Under the Companies Act 2013, all the companies incorporating in India are mandatory to maintain books of accounts. Besides, all the companies registered in India are also mandated by the Income Tax Act to maintain records. In this article, we will overview at maintaining books of accounts of the company under Companies Act 2013 and accounting requirements.

Books of Accounts as per section 128 of Companies Act, 2013

The Books of Accounts means maintaining accounts, deeds, vouchers, writings, documents, minutes, and registers on paper or digitally. Books of Accounts includes records, ledgers, vouchers, invoices, receivables, payables maintained in respect of –

  • Sum of money received and expended and matters about which the receipt and expenditure take place
  • Sales and purchase of goods and service
  • Assets and liabilities
  • Item of cost as prescribed etc.

The place for maintaining Books of Accounts of Company

[128(1) of Companies Act, 2013]

The book of accounts, other relevant books and papers, and financial statement for every financial year has to be maintained at the registered office or the working place of the company. However, the Board of Directors could decide to keep or maintain the book of accounts at any other location suitable to the business after providing intimation to the Registrar of Companies. Books shall be kept on an accrual basis and according to the double-entry system of accounting.

Maintaining of Books of Accounts Digitally/Electronically

[Second proviso to Section 128(1)]

Books of accounts of a private limited company can be maintained in an electronic form or digitally on in the following conditions –

  • Electronic records must be accessible in India.
  • Information should retain  the format in which it is generated and should remain complete and unaltered
  • Information provided by the branch should not be altered
  • Electronic records should be capable of being displayed in a legible form
  • Backup shall be kept on a server located in India
  • The company should inform ROC on annual basis with all the relevant information related to the service provider.

Maintaining Records of Branch Office at Branch

[128(2) of Companies Act 2013]

In case a company has more than one branch of their office, the books of accounts of the company should be maintained at the registered office. Also, the record of the transaction effected at its branch should be kept at the branch office itself. A regular summary report should be sent to the office where accounts are maintained and it should be kept open for inspection by the Directors.

Inspection of Books of Accounts by director [Sec 128(3)]

The Board of Directors of the company has the right to inspect the Books of Accounts of the company and other documents and papers of a company. However, it can be done only by a person authorized by the Board of Directors in case inspecting the records of a subsidiary company.

Time-Limit for maintaining the Books of Accounts [Sec 128(5)]

The Books of Accounts of a company should be maintained and preserved for a period of not less than 8 years immediately preceding the financial year.

Punishment for contravention

The following persons in a company will be responsible for maintaining the Books of Accounts of a company:

  • Managing Director
  • Whole Time Director or In-charge of Finance
  • Chief Financial Officer
  • Any other person charged by the Board of Directors

Failure to maintain the Books of accounts of the company as per the provisions detailed above can lead to the penalty of up to Rs.5 lakhs or imprisonment up to 1 year.

Other Relevant Points regarding Maintenance and Inspection of Books

  • Summarized returns of books maintained outside India to be sent to the registered office on quarterly intervals.
  • If financial information maintained outside India is required by the Director. then Director should make a request to Company stating details sought and a period for which details are to be sought.
  • Company to provide the details to the Director within 15 days of receipt of the request for information
  • Financial information required to be sought by the Director himself and not by/through a power of attorney holder or agent or representatives.

Under the Income Tax Act

The Books of accounts of the company will be compulsorily maintained if the sale or profit receipts from the business are more than Rs. 2,50,000 or the income from business or pr is more than Rs. 2,50,000 in any of the 3 preceding years.

According to the Rule 6F(2) following books of accounts and other documents have to be maintained –

  1. Cash Book
  2. Journal (if the accounts are maintained by the mercantile system of accounting)
  3. Ledger
  4.  Copies of bills numbered in serial order
  5. Original Bills and payment vouchers for petty expenses.

If you want to apply for Private Limited Company Registration, you can register at  Company Registration Online.

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