Books of Accounts & Financial Statements of Company

Books of Accounts & Financial Statements

Every company should prepare and keep its books of accounts and financial statement at the end of every financial year which give a true and fair view of the state of the affairs of the corporation and explains each transaction. The accounts should be maintained on accrual basis and double entry system of accounting.

The Financial Statement of the company should include: –

• Balance sheet of the company at the end of every financial year.
• Cash flow statement of the company for the financial year.
• Profit and loss account or income and expenditure account at the end of financial year in case of NPO.
• The statement that shows changes in equity in case if imposed
• Explanatory note carrying part of any document specified in above all clauses.

According to the Section 2(13) of Companies Act, Books of Account involve records maintained in connection with these: 

• The sum of money received or expanded by a company for which the receipts and expenditure has taken place.
• The assets and liabilities of the company.
• All sales and purchases of goods and services made by the company during the financial year.
• According to the section 148 of the company Act 2013 all the items of cost which belongs to any class of the companies specified under the said section.

The word “Book and Paper” and “Book or Paper” is used to describe the books of account, vouchers, debts, minutes, documents, writings, and registers maintained on paper or also in electronic form.

Board of Directors must prepare a Directors Report in the given format and must send it to the shareholders along with audited accounts.

The financial statements of the company should be prepared before the AGM of the company, and it has to be adopted by the meeting.

Also, all the accounts should be maintained at the registered office

The books of accounts of the company should be maintained at the registered office of the company for every financial year. Also, the board of directors of the company can keep the books of accounts of the company at any other place in India after filing a notice with the Registrar.

Maintenance of books of accounts of the company at different Place

The Board of Directors should decide to keep the books of accounts of the company at any other place in India. For this a special resolution should be passed in the AGM by the board of directors within 7 days a notice should be filed with the Registrar of Companies in Form AOC-5.

Books of Accounts of the company should be kept in Electronic Form:

A company can maintain its books of accounts along with all the relevant papers in electronic formation if the company satisfies all the given conditions: –

• Those records that are maintain in electronic formation should be accessible in India.
• Records should be maintained completely in its original format without any alteration.
• The information should be kept originally without any change or alteration as it was given by the branch office.
• Books of Accounts should be kept in readable form.
• There should be a proper system for storage, retrieval, display or printout of all the electronic records are in their place and all these records shall not be disposed unless guided by law.
• Back-up of all the records and Books of Accounts should keep in servers that are physically located in India periodically.
• An intimation should file with Registrar by the company on annually at the time of filing of financial statement regarding the name of the service provider,
  • along with the internet protocol address of service provider,
  • the location of the service provider,
  • Address of records maintained on cloud, as per the applicability

Company Annual Filling

• Every company which is registered under the Companies Act,2013 should file their annual return with the Registrar of the Company.
• The term Annual Filing means the filing of Audited Annual Financial Accounts of the company with Directors Report. Also Annual Return of the company with ROC. These annual filings are necessary for every registered company no matter the company is carrying on the business or not.

Financial Year of a Company

The FY of a company starts from 1^st April of a year and end on 31^st March of the relevant year.

• However, when a company incorporated on or after 1^st January of a year it has to end its account on 31^st March and financial year of the company should be from 1^st January to 31^st Where the accounts made up of that particular year since incorporation shall be considered.

Different Financial Year than April – March

The company is a holding company, subsidiary company or an associate of company that is incorporated outside India. In that case the company can adopt a different financial year for the purpose of consolidation of its accounts outside India after getting an approval from the Central Government.

Accounts of Branch Office

All the Company that has a branch office in India or Outside India should keep its records at the branch office which are relating to those transactions that effect branch. Also, the branch office should send the summarized returns periodically to its registered office or it may be the office where the books of accounts of the company are maintained.

Inspection of Books of accounts

The company has to make all its records ready for inspection at registered office of the company or may be the other place in India during business hours which includes all the financial information being maintained outside India. Further, a person who has given legal authority by the respective board of directors through a resolution can inspect the subsidiary company.

How Preservation of Books of Accounts?

The company Needed to preserve all its books of accounts of 8 financial years immediately preceding a financial year and if the existence of the company is for less than 8 years than the records of all the preceding years should be preserved.

FAQ’s ON BOOKS OF ACCOUNTS & FINANCIAL STATEMENTS

Q.1: whether the Minutes, Statutory Registers and Records of the Company are need to be maintained for more than eight years or more?

• According to the section 128(5) of the companies Act, 2013 every company should maintain its books of accounts for not less than 8 financial years immediately preceding a financial year. Minutes, statutory records are the principal documents of the company that should be maintained preserved since inception.

Q.2: What if a company keep its part of Books of Accounts and other papers in some other place in India other than the registered office of the company?

• Yes, a Company can prepare, preserve and maintain the Books of Accounts and other papers of the company at a place other than the Registered Office of the Company after getting the approval from the Board of Directors.

Q.3: What if a company keep its books of accounts and other papers in multiple places in India?

• Yes, as per the provisions of the section 128 & rules under the companies Act, 2013, there is no such restriction on a company. A company can keep its accounts at multiple places in India. However, the Board Resolution has clearly specified that such books of accounts should be kept at ROC.

CASE STUDY BASIS ON REAL SITUATION

What is the remedy for a listed company if the shareholder of the company goes to the registered office of the company to inspect the respective documents such as books and papers, but the papers are situated at a place other rather than the registered office?

According to the section 170 of the Companies Act,2013 every shareholder of the company can inspect the statutory registers and records of the company during the business hours, and he/she can take the extracts from there along with the copies of the registers. However, if the shareholder of the company visited the registrar office of the company but documents have been kept at any other place in India other than the company shall explain the matter and guide the shareholder about the other place and about the records.