{"id":27349,"date":"2021-03-13T12:02:54","date_gmt":"2021-03-13T06:32:54","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=27349"},"modified":"2021-03-13T12:02:55","modified_gmt":"2021-03-13T06:32:55","slug":"provisions-for-maintaining-books-of-accounts-in-a-registered-company","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/provisions-for-maintaining-books-of-accounts-in-a-registered-company\/","title":{"rendered":"Provisions for Maintaining Books of Accounts in a Registered Company"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Section 128 of the\nCompanies Act, 2013 talks about the maintenance of books of accounts for the\nregistered entity in India. According to this section, every registered entity\nhas to mandatorily ensure the well-being of the financial record by maintaining\nthem properly.<\/p>\n\n\n\n<p>Books of Accounts define as the documentation that reflects the financial status of a business. All financial transactions find their way into the books of accounts. In general, the person-in-charge or the owner of a company is liable to maintain the books of accounts and other financial records for a given timeline.&nbsp;It mainly includes-<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/Provisions-for-Maintaining-Books-of-Accounts-in-a-Registered-Company.png\" alt=\"Provisions for Maintaining Books of Accounts\" class=\"wp-image-27385\" width=\"543\" height=\"491\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/Provisions-for-Maintaining-Books-of-Accounts-in-a-Registered-Company.png 900w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/Provisions-for-Maintaining-Books-of-Accounts-in-a-Registered-Company-300x271.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/Provisions-for-Maintaining-Books-of-Accounts-in-a-Registered-Company-768x695.png 768w\" sizes=\"(max-width: 543px) 100vw, 543px\" \/><\/figure><\/div>\n\n\n\n<p><strong><em>In India, a registered organization\nhas to maintain Books of Account under:-<\/em><\/strong><\/p>\n\n\n\n<ul><li>Goods\nAnd Service Tax Act, 2017<\/li><li>Income\nTax Act, 1961<\/li><li>The\nCompanies Act, 2013<\/li><\/ul>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/provisions-for-maintaining-books-of-accounts-in-a-registered-company\/#Who_is_Liable_to_Maintain_Books_of_Accounts\" >Who is Liable to Maintain Books of\nAccounts?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/provisions-for-maintaining-books-of-accounts-in-a-registered-company\/#What_do_Books_of_Accounts_Include\" >What do Books of Accounts Include?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/provisions-for-maintaining-books-of-accounts-in-a-registered-company\/#What_is_the_Required_Timeline_for_Maintaining_the_Companys_Books_of_Accounts\" >What is the Required Timeline for\nMaintaining the Company\u2019s Books of Accounts?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/provisions-for-maintaining-books-of-accounts-in-a-registered-company\/#Penalty_Provisions_Related_to_the_Non-maintenance_of_Books_of_Accounts\" >Penalty Provisions Related to the Non-maintenance of Books\nof Accounts<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/provisions-for-maintaining-books-of-accounts-in-a-registered-company\/#Places_for_Maintaining_Books_of_Accounts\" >Places for Maintaining Books of Accounts<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/provisions-for-maintaining-books-of-accounts-in-a-registered-company\/#What_are_the_Required_Forms_for_Maintaining_the_Books_of_Accounts\" >What are the Required Forms for Maintaining the Books of\nAccounts?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/provisions-for-maintaining-books-of-accounts-in-a-registered-company\/#Applicability_of_Section_128_of_Companies_Act_2013_on_the_Overseas_Companies\" >Applicability of Section 128 of Companies Act, 2013 on the Overseas Companies<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/corpbiz.io\/learning\/provisions-for-maintaining-books-of-accounts-in-a-registered-company\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_is_Liable_to_Maintain_Books_of_Accounts\"><\/span>Who is Liable to Maintain Books of\nAccounts?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>As per Sec 128 (6) of the Companies Act, 2013, the given entities are accountable for maintaining the books of accounts of the company: <\/strong><\/em><\/p>\n\n\n\n<ul><li>Managing Director of the company;<\/li><li>CFO (aka Chief Financial Officer) of the company;<\/li><li>The Whole-time Director in charge of finance; or<\/li><li>Any other person in-charge of finance appointed by the BODs with the obligation to comply with the provisions of Section 128.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_do_Books_of_Accounts_Include\"><\/span>What do Books of Accounts Include?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Books of Account, other\nfinancial papers for a financial year ought to be maintained by companies,\nincluding their subsidiaries (If any).<\/p>\n\n\n\n<p><strong><em>Books of Accounts includes-<\/em><\/strong><\/p>\n\n\n\n<ul><li>Cash flow statement (sums of money collected &amp; expended by an organization and matter in relation to which expenditure and receipts occur).&nbsp;&nbsp;<\/li><li>Records related to sales &amp; purchases of goods or services,<\/li><li>Records related to assets &amp; liabilities of Company<\/li><li>Items of cost<\/li><li>Deeds, vouchers, documents, register, and minutes whether in physical or digital format.<\/li><\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/basic-financial-statements\/\">What are the Basic Financial Statements?<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Required_Timeline_for_Maintaining_the_Companys_Books_of_Accounts\"><\/span>What is the Required Timeline for\nMaintaining the Company\u2019s Books of Accounts?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>The Sec 128 of Companies Act, 2013 has underpinned a specific timeline for maintaining the Company\u2019s Books of Account. These are as follows:&nbsp;<\/strong><\/em><\/p>\n\n\n\n<ul><li>Every Company must keep the books of account in relevant order relating to a timeline which should not be less than 8 years promptly preceding a Financial Year; or<\/li><li>If the Company is relatively new, it is supposed to maintain the books of accounts in good order in respect of all the past years together.<\/li><li>If there\u2019s an order regarding the investigation as per Chapter XIV of Company Act, 2013, the Company will have to maintain the books of accounts as per the direction of the Central Government.<\/li><\/ul>\n\n\n\n<div class=\"shadow1\"><strong>Note:<\/strong> Chapter XIV consolidates Sections 206 to 229 of the Companies Act, 2013 that talk about the provisions of Inspection and investigation of the Company\u2019s affairs. <\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Penalty_Provisions_Related_to_the_Non-maintenance_of_Books_of_Accounts\"><\/span>Penalty Provisions Related to the Non-maintenance of Books\nof Accounts <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If the Company fails to\nmaintain the books of account as per the bylaws, the person-in-charge will be\ncharged with penalties mentioned below for such misconduct:-<\/p>\n\n\n\n<ul><li>A\npenalty of Rs 50,000 will be imposed on the person-in-charge. This sum of the\npenalty may extend to Rs 5 lakhs.<\/li><li>Imprisonment\nfor a pre-determined period which may extend to one year.<\/li><li>The\ndefaulter may confront both of the above punishments depending on the level of\nnon-compliance.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Places_for_Maintaining_Books_of_Accounts\"><\/span>Places for Maintaining Books of Accounts<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>As\nper Section 128(1), every company must prepare and maintain the Books of\nAccounts and other essential books at its registered office.<\/li><li>However,\nthe company\u2019s BODs have the right to shift all the essential financial records\nto a place other than the existing one in India.&nbsp; <\/li><li>In\ncase the location changes, the company needs to share such information with the\nROC within seven days. For this, the company must issue a writ notification\nenclosing the full address of the decided place.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Required_Forms_for_Maintaining_the_Books_of_Accounts\"><\/span>What are the Required Forms for Maintaining the Books of\nAccounts?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Given the second proviso\nof Section 128(1), all the entities may opt to store their books of account and\nother essential papers in a digital format or as prescribed.<\/p>\n\n\n\n<p>Such Books of Accounts\nmust be accessible in India so that it can be used whenever the need arises\n(the Companies (Accounts) Rules, 2014 from now on mentioned in this Chapter as\nRule) (Rule 3(1)).<\/p>\n\n\n\n<p><strong><em>Therefore, the books of account as well as other essential papers stored digitally:-<\/em><\/strong><\/p>\n\n\n\n<ul><li>Shall\nremain accessible in India;<\/li><li>Be in\nprinciple format &amp; complete;<\/li><li>Must\nbe in the format that supports readability;<\/li><li>Information\/details\nobtained from the branch office shall not be modified;<\/li><li>One\nmust store the books of account in servers located in India.<\/li><\/ul>\n\n\n\n<p><strong><em>Moreover, the Company must intimate the ROC annually during the filing of financial statement:<\/em><\/strong><\/p>\n\n\n\n<ul><li>Name\n&amp; IP address regarding the service provider;<\/li><li>Location\nregarding the service provider (wherever applies);<\/li><li>Where\nthe Books of Accounts are store digitally, mainly on the cloud, such address as\nfurnished by the service provider. (Rule 3(6)).<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Applicability_of_Section_128_of_Companies_Act_2013_on_the_Overseas_Companies\"><\/span>Applicability of Section 128 of Companies Act, 2013 on the Overseas Companies<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 128 of the\nCompanies Act, 2013 applies to those overseas companies only that have a\nprincipal location of the business in India. <\/p>\n\n\n\n<p>According to Section 384\n(3) of the Companies Act, 2013, the provisions cite under Sec 128 shall apply\nto an overseas firm in the given scenarios: <\/p>\n\n\n\n<ul><li>The Principal location of business situated in the <em><strong>Indian Territory<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Indian_Territory\"><em><strong>[1]<\/strong><\/em><\/a><\/sup>. <\/li><li>Books of Accounts as defined u\/s 128 of the Companies Act, 2013 with respect to: &#8211;<\/li><li>Money spent &amp; received;<\/li><li>Sales &amp; purchase made;<\/li><li>Assets &amp; Liabilities.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It\u2019s evident from the\ninformation above that the maintenance of books of accounts is not optional for\na company. Every registered entity has to make sure that Books of Accounts\nshould be kept on an accrual basis.<\/p>\n\n\n\n<p>Moreover, the account\nshould reflect the valid view of the Company\u2019s financial transaction. It must\nbe examined for flaws only by the Company\u2019s director and should be kept in\ndigital format.<\/p>\n\n\n\n<p>If a company fails to comply with such a requirement, it will have to confront severe penalties. So, maintaining Books of Accounts is hugely vital from a legal standpoint.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/how-to-select-the-best-accounting-firm-for-your-business\/\">How to Select the Best Accounting Firm for your Business?<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Section 128 of the Companies Act, 2013 talks about the maintenance of books of accounts for the registered entity in India. According to this section, every registered entity has to mandatorily ensure the well-being of the financial record by maintaining them properly. Books of Accounts define as the documentation that reflects the financial status [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":27384,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[128],"tags":[1597],"acf":{"service_id":"230"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":14107,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/27349"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=27349"}],"version-history":[{"count":8,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/27349\/revisions"}],"predecessor-version":[{"id":27386,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/27349\/revisions\/27386"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/27384"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=27349"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=27349"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=27349"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}