Maintaining Company Accounts

Overview :Maintaining Books of Accounts is mandatory for all types of companies registered in India, as per Section 128 of the Companies Act, 2013. Maintenance of accounts is indispensable as they serve as a key foundation for preparation of financial statements of a company. Several financial transactions need to be recorded in the Books of Accounts. The blog elaborates best practices for maintaining company accounts along with some crucial factors to ensure compliance with relevant authorities.

As per section 128 of the companies act, 2013, whether it is a Private Limited Company, One Person Company, Limited Company, or Small Company, irrespective of its type or form, it is mandatory to maintain Books of Accounts.

Financial statements of a company are prepared, based on the Books of Accounts, hence maintenance of proper accounts is mandatory and indispensable. Through this blog we have tried to give our readers a glimpse of what it takes for maintaining company accounts.

Maintenance of Books of Accounts

Every company is liable to maintain books of accounts to record the following financial transactions.

The sales and purchases of goods, money received and expended, and the assets and liabilities of the company must be recorded in the company’s Books of Accounts.
The books of accounts must be maintained as per double entry system and on accrual basis.
The books of accounts must give a true and fair view of the state of the affairs of the company.
Records, vouchers, books, papers and financial statements should pertain to a specific period or financial year only.
It is mandatory to maintain and keep all Books of accounts at the registered office of the company. If any company requires to keep the Books of Accounts at any place other than its registered office in India, the company needs to intimate the Registrar of Companies about the changed address in full within 7 days of the passing of a Board Resolution in this respect.
The books of accounts and other books can be maintained both in electronic mode or on papers. For maintaining company accounts in electronic format you can use Tally or QuickBooks accounting softwares for accuracy and speed. However, it is recommended to maintain company accounts in both formats.
Managing Director,
Whole-Time Director, in charge of finance.
Chief Financial Officer
Any other person of a company charged by the Board with duty of complying with provisions of section 128.

As per the Companies Act, 2013, the responsibility for proper maintenance of Books of Accounts of the company has to be fulfilled by anyone of the following persons nominated by the Board of Directors of the company

Preserving Company Accounts

As per Companies Act, 2013, a company is required to preserve the accounts in good condition together with relevant vouchers to any entry for 8 years. However, newly incorporated companies need to maintain accounts and vouchers for upto 8 years from date of incorporation. In case books are required to be maintained for an extended or longer period as per any other regulation then the company would have to maintain books for an extended period as well.

Penalty for NOT Maintaining Company Accounts

In case the Managing Director, Whole Time Director, Chief Financial Officer or any other above mentioned persons fail to fulfill his/her responsibility of properly maintaining the Books of Accounts of the company as per the provisions of Companies Act, 2013, a penalty of not less than Rs. 50,000 which is extendable to Rs. 5,00,000 or an imprisonment for a term which may be extended to one year or both is levied on the person.

Conclusion

In India, every company must maintain Books of Accounts regardless of their type or form, according to Section 128 of the Companies Act, 2013. The books of accounts and other books can be maintained in two modes; on papers or in electronic mode. Delving into essential aspects of maintenance of a company's books of accounts, and also the penalty for not maintaining company accounts, will aid you to take quick actions for maintaining company accounts.