Books of Accounts | Provisions of Companies Act' 2013 | Company Law Notes for BCom, BBA and MBA | CBCS Pattern

Books of Accounts

Provisions of Companies Act Act' 2013

Company Law Notes for BCom, BBA and MBA

Books of Accounts to be maintained by a Company

Section 128 of the Companies Act, 2013 requires that every company shall prepare and keep at its registered office books of accounts and other relevant books and papers and financial statements for every financial year which give a true and fair view of the state of 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 book will be kept on accrual basis and according to the double entry system of accounting. “Books of account” as defined in Section 2(13) includes records maintained in respect of:

a)    All sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place;

b)   All sales and purchases of goods and services by the company;

c)    The assets and liabilities of the company; and

d)   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.

Place of keeping books of accounts: 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 full address of that other place.

Electronic Mode: The Company may keep such books of account or other relevant papers in electronic mode in such manner as may be prescribed. 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. 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.

Period for preserving books account: The books of accounts along with other relevant documents are required to be preserved in good order by the company for a period of not less than eight years immediately preceding the relevant financial year.

Inspection of books of accounts by any director or other parties: As per Sec 128 (3) of the Companies Act’ 2013, the books of accounts and other books and papers shall be open for inspection by any director during business hours. Such inspection may be done by any type of director- nominee, independent, promoter or whole time. The directors can also make inspection through agents. However, the right of inspection is not an absolute right and may be refused if director has vacated the office or convicted of any offense.

The books of accounts can also be inspected during business hours by:

a) The ROC

b) Authorised officer of the Central government.

c) Authorised officers of SEBI.

Responsibility for keeping books of account:  The primary duty for the proper maintenance of the books of account is that of the managing director or manager. If company has neither a managing director nor manager, every director of the company are responsible of keeping books of account. The following person responsible to take all reasonable steps to secure compliance by the company with the requirement of maintenance of books of accounts: (sub-section 6):

a)    Managing Director,

b)   Whole-Time Director, in charge of finance

c)    Chief Financial Officer

d)   Any other person of a company charged by the Board with duty of complying with provisions of section 128.

Annual Accounts and Balance Sheet (Sec. 129)

The annual accounts or financial statements of a Company consist of two statements, namely Profit and Loss Account (Income Statement) and Balance Sheet (Position statement). At every AGM, the board of directors shall lay before the meeting – Income statement, Balance sheet and a report by the Company’s board of directors. In case of not trading entities, an income and expenditure account shall be laid before the company at its annual general meeting instead of profit and loss account.

Section 129 of the Companies Act, 2013 requires that the financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards under Section 133 and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III.

Where a company has one or more subsidiaries, it shall in addition to its financial statements, prepare a consolidated financial statements of the company and of all the subsidiaries in the same form and manner as that of its own which shall also be laid before the annual general meeting of the company along with the laying of its financial statements.

It is further stated that the books of account should be maintained on accrual basis and according to the double entry system of accounting to ensure that these represent true and fair view of the affairs of the company or branch office, as the case may be. The Act requires that proper stock records should form a necessary part of proper books of account and also that the books of account and the relevant vouchers must be preserved for a minimum period of eight years in good order. 

Statutory and Statistical Books Maintained by Company:

Statutory book: 

Such books are those which a limited company is under statutory obligation to maintain at its registered office with a view to safeguard the interests of shareholders and creditors. Main statutory books are:

a.       Register of investments held and their names

b.      Register of charges

c.       Register of members

d.      Register of debenture holders

e.      Annual returns

f.        Minute books

g.       Register of contracts

h.      Register of directors

i.         Register of director’s shareholdings

j.        Register of loans to companies under the same management

k.       Register of investment in the shares and debentures of other companies

l.         Register of fixed deposits

m.    Index of members where the number is more than fifty unless register of members itself affords an index

n.      Index of debenture holders where the number is more than fifty, unless the register of debenture holders itself affords an index

o.      Foreign register of members and debenture holders, if any

p.      Register of renewed and duplicate certificates.

Statistical Books:

In order to keep a complete record of numerous details of certain transactions and activities of the company the following statistical books are usually maintained by joint stock companies in addition to statutory books. The keeping of such books are optional. The main books are:

a.       Share application and allotment book

b.      Share calls book

c.       Share certificate book

d.      Debenture application and allotment book

e.      Debenture calls book

f.        Register of share transfers

g.       Dividend book

h.      Debenture interest book

i.         Register of documents sealed

j.        Register of share warrants

k.       Dividend mandates register

l.         Register of debenture transfers

m.    Register of powers of attorney

n.      Agenda book

o.      Register of lost share certificates

p.      Register of director’s Attendance

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