Books of Accounts of a Company
Maintenance of books of accounts of a company would mean documents and papers maintained by the company to record the specified financial transaction. It has been provided in the Companies Act, 2013 that every company shall keep proper books of accounts.
The provisions relating to maintenance of books of accounts of a company are contained in Section 128 of the Companies Act, 2013 and rules contained in Companies (Accounts) Rules, 2014.
Every company shall prepare and keep at its registered office books of account and other relevant books and papers and financial statement for every financial year –
(i) which give a true and fair view of the state of the affairs of the company, including that of its branch office or offices, if any, and
(ii) explain the transactions effected both at the registered office and its branches and
(iii) such books shall be kept on accrual basis and according to the double entry system of accounting.
In this regard, “books of accounts” are defined under section 2(13) of the Act as given below –
“books of account” includes records maintained in respect of-
(i) all sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place;
(ii) all sales and purchases of goods and services by the company;
(iii) the assets and liabilities of the company; and
(iv) the items of cost as may be prescribed under section 148 in the case of a company which belongs to any class of companies specified under that section;
Section 2(12) of the Act defines “book and paper” and “book or paper” include books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form.
Place of Keeping Books of Accounts of a Company –
The books of account and other relevant papers may be kept at such other place in India as the Board of Directors may decide and where such a decision is taken, the company shall, within seven days thereof, file with the Registrar a notice in writing in Form AOC – 5 giving the full address of that other place.
Books of Accounts in respect of branches –
Where a company has a branch office in India or outside India, it shall be deemed to have complied with the provisions of Section 128 (1), if proper books of account relating to the transactions effected at the branch office are kept at such office.
Further the branch offices are required to send proper summarized returns periodically to the company at its registered office or the other place referred to in sub-section (1).
Inspection of Books of Accounts of a Company
The books of account and other books and papers maintained by the company within India shall be open for inspection at the registered office of the company or at such other place in India by any director during business hours.
In the case of financial information, if any, maintained outside the country, copies of such financial information shall be maintained and produced for inspection by any director.
The inspection in respect of any subsidiary of the company shall be done only by the person authorized in this behalf by a resolution of the Board of Directors.
Where such inspection is made, the officers and other employees of the company shall give to the person making such inspection all assistance in connection with the inspection which the company may reasonably be expected to give.
Period for which books to be preserved –
The books of account, together with vouchers relevant to any entry in such books, are required to be preserved in good order for a period of not less than eight financial years immediately preceding a financial year. In case of a company incorporated less than eight years, the books of account for the entire period preceding the financial year together with vouchers shall be preserved.
Where an investigation has been ordered in respect of the company under Chapter XIV of the Companies Act, 2013, the Central Government may direct that the books of account may be kept for such longer period as it may deem fit.
Persons responsible to maintain books –
The following persons shall take all reasonable steps to secure compliance with the requirement of maintenance of books of accounts of a company –
- Managing director,
- Whole-time director, in charge of finance,
- Chief Financial Officer or
- Any other person of a company charged by the Board with the duty of complying with the provisions of section 128.
The aforesaid persons shall comply with the provisions contained in Section 128 and rules prescribed thereon in respect of maintenance of books of accounts of a company failing which they will be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees or with both.
Books of Accounts of a Company
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