Accounts of Companies | Corporate & Other Laws for CA Intermediate PDF Download

 Page 1


                                 
   
 
 
ACCOUNTS OF COMPANIES 
 
•  BOOKS OF ACCOUNT, ETC., TO BE KEPT BY COMPANY  
  [SECTION 128] 
General 
requirement 

 Every company shall prepare “books of account” and other 
relevant books and papers and financial statement for every 
financial year. 

 These books of accounts should give a true and fair view of the 
state of the affairs of the company, including that of its branch 
office(s). These books of accounts must be kept on accrual basis 
and according to the double entry system of accounting. 

 Accrual concept is one of the four principles or accounting 
concepts, which involves recording income and expenses as they 
accrue, as distinct from when they are received or paid.  

 Double entry book-keeping is a method of recording any 
transactions of a business in a set of accounts, in which every 
transaction has a dual aspect of debt and credit and therefore, 
needs to be recorded in at least two accounts. 

 Company have the option of keeping such books of account or 
other relevant papers in electronic mode. 
Definitions 
 “Books of account” as defined in Section 2(13) includes records 
maintained in respect of—  
(i) all sums of money received and expended by a company 
and matters in relation to which the receipts and 
expenditure take place; 
(ii) All sales and purchases of goods and services by the 
company;  
(iii) the assets and liabilities of the company; and  
(iv) The items of cost as may be prescribed under section 148 
in the case of a company which belongs to any class of 
companies specified under that section.  

 “Book and paper” and “book or paper” as defined in Section 
2(12) include books of account, deeds, vouchers, writings, 
documents, minutes and registers maintained on paper or in 
electronic form; 
Place of 
Keeping 
Books of 
Account 

 Every company to prepare and keep the books of account and 
other relevant books and papers and financial statements at its 
registered office.  

 Provided all or any of the books of accounts may be kept at such 
other place in India as the Board of directors may decide. 
Where such a decision is taken by the Board the company shall 
within 7 days thereof file with the registrar a notice in writing 
giving full address of that other place. 
Books of 
Account - 
Branch 
Proper books of account relating to the transactions effected at the 
branch office are to be kept at that office and proper summarized 
returns periodically are sent by the branch office to the company 
Page 2


                                 
   
 
 
ACCOUNTS OF COMPANIES 
 
•  BOOKS OF ACCOUNT, ETC., TO BE KEPT BY COMPANY  
  [SECTION 128] 
General 
requirement 

 Every company shall prepare “books of account” and other 
relevant books and papers and financial statement for every 
financial year. 

 These books of accounts should give a true and fair view of the 
state of the affairs of the company, including that of its branch 
office(s). These books of accounts must be kept on accrual basis 
and according to the double entry system of accounting. 

 Accrual concept is one of the four principles or accounting 
concepts, which involves recording income and expenses as they 
accrue, as distinct from when they are received or paid.  

 Double entry book-keeping is a method of recording any 
transactions of a business in a set of accounts, in which every 
transaction has a dual aspect of debt and credit and therefore, 
needs to be recorded in at least two accounts. 

 Company have the option of keeping such books of account or 
other relevant papers in electronic mode. 
Definitions 
 “Books of account” as defined in Section 2(13) includes records 
maintained in respect of—  
(i) all sums of money received and expended by a company 
and matters in relation to which the receipts and 
expenditure take place; 
(ii) All sales and purchases of goods and services by the 
company;  
(iii) the assets and liabilities of the company; and  
(iv) The items of cost as may be prescribed under section 148 
in the case of a company which belongs to any class of 
companies specified under that section.  

 “Book and paper” and “book or paper” as defined in Section 
2(12) include books of account, deeds, vouchers, writings, 
documents, minutes and registers maintained on paper or in 
electronic form; 
Place of 
Keeping 
Books of 
Account 

 Every company to prepare and keep the books of account and 
other relevant books and papers and financial statements at its 
registered office.  

 Provided all or any of the books of accounts may be kept at such 
other place in India as the Board of directors may decide. 
Where such a decision is taken by the Board the company shall 
within 7 days thereof file with the registrar a notice in writing 
giving full address of that other place. 
Books of 
Account - 
Branch 
Proper books of account relating to the transactions effected at the 
branch office are to be kept at that office and proper summarized 
returns periodically are sent by the branch office to the company 
                                 
Office at its registered office and are kept open for inspection at the 
registered office of the company or at such other place in India by any 
director during business hours. 
Inspection 
by directors 
Any director can inspect the books of accounts and other books and 
papers of the company during business hours. 
Period for 
preservation 
of books 
The books of account of every company relating to a period of atleast 
8 financial years immediately preceding a financial year, or where 
the company had been in existence for a period less than eight years, 
in respect of all the preceding years together with the vouchers 
relevant to any entry in such books of account shall be kept in good 
order. 
Persons 
responsible 
to maintain 
books 
The person responsible to take all reasonable steps to secure 
compliance by the company with the requirement of maintenance of 
books of accounts etc. shall be :  
(i) Managing Director,  
(ii) Whole-Time Director, in charge of finance  
(iii) Chief Financial Officer  
(iv) Any other person of a company charged by the Board with 
duty of complying with provisions of section 128. 
Penalty 
provisions 
Imprisonment for a term which may extend to one year or with fine 
which shall not be less than 50,000 rupees but which may extend to 
500,000 rupees or both. 
 
• FINANCIAL STATEMENT [SECTION 129] 
Definition  As per section 2(40), financial statement in relation to a company, 
includes—  
(i) a balance sheet as at the end of the financial year;  
(ii) a profit and loss account, or in the case of a company carrying on 
any activity not for profit, an income and expenditure account for the 
financial year;  
(iii) cash flow statement for the financial year;  
(iv) a statement of changes in equity, if applicable; and  
(v) any explanatory note annexed to, or forming part of, any document 
referred to in sub-clause (i) to sub-clause (iv):  
Provided that the financial statement, with respect to One Person 
Company, small company and dormant company, may not include the 
cash flow statement;  
Note: Students may note that ‘Profit and Loss Account’ may also be 
referred as ‘Statement of Profit and Loss’ under the Act at some places. 
True and Fair 
view 
The financial statements shall give a true and fair view of the state of 
affairs of the company or companies. It shall comply with the 
accounting standards notified under section 133 and shall be in the 
form or forms as may be provided for different class or classes of 
companies in Schedule III. 
Page 3


                                 
   
 
 
ACCOUNTS OF COMPANIES 
 
•  BOOKS OF ACCOUNT, ETC., TO BE KEPT BY COMPANY  
  [SECTION 128] 
General 
requirement 

 Every company shall prepare “books of account” and other 
relevant books and papers and financial statement for every 
financial year. 

 These books of accounts should give a true and fair view of the 
state of the affairs of the company, including that of its branch 
office(s). These books of accounts must be kept on accrual basis 
and according to the double entry system of accounting. 

 Accrual concept is one of the four principles or accounting 
concepts, which involves recording income and expenses as they 
accrue, as distinct from when they are received or paid.  

 Double entry book-keeping is a method of recording any 
transactions of a business in a set of accounts, in which every 
transaction has a dual aspect of debt and credit and therefore, 
needs to be recorded in at least two accounts. 

 Company have the option of keeping such books of account or 
other relevant papers in electronic mode. 
Definitions 
 “Books of account” as defined in Section 2(13) includes records 
maintained in respect of—  
(i) all sums of money received and expended by a company 
and matters in relation to which the receipts and 
expenditure take place; 
(ii) All sales and purchases of goods and services by the 
company;  
(iii) the assets and liabilities of the company; and  
(iv) The items of cost as may be prescribed under section 148 
in the case of a company which belongs to any class of 
companies specified under that section.  

 “Book and paper” and “book or paper” as defined in Section 
2(12) include books of account, deeds, vouchers, writings, 
documents, minutes and registers maintained on paper or in 
electronic form; 
Place of 
Keeping 
Books of 
Account 

 Every company to prepare and keep the books of account and 
other relevant books and papers and financial statements at its 
registered office.  

 Provided all or any of the books of accounts may be kept at such 
other place in India as the Board of directors may decide. 
Where such a decision is taken by the Board the company shall 
within 7 days thereof file with the registrar a notice in writing 
giving full address of that other place. 
Books of 
Account - 
Branch 
Proper books of account relating to the transactions effected at the 
branch office are to be kept at that office and proper summarized 
returns periodically are sent by the branch office to the company 
                                 
Office at its registered office and are kept open for inspection at the 
registered office of the company or at such other place in India by any 
director during business hours. 
Inspection 
by directors 
Any director can inspect the books of accounts and other books and 
papers of the company during business hours. 
Period for 
preservation 
of books 
The books of account of every company relating to a period of atleast 
8 financial years immediately preceding a financial year, or where 
the company had been in existence for a period less than eight years, 
in respect of all the preceding years together with the vouchers 
relevant to any entry in such books of account shall be kept in good 
order. 
Persons 
responsible 
to maintain 
books 
The person responsible to take all reasonable steps to secure 
compliance by the company with the requirement of maintenance of 
books of accounts etc. shall be :  
(i) Managing Director,  
(ii) Whole-Time Director, in charge of finance  
(iii) Chief Financial Officer  
(iv) Any other person of a company charged by the Board with 
duty of complying with provisions of section 128. 
Penalty 
provisions 
Imprisonment for a term which may extend to one year or with fine 
which shall not be less than 50,000 rupees but which may extend to 
500,000 rupees or both. 
 
• FINANCIAL STATEMENT [SECTION 129] 
Definition  As per section 2(40), financial statement in relation to a company, 
includes—  
(i) a balance sheet as at the end of the financial year;  
(ii) a profit and loss account, or in the case of a company carrying on 
any activity not for profit, an income and expenditure account for the 
financial year;  
(iii) cash flow statement for the financial year;  
(iv) a statement of changes in equity, if applicable; and  
(v) any explanatory note annexed to, or forming part of, any document 
referred to in sub-clause (i) to sub-clause (iv):  
Provided that the financial statement, with respect to One Person 
Company, small company and dormant company, may not include the 
cash flow statement;  
Note: Students may note that ‘Profit and Loss Account’ may also be 
referred as ‘Statement of Profit and Loss’ under the Act at some places. 
True and Fair 
view 
The financial statements shall give a true and fair view of the state of 
affairs of the company or companies. It shall comply with the 
accounting standards notified under section 133 and shall be in the 
form or forms as may be provided for different class or classes of 
companies in Schedule III. 
                                 
Non 
Applicability 
 
Consolidation 
of financial 
statements 

 The consolidation of financial statements of the company shall be 
made in accordance with the provisions of Schedule III of the Act 
and the applicable accounting standards. 

 Prepare a consolidated financial statement of the company and of 
all the subsidiaries and associate companies in the same form and 
manner as that of its own  
Laying of 
financial 
Statements 
At every annual general meeting of a company, the Board of Directors 
of the company shall lay before such meeting financial statements for 
the financial year. 
Exemptions 
from 
preparation of 
CFS : 
(i)  It is a wholly-owned subsidiary, or is a partially-owned subsidiary of 
another company and all its other members, having been intimated 
in writing do not object to the company not presenting consolidated 
financial statements 
(ii) It is a company whose securities are not listed or are not in the 
process of listing on any stock exchange, whether in India or outside 
India; and  
(iii) Its ultimate or any intermediate holding company files consolidated 
financial statements with the Registrar which are in compliance with 
the applicable Accounting Standards. 
Penal 
provisions 
Imprisonment for a term which may extend to one year or with fine 
which shall not be less than fifty thousand rupees but which may 
extend to five lakh rupees, or with both. 
 
 
 
 
 
 
 
 
 
 
Page 4


                                 
   
 
 
ACCOUNTS OF COMPANIES 
 
•  BOOKS OF ACCOUNT, ETC., TO BE KEPT BY COMPANY  
  [SECTION 128] 
General 
requirement 

 Every company shall prepare “books of account” and other 
relevant books and papers and financial statement for every 
financial year. 

 These books of accounts should give a true and fair view of the 
state of the affairs of the company, including that of its branch 
office(s). These books of accounts must be kept on accrual basis 
and according to the double entry system of accounting. 

 Accrual concept is one of the four principles or accounting 
concepts, which involves recording income and expenses as they 
accrue, as distinct from when they are received or paid.  

 Double entry book-keeping is a method of recording any 
transactions of a business in a set of accounts, in which every 
transaction has a dual aspect of debt and credit and therefore, 
needs to be recorded in at least two accounts. 

 Company have the option of keeping such books of account or 
other relevant papers in electronic mode. 
Definitions 
 “Books of account” as defined in Section 2(13) includes records 
maintained in respect of—  
(i) all sums of money received and expended by a company 
and matters in relation to which the receipts and 
expenditure take place; 
(ii) All sales and purchases of goods and services by the 
company;  
(iii) the assets and liabilities of the company; and  
(iv) The items of cost as may be prescribed under section 148 
in the case of a company which belongs to any class of 
companies specified under that section.  

 “Book and paper” and “book or paper” as defined in Section 
2(12) include books of account, deeds, vouchers, writings, 
documents, minutes and registers maintained on paper or in 
electronic form; 
Place of 
Keeping 
Books of 
Account 

 Every company to prepare and keep the books of account and 
other relevant books and papers and financial statements at its 
registered office.  

 Provided all or any of the books of accounts may be kept at such 
other place in India as the Board of directors may decide. 
Where such a decision is taken by the Board the company shall 
within 7 days thereof file with the registrar a notice in writing 
giving full address of that other place. 
Books of 
Account - 
Branch 
Proper books of account relating to the transactions effected at the 
branch office are to be kept at that office and proper summarized 
returns periodically are sent by the branch office to the company 
                                 
Office at its registered office and are kept open for inspection at the 
registered office of the company or at such other place in India by any 
director during business hours. 
Inspection 
by directors 
Any director can inspect the books of accounts and other books and 
papers of the company during business hours. 
Period for 
preservation 
of books 
The books of account of every company relating to a period of atleast 
8 financial years immediately preceding a financial year, or where 
the company had been in existence for a period less than eight years, 
in respect of all the preceding years together with the vouchers 
relevant to any entry in such books of account shall be kept in good 
order. 
Persons 
responsible 
to maintain 
books 
The person responsible to take all reasonable steps to secure 
compliance by the company with the requirement of maintenance of 
books of accounts etc. shall be :  
(i) Managing Director,  
(ii) Whole-Time Director, in charge of finance  
(iii) Chief Financial Officer  
(iv) Any other person of a company charged by the Board with 
duty of complying with provisions of section 128. 
Penalty 
provisions 
Imprisonment for a term which may extend to one year or with fine 
which shall not be less than 50,000 rupees but which may extend to 
500,000 rupees or both. 
 
• FINANCIAL STATEMENT [SECTION 129] 
Definition  As per section 2(40), financial statement in relation to a company, 
includes—  
(i) a balance sheet as at the end of the financial year;  
(ii) a profit and loss account, or in the case of a company carrying on 
any activity not for profit, an income and expenditure account for the 
financial year;  
(iii) cash flow statement for the financial year;  
(iv) a statement of changes in equity, if applicable; and  
(v) any explanatory note annexed to, or forming part of, any document 
referred to in sub-clause (i) to sub-clause (iv):  
Provided that the financial statement, with respect to One Person 
Company, small company and dormant company, may not include the 
cash flow statement;  
Note: Students may note that ‘Profit and Loss Account’ may also be 
referred as ‘Statement of Profit and Loss’ under the Act at some places. 
True and Fair 
view 
The financial statements shall give a true and fair view of the state of 
affairs of the company or companies. It shall comply with the 
accounting standards notified under section 133 and shall be in the 
form or forms as may be provided for different class or classes of 
companies in Schedule III. 
                                 
Non 
Applicability 
 
Consolidation 
of financial 
statements 

 The consolidation of financial statements of the company shall be 
made in accordance with the provisions of Schedule III of the Act 
and the applicable accounting standards. 

 Prepare a consolidated financial statement of the company and of 
all the subsidiaries and associate companies in the same form and 
manner as that of its own  
Laying of 
financial 
Statements 
At every annual general meeting of a company, the Board of Directors 
of the company shall lay before such meeting financial statements for 
the financial year. 
Exemptions 
from 
preparation of 
CFS : 
(i)  It is a wholly-owned subsidiary, or is a partially-owned subsidiary of 
another company and all its other members, having been intimated 
in writing do not object to the company not presenting consolidated 
financial statements 
(ii) It is a company whose securities are not listed or are not in the 
process of listing on any stock exchange, whether in India or outside 
India; and  
(iii) Its ultimate or any intermediate holding company files consolidated 
financial statements with the Registrar which are in compliance with 
the applicable Accounting Standards. 
Penal 
provisions 
Imprisonment for a term which may extend to one year or with fine 
which shall not be less than fifty thousand rupees but which may 
extend to five lakh rupees, or with both. 
 
 
 
 
 
 
 
 
 
 
                                 
• RE-OPENING OF ACCOUNTS ON COURT’S OR TRIBUNAL ORDERS 
[SECTION 130]   
 

 No order shall be made in respect of re-opening of books of account relating to a 
period earlier than eight financial years immediately preceding the current 
financial year: 

 Provided that where a direction has been issued by the Central Government for 
keeping of books of account for a period longer than eight years, the books of 
account may be ordered to be re-opened within such longer period. 
    (As amended by notification dated 3
rd
 Jan, 2018) 
 
Page 5


                                 
   
 
 
ACCOUNTS OF COMPANIES 
 
•  BOOKS OF ACCOUNT, ETC., TO BE KEPT BY COMPANY  
  [SECTION 128] 
General 
requirement 

 Every company shall prepare “books of account” and other 
relevant books and papers and financial statement for every 
financial year. 

 These books of accounts should give a true and fair view of the 
state of the affairs of the company, including that of its branch 
office(s). These books of accounts must be kept on accrual basis 
and according to the double entry system of accounting. 

 Accrual concept is one of the four principles or accounting 
concepts, which involves recording income and expenses as they 
accrue, as distinct from when they are received or paid.  

 Double entry book-keeping is a method of recording any 
transactions of a business in a set of accounts, in which every 
transaction has a dual aspect of debt and credit and therefore, 
needs to be recorded in at least two accounts. 

 Company have the option of keeping such books of account or 
other relevant papers in electronic mode. 
Definitions 
 “Books of account” as defined in Section 2(13) includes records 
maintained in respect of—  
(i) all sums of money received and expended by a company 
and matters in relation to which the receipts and 
expenditure take place; 
(ii) All sales and purchases of goods and services by the 
company;  
(iii) the assets and liabilities of the company; and  
(iv) The items of cost as may be prescribed under section 148 
in the case of a company which belongs to any class of 
companies specified under that section.  

 “Book and paper” and “book or paper” as defined in Section 
2(12) include books of account, deeds, vouchers, writings, 
documents, minutes and registers maintained on paper or in 
electronic form; 
Place of 
Keeping 
Books of 
Account 

 Every company to prepare and keep the books of account and 
other relevant books and papers and financial statements at its 
registered office.  

 Provided all or any of the books of accounts may be kept at such 
other place in India as the Board of directors may decide. 
Where such a decision is taken by the Board the company shall 
within 7 days thereof file with the registrar a notice in writing 
giving full address of that other place. 
Books of 
Account - 
Branch 
Proper books of account relating to the transactions effected at the 
branch office are to be kept at that office and proper summarized 
returns periodically are sent by the branch office to the company 
                                 
Office at its registered office and are kept open for inspection at the 
registered office of the company or at such other place in India by any 
director during business hours. 
Inspection 
by directors 
Any director can inspect the books of accounts and other books and 
papers of the company during business hours. 
Period for 
preservation 
of books 
The books of account of every company relating to a period of atleast 
8 financial years immediately preceding a financial year, or where 
the company had been in existence for a period less than eight years, 
in respect of all the preceding years together with the vouchers 
relevant to any entry in such books of account shall be kept in good 
order. 
Persons 
responsible 
to maintain 
books 
The person responsible to take all reasonable steps to secure 
compliance by the company with the requirement of maintenance of 
books of accounts etc. shall be :  
(i) Managing Director,  
(ii) Whole-Time Director, in charge of finance  
(iii) Chief Financial Officer  
(iv) Any other person of a company charged by the Board with 
duty of complying with provisions of section 128. 
Penalty 
provisions 
Imprisonment for a term which may extend to one year or with fine 
which shall not be less than 50,000 rupees but which may extend to 
500,000 rupees or both. 
 
• FINANCIAL STATEMENT [SECTION 129] 
Definition  As per section 2(40), financial statement in relation to a company, 
includes—  
(i) a balance sheet as at the end of the financial year;  
(ii) a profit and loss account, or in the case of a company carrying on 
any activity not for profit, an income and expenditure account for the 
financial year;  
(iii) cash flow statement for the financial year;  
(iv) a statement of changes in equity, if applicable; and  
(v) any explanatory note annexed to, or forming part of, any document 
referred to in sub-clause (i) to sub-clause (iv):  
Provided that the financial statement, with respect to One Person 
Company, small company and dormant company, may not include the 
cash flow statement;  
Note: Students may note that ‘Profit and Loss Account’ may also be 
referred as ‘Statement of Profit and Loss’ under the Act at some places. 
True and Fair 
view 
The financial statements shall give a true and fair view of the state of 
affairs of the company or companies. It shall comply with the 
accounting standards notified under section 133 and shall be in the 
form or forms as may be provided for different class or classes of 
companies in Schedule III. 
                                 
Non 
Applicability 
 
Consolidation 
of financial 
statements 

 The consolidation of financial statements of the company shall be 
made in accordance with the provisions of Schedule III of the Act 
and the applicable accounting standards. 

 Prepare a consolidated financial statement of the company and of 
all the subsidiaries and associate companies in the same form and 
manner as that of its own  
Laying of 
financial 
Statements 
At every annual general meeting of a company, the Board of Directors 
of the company shall lay before such meeting financial statements for 
the financial year. 
Exemptions 
from 
preparation of 
CFS : 
(i)  It is a wholly-owned subsidiary, or is a partially-owned subsidiary of 
another company and all its other members, having been intimated 
in writing do not object to the company not presenting consolidated 
financial statements 
(ii) It is a company whose securities are not listed or are not in the 
process of listing on any stock exchange, whether in India or outside 
India; and  
(iii) Its ultimate or any intermediate holding company files consolidated 
financial statements with the Registrar which are in compliance with 
the applicable Accounting Standards. 
Penal 
provisions 
Imprisonment for a term which may extend to one year or with fine 
which shall not be less than fifty thousand rupees but which may 
extend to five lakh rupees, or with both. 
 
 
 
 
 
 
 
 
 
 
                                 
• RE-OPENING OF ACCOUNTS ON COURT’S OR TRIBUNAL ORDERS 
[SECTION 130]   
 

 No order shall be made in respect of re-opening of books of account relating to a 
period earlier than eight financial years immediately preceding the current 
financial year: 

 Provided that where a direction has been issued by the Central Government for 
keeping of books of account for a period longer than eight years, the books of 
account may be ordered to be re-opened within such longer period. 
    (As amended by notification dated 3
rd
 Jan, 2018) 
 
                                 
• VOLUNTARY REVISION OF FINANCIAL STATE- MENTS OR 
BOARD’S REPORT [SECTION 131] 
 
• FINANCIAL STATEMENT, BOARD’S REPORT, ETC [SECTION 134] 
(i)   Authentication of Financial statements: 
(a)  The financial statements, including consolidated financial statement, if any, 
shall be approved by the Board of Directors before they are signed on 
behalf of the Board at least by the following:  
(1) The chairperson of the company where he is authorised by the 
Board; or  
(2)  By two directors out of which one shall be managing director and 
other the Chief Executive Officer, if he is a director in the company,  
(4) The Chief Executive Officer, wherever he is appointed; 
(3)  The Chief Financial Officer, wherever he is appointed; and  
(4)  The company secretary of the company, wherever he is appointed.  
(b)  In the case of a One Person Company, the financial statement shall be 
signed by only one director, for submission to the auditor for his report 
thereon.  
(c)  The auditors’ report shall be attached to every financial statement.  
(d)  A signed copy of every financial statement, including consolidated financial 
statement, if any, shall be issued, circulated or published along with a copy 
each of— (1) Any notes annexed to or forming part of such financial 
statement; (2) The auditor’s report; and (3) The Board’s report. 
(ii)  Signing of Board’s Report: The Board’s report and any annexures thereto shall 
be signed by its chairperson of the company if he is authorised by the Board 
and where he is not so authorised, shall be signed by at least two directors, 
one of whom shall be a managing director, or by the director where there is one 
director.