Company Law

Accounts of companies [S.128]

1.

Definition of Books of account

[S. 2(13)]

“books of account” includes records maintained in respect of—

  • all sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place;
  • all sales and purchases of goods and services by the company;
  • the assets and liabilities of the company; and
  • the items of cost as may be prescribed u/s. 148 in the case of a Co which belongs to any class of companies specified under that section

2.

Books of accounts etc. to be kept by the Co

[S. 128(1), (2) & R. 4(1)]
  • Every Co shall prepare and keep books of account and other relevant books and papers and FS for every FY which give a true and fair view of the state of the affairs of the Co
  • such books shall be kept -
    • on accrual basis and according to the double entry system of accounting
    • at its registered office
      • may be kept at such other place in India as BoD may decide - within 7 days the Co shall file with RoC notice in writing giving the full address of that other place
  • If a Co has a branch office in India/outside India ➔books of account or other relevant papers of such branch can be kept at such branch and a proper summarized return sent at registered office (or such other place where books of account are maintained) at quarterly intervals
  • books of account or other relevant papers may be kept in electronic mode in prescribed manner

3.

Books of account to be kept in electronic mode

[R. 3]
  • Such books of account shall :-
    • remain accessible in India
    • remain complete and unaltered
    • be capable of being displayed in a legible form
  • Information received from branch offices shall not be altered
  • There shall be a proper system for storage, retrieval, display or printout of the electronic records as AC/BoD may deem fit
  • Books of account and other books and papers of the Co may be maintained in electronic mode at a place outside India, if a back-up thereof is kept in servers physically located in India on a periodic basis
   
  • Co shall intimate to RoC on an annual basis at the time of filing of FS -
    • the name of the service provider;
    • the internet protocol address of service provider;
    • the location of the service provider (wherever applicable);
    • where the books of account and other books and papers are maintained on cloud, such address as provided by the service provider

4.

Open for inspection

[S. 128(3), R. 4(1)]
  • Books of account and other books and papers maintained by the Co shall be open for inspection to any director
    • If maintained within India➔ at the registered office/such other place in India during business hours
    • If maintained outside India➔ copies of quarterly summarized return kept and maintained
  • Inspection in respect of any subsidiary➔only by the person authorized by a BR

5.

Preservation of books of account [S. 128(5)]
  • Books of account together with the vouchers relevant to entry in such books of account shall be kept in good order by a Co -

Type of Co

Period of preservation

in existence for < 8 years

for all the preceding years

If investigation order under Ch XIV

As may be directed by CG

In all other cases

NOT < 8 FYs immediately preceding a FY