Introduction
As per the legal requirement of the Companies Act 2013, maintaining books of accounts is essential to be complied by all companies registered under MCA.
Some of the major books of accounts are:-
- Cash flow statement
- Copies of bills or receipts, records of sales and purchases and record of assets and liabilities
- Financial Statement such as profit and loss account, balance sheet and trading account
- Deeds, voucher, minutes, registers
Who has to maintain Books of Accounts?
Every organization must have books of accounts that should be kept at the registered office of the company. However, if any company wish to change the place then, it can be done after providing intimation to the Registrar of Companies.
For verification as well as for proving the accurate view of the company’s state of affairs or branch office, maintaining books of accounts is necessary.
What do you mean by “Books of Accounts”?
As per Section 128, following are the clauses mentioned, namely:-
- 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 which gave 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 explain the transactions effected both at the registered office and its branches and such books shall be kept on accrual basis and according to the double entry system of accounting.
Provided that all or any of the books of account aforesaid 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 giving the full address of that other place:
Provided further that the company may keep such books of account or other relevant papers in electronic mode in such manner as may be prescribed.
- Where a company has a branch office in India or outside India, it shall be deemed to have complied with the provisions of sub-section (1), if proper books of account relating to the transactions effected at the branch office are kept at that office and proper summarized returns periodically are sent by the branch office to the company at its registered office or the other place referred to in sub-section (1).
- 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, and 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 subject to such conditions as may be prescribed:
Provided that 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 an 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.
- The books of account of every company relating to a period of not less than eight financial years immediately preceding a financial year, or where the company had been in existence for a period less than eight years, in respect of all the preceding years together with the vouchers relevant to any entry in such books of account shall be kept in good order:
Provided that where an investigation has been ordered in respect of the company under Chapter XIV, the Central Government may direct that the books of account may be kept for such longer period as it may deem fit.
- If the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person of a company charged by the Board with the duty of complying with the provisions of this section, contravenes such provisions, such managing director, whole-time director in charge of finance, Chief Financial Officer or such other person of the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.
Penalty for non-maintenance of Books Of Accounts
Where books of accounts are not maintained by the company then, the person in charge shall be held punishable with the following:-
- A minimum penalty of Rs. 50,000 which may be extended to Rs. 5 Lakh; or
- Imprisonment for a specific period/ term which may extend to one year; or
- With both of the above punishment i.e. both fine as well as imprisonment
