In this article, we will discuss the Books of Accounts kept by a Company in details as mentioned in the Companies Act.
What books of accounts are to be kept by a company?
The Companies Act contains provisions in respect of books of account required to be maintained by a company. They are briefly summarized below:
1.Items for which Books of Accounts should be maintained:
A company shall maintain proper books of account with respect to the following items-
a) all sums of money received and expended by the company and the matters in respect of which receipt and expenditure take place,
b) all goods purchased and sold by the company,
c) the assets and liabilities of the company, and
d) in case, it is a company engaged in production, processing, manufacturing or mining activities, particulars relating to utilization of material or labour or other items of cost if there is such a requirement by the Central Government to include such particulars in its books of account.
2. Place:
Every company is required to keep proper books of account at its Registered Office. However, all or any of the books of account may be kept at such other place in India as the Board of Directors may decide. The company should file a notice to the Registrar of Companies (ROC) giving full address of that other place, within 7 days of this decision.
3. Branch Accounts:
Where a company has a Branch office, whether in or outside India, the company must maintain at the branch office proper books of account relating to transactions effected at the branch office. The company also shall arrange to obtain from the branch proper summarized returns, at intervals of not more than three months, for keeping at the registered office or the other place.
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4. Deemed Non-compliance: A company shall not be deemed to have kept proper books of account under the following circumstances:
i) if it does not keep such books as are necessary to give a true and fair view of the state of the affairs of the company or Branch Office as the case may be, and to explain its transactions, and
ii) if such books are not kept on accrual basis or according to the double entry system of accounting.
5. Inspection: The books of accounts and other books and papers shall be open to inspection by any Director of the company during business hours. However, it shall not be open to the members.
6. Period of maintaining Books: The Books of Accounts together with relevant vouchers shall be preserved in proper and good condition for a period of not less than 8 years immediately preceding the current year.
7. Default and Liability: When a responsible person of the company commits breach of duty resulting in default by the company in respect of maintenance of books of accounts, he shall be punishable for each offence with imprisonment for a term which may extend to six months and a fine which may extend to ₹ 10,000 or with both. But he may be relieved from such a liability if he can show that he has reasonable ground to believe that a competent and responsible person was charged with the duty of compliance and he was in a position to discharge that duty.
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