Durga Rao & Co., Chartered Accountants is a medium sized firm catering to the requirements of various Commercial and Non Commercial Entities for more than 3 decades.
Books of Accounts - Companies Act 1956
Books of Accounts
Requirements in Companies Act, 1956
1. Where should I keep my books of Accounts?
Ans. Every Company should keep its books of accounts at the Registered Office of the Company. [Sec. 209(1)]
2. My Corporate Office / Head Office is different from the Registered Office as per ROC. Can I Keep my books of accounts at my Corporate Office / Head Office?
Ans. Yes. The Board of Directors have to pass a resolution to that effect and file with the ROC a notice in writing to that effect giving the address of the Corporate Office / Head Office or any other place at which the Books of accounts are intended to be kept. Notice to be filed within 7 days of moving the books of accounts from the Registered Office. [Proviso to Sec. 209(1)]
3. Do I have to keep books of accounts of all my branches at Registered Office?
Ans. No. If you have several branches, you can keep accounts of branches at the branches itself. You have to send Proper Summarized Returns of not more than 3 months to the Registered Office or such other place where books are kept by the company. [Sec. 209(2)]
4. Who is responsible for maintenance of Books of Accounts?
Ans. Sec. 209(6), Sec 209(7) puts the responsibility to maitain the books of accounts on the following persons.
1. Managing Director of Manager of the Company.
2. If the company does not have any Managing Director or Manager, then every Director of the Company.
3. Every officer / employee who has been authorised by the Board of Directors or Managing Director or Manager.
4. Though not specifically mentioned in Companies Act, in case of Branch Offices, the Branch Manager / Incharge is Responsible to maintain Books of Accounts.
5. What constitutes Proper Books of Accounts?
Ans. There are 5 primary requirements of a proper books of accounts as required in the Companies Act, 1956.
1. Books of Accounts must give a true and fair view of the affairs of the company or branch
2. Books of accounts should be maintained on accrual basis of accounting.
3. Books of accounts must maintained in respect of the following:-
a. all sums of money received and expended by the company and the matters in respect of which the respect of which the receipt and expenditure took place;
b. all sales and purchases of goods by the company; and
c. the assets and liabilities of the company.
d. in the case of a company engaged in production, processing, manufacturing or mining activities, such particulars relating to utilisation of material or other items of cost as may be prescribed relating to certain class of companies as the Central Government may require.
4. Books of accounts must explain the transactions for which they are maintained.
5. They must not conceal any transaction and also not disclose any transaction which is fictitious
6. What is the medium in which I can maintain my Books of Accounts.
Ans. 1. MCA Circular 2/83 dated 02/03/1983 Books of accounts should be maintained in indelible ink (not in pencil).
2. Books of accounts can be maintained on computers systems. But the evidence explaining the transactions will normally be in printed material only and depends on the requirements of various other acts. For example the Andhra Pradesh Value Added Tax Act requires you to maintain physical copies of the invoices of purchases.
7. How long should I maintain my Books of Accounts?
Ans. Books of accounts should be maintained for a minimum period of 8 years. If the company / branch is in existence for a lesser period, then books of accounts for the entire period should be maintaied in good order.
8. Who can inspect the Books of Accounts?
Ans. 1. Directors: Books of Accounts should be open for inspection of directors during business hours of the company.
2. ROC or authorised officers: Books of Accounts should be open for inspection of the Registrar of Companies or any officer authorized by him ??? at times required by him???
3. Members and Auditors can also inspect books of accounts subject to conditions.
9. Penalty for Default
Ans. Every person responsible for maintenance of Books of Accounts is liable for the following penal actions if in willful default of any of the above requirements.
1. Imprisonment upto 6 months, and / or
2. Fine upto Rs. 10,000/-