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Books of accounts to be kept by Company- Section 128 of the Companies Act

Books of accounts to be kept by Company- Section 128 of the Companies Act

Section 128 of the Companies Act, 2013 deals with the books of accounts to be kept by the company. It contains the provisions of maintenance of books of accounts, period of maintenance, place of maintenance, person responsible for maintenance and penalty for non compliance of the provision.

Books of accounts to be kept by Company- Section 128 of the Companies Act

  1. Every company is required to maintain proper books of accounts, vouchers and financial statements for every financial year which gives true and fair view of the financial position of the company.
  2. Such books of accounts should explain the nature of transactions of the company.
  3. Books of accounts should be maintained on cash basis and according to double entry system of book keeping.

Place of maintenance

  1. Every company is required to maintain the books at its registered office.
  2. Companies can also maintain their books at a place other than the registered office by passing a board resolution, and the same has to be intimated to Registrar of Companies (also known as ROC) within seven days of boards decision.
  3. Notice to ROC where books are maintained, shall be in form AOC 5.

Manner in which books can be kept

Companies can maintain their books in physical or electronic form.

Rule 3 of the Companies Accounts rules, 2014 provides the conditions for maintenance of  books of accounts in electronic form.

As per this rule;

  1. Books of accounts maintained in electronic form shall remain accessible in India so as to be usable for subsequent reference.
  2. They should remain in original format in which it was generated, sent or received from branch office.
  3. It should be capable of being displayed in legible format.
  4. Back up of books of accounts should be maintained.
  5. Company is required to intimate ROC on annual basis, the name of the service provider, his IP address and location where books are maintained on cloud.

Period of maintenance

  1. Every company is required to maintain its books, vouchers and supporting documents for a period of 8 years.
  2. Where an investigation is ordered by the Central government, it may direct the company to maintain the books of accounts for such longer period as it may deem fit.

Inspection of books of accounts

  1. Books of accounts, maintained at registered office or at any place as decided by the Board of directors shall be open for inspection for directors during the business hours.
  2. If any financial information maintained at foreign branches, such information should be provided for directors to inspection as per the provisions of Rule 4 of the Company Accounts rules 2014.
  3. Inspection of books of accounts of branch office shall be done by the person who are authorized by the board in this behalf.

Persons responsible for maintenance

Following persons are responsible for maintenance of books of accounts:

  1. Managing director or
  2. Whole time director in charge of finance or
  3. Chief Financial Officer or
  4. Any other persons charged by the board with the duty of complying the provisions of this section.

Penalty for non compliance

If any provisions for this section is not complied, the above mentioned officers shall be punishable with

  1. A fine of Rs 50,000 and may extend up to  Rs. 500,000. Or
  2. Imprisonment up to one year. Or
  3. Both.

Books of accounts to be kept by Company- Section 128 of the Companies Act

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