledger
At the end of the quarter, your Subsidiary Sales Journal total should match the Output VAT in your General Ledger, which should match what you file on your VAT return.
Common mistakes to avoid
Mixing personal and business transactions. If you use a personal bank account for business, separate them in your records. Better yet, open a dedicated business account.
Not recording small cash transactions. That P200 grab fare to meet a client? That P150 for printer paper? They add up, and they’re deductible. Record them.
Wrong VAT computation. A common error: applying 12% on top of the VAT-inclusive amount. If the total price is P11,200, the base is P10,000 and the VAT is P1,200, not P11,200 x 12%.
Forgetting to match invoices to journal entries. Every entry in your books should tie back to a source document: an invoice, a receipt, a contract, or a voucher.
Not posting to the General Ledger regularly. Some businesses record in their journals but forget to update the ledger. Do it at least monthly. Your ledger is what gives you an accurate picture of where you stand.
The takeaway
Recording transactions isn’t complicated once you understand the pattern. Cash comes in, record it in the Cash Receipts Journal. Cash goes out, record it in the Cash Disbursements Journal. Every transaction gets a General Journal entry and updates the General Ledger. If you’re VAT-registered, your sales and purchases get their own subsidiary journals too.
The key is consistency. Pick a routine, whether it’s daily or weekly, and stick to it. Your future self (and your accountant) will thank you.