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

 Page 1


a    
 
 
CHAPTER 
9 
 
 
 
LEARNING OUTCOMES 
 
ACCOUNTS OF 
COMPANIES 
 
At the end of this chapter, you will be able to: 
?
Gain knowledge about preparation and maintenance of 
books of account etc. to be kept by company. 
?
Identify the provisions as to preparation and filing of 
financial statements and other related matters. 
?
Explain about the re-opening and revision of financial 
statements. 
?
Gain knowledge about constitution, working and power of 
National Financial Reporting Authority (NFRA). 
?
Comprehend various concepts related to Corporate Social 
Responsibility (CSR). 
?
Explain procedure related to internal audit of companies. 
  
© The Institute of Chartered Accountants of India
Page 2


a    
 
 
CHAPTER 
9 
 
 
 
LEARNING OUTCOMES 
 
ACCOUNTS OF 
COMPANIES 
 
At the end of this chapter, you will be able to: 
?
Gain knowledge about preparation and maintenance of 
books of account etc. to be kept by company. 
?
Identify the provisions as to preparation and filing of 
financial statements and other related matters. 
?
Explain about the re-opening and revision of financial 
statements. 
?
Gain knowledge about constitution, working and power of 
National Financial Reporting Authority (NFRA). 
?
Comprehend various concepts related to Corporate Social 
Responsibility (CSR). 
?
Explain procedure related to internal audit of companies. 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 9.2 
?  
 
This chapter explains the provisions of Chapter IX of the Companies Act, 2013 
(hereinafter also referred to as “the Act” or “this Act”), consisting of Sections 128 to 
138 dealing with the accounts of companies. Chapter will also explain procedural 
aspects described in relevant rules notified in this context. Following diagram 
depicts the arrangement of relevant sections. 
 
Accounts of Companies
(Section 128- 138)
Types of accounts to be 
maintained
(Section 128 and 129)
Books of account
Relevant books and papers
Financial statement
Periodical Financial Results (Section 129A)
Re-opening and recasting of accounts on Court's or 
Tribunal's Orders (Section 130)
Voluntary revision of accounts (Section 131)
Constitution of NFRA & power of CG to prescribe 
accounting standards (Section 132- 133)
Financial Statements, Board reports,etc (Section 134)
Corporate Social Responsibility (Section 135)
Right of members & Filing of Financial statement with 
Registrar (Section 136- 137)
Internal Audit (Section 138)
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
Page 3


a    
 
 
CHAPTER 
9 
 
 
 
LEARNING OUTCOMES 
 
ACCOUNTS OF 
COMPANIES 
 
At the end of this chapter, you will be able to: 
?
Gain knowledge about preparation and maintenance of 
books of account etc. to be kept by company. 
?
Identify the provisions as to preparation and filing of 
financial statements and other related matters. 
?
Explain about the re-opening and revision of financial 
statements. 
?
Gain knowledge about constitution, working and power of 
National Financial Reporting Authority (NFRA). 
?
Comprehend various concepts related to Corporate Social 
Responsibility (CSR). 
?
Explain procedure related to internal audit of companies. 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 9.2 
?  
 
This chapter explains the provisions of Chapter IX of the Companies Act, 2013 
(hereinafter also referred to as “the Act” or “this Act”), consisting of Sections 128 to 
138 dealing with the accounts of companies. Chapter will also explain procedural 
aspects described in relevant rules notified in this context. Following diagram 
depicts the arrangement of relevant sections. 
 
Accounts of Companies
(Section 128- 138)
Types of accounts to be 
maintained
(Section 128 and 129)
Books of account
Relevant books and papers
Financial statement
Periodical Financial Results (Section 129A)
Re-opening and recasting of accounts on Court's or 
Tribunal's Orders (Section 130)
Voluntary revision of accounts (Section 131)
Constitution of NFRA & power of CG to prescribe 
accounting standards (Section 132- 133)
Financial Statements, Board reports,etc (Section 134)
Corporate Social Responsibility (Section 135)
Right of members & Filing of Financial statement with 
Registrar (Section 136- 137)
Internal Audit (Section 138)
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
ACCOUNTS OF COMPANIES 
 
a
    
 9.3 
 1. INTRODUCTION 
Chapter IX Consists of sections 128 to 138 as well as the Companies 
(Accounts) Rules, 2014. 
Directors who are agents of shareholders and acting in fiduciary capacity, required 
to report in order to disclose financial results (financial performance and position 
through financial results) to shareholders so that the shareholders remain aware of 
the working and affairs of the company.  As stated earlier also, chapter IX of the 
Companies Act, 2013, lays down various provisions related to maintenance of 
proper books of account of the companies and allied aspects that are explained in 
this chapter. 
 2. BOOKS OF ACCOUNT, ETC., TO BE KEPT BY 
COMPANY [SECTION 128] 
 
Company shall prepare 
Books of account 
Books and papers 
Financial statement 
Keep at its registered office/any other place in India as 
the Board of Directors (BOD) may decide 
Open for inspection by directors 
Preserved for 8 years 
Fine (` 50,000 to 5 lacs) 
Failure in compliance 
Other 
financial 
information 
outside 
India-on 
written 
request by 
director 
himself 
Inspection of 
Books of 
account of the 
subsidiary by a 
person -Only on 
authorisation by 
BOD’s resolution 
 
© The Institute of Chartered Accountants of India
Page 4


a    
 
 
CHAPTER 
9 
 
 
 
LEARNING OUTCOMES 
 
ACCOUNTS OF 
COMPANIES 
 
At the end of this chapter, you will be able to: 
?
Gain knowledge about preparation and maintenance of 
books of account etc. to be kept by company. 
?
Identify the provisions as to preparation and filing of 
financial statements and other related matters. 
?
Explain about the re-opening and revision of financial 
statements. 
?
Gain knowledge about constitution, working and power of 
National Financial Reporting Authority (NFRA). 
?
Comprehend various concepts related to Corporate Social 
Responsibility (CSR). 
?
Explain procedure related to internal audit of companies. 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 9.2 
?  
 
This chapter explains the provisions of Chapter IX of the Companies Act, 2013 
(hereinafter also referred to as “the Act” or “this Act”), consisting of Sections 128 to 
138 dealing with the accounts of companies. Chapter will also explain procedural 
aspects described in relevant rules notified in this context. Following diagram 
depicts the arrangement of relevant sections. 
 
Accounts of Companies
(Section 128- 138)
Types of accounts to be 
maintained
(Section 128 and 129)
Books of account
Relevant books and papers
Financial statement
Periodical Financial Results (Section 129A)
Re-opening and recasting of accounts on Court's or 
Tribunal's Orders (Section 130)
Voluntary revision of accounts (Section 131)
Constitution of NFRA & power of CG to prescribe 
accounting standards (Section 132- 133)
Financial Statements, Board reports,etc (Section 134)
Corporate Social Responsibility (Section 135)
Right of members & Filing of Financial statement with 
Registrar (Section 136- 137)
Internal Audit (Section 138)
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
ACCOUNTS OF COMPANIES 
 
a
    
 9.3 
 1. INTRODUCTION 
Chapter IX Consists of sections 128 to 138 as well as the Companies 
(Accounts) Rules, 2014. 
Directors who are agents of shareholders and acting in fiduciary capacity, required 
to report in order to disclose financial results (financial performance and position 
through financial results) to shareholders so that the shareholders remain aware of 
the working and affairs of the company.  As stated earlier also, chapter IX of the 
Companies Act, 2013, lays down various provisions related to maintenance of 
proper books of account of the companies and allied aspects that are explained in 
this chapter. 
 2. BOOKS OF ACCOUNT, ETC., TO BE KEPT BY 
COMPANY [SECTION 128] 
 
Company shall prepare 
Books of account 
Books and papers 
Financial statement 
Keep at its registered office/any other place in India as 
the Board of Directors (BOD) may decide 
Open for inspection by directors 
Preserved for 8 years 
Fine (` 50,000 to 5 lacs) 
Failure in compliance 
Other 
financial 
information 
outside 
India-on 
written 
request by 
director 
himself 
Inspection of 
Books of 
account of the 
subsidiary by a 
person -Only on 
authorisation by 
BOD’s resolution 
 
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 9.4 
Every company shall prepare books of account and other relevant books and 
records and financial statement for every financial year.  
Note: 
(Despite th es e definition clauses already covered in chapter 1, a quick 
reference shall be handy to recapitulate)  
1.  As defined in Section 2(13) of the Act, the “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 under section 148 (Cost Audit) of the 
Companies Act 2013 (“Act”) in the case of a company which belongs to any 
class of companies specified under that section. 
2.  As per section 2(12) of this Act, the “book and paper” and “book or paper” 
include books of account, deeds, vouchers, writings, documents, minutes and 
registers maintained on paper or in electronic form. 
3.  Further as per section 2(40) of this Act, the “financial statement” in relation 
to a company, includes- 
? A balance sheet as at the end of the financial year; 
? 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; 
? Cash flow statement for the financial year with exception in case of one 
person company, small company, dormant company and private company (if 
such private company is a start-up and has not committed a default in filing 
its financial statements under section 137 of the said Act or annual return 
under section 92 of the said Act with the Registrar
1
); 
? A statement of changes in equity, if applicable; and 
 
1
 Vide exemption notification GSR 583(E) dated 13th June, 2017 
© The Institute of Chartered Accountants of India
Page 5


a    
 
 
CHAPTER 
9 
 
 
 
LEARNING OUTCOMES 
 
ACCOUNTS OF 
COMPANIES 
 
At the end of this chapter, you will be able to: 
?
Gain knowledge about preparation and maintenance of 
books of account etc. to be kept by company. 
?
Identify the provisions as to preparation and filing of 
financial statements and other related matters. 
?
Explain about the re-opening and revision of financial 
statements. 
?
Gain knowledge about constitution, working and power of 
National Financial Reporting Authority (NFRA). 
?
Comprehend various concepts related to Corporate Social 
Responsibility (CSR). 
?
Explain procedure related to internal audit of companies. 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 9.2 
?  
 
This chapter explains the provisions of Chapter IX of the Companies Act, 2013 
(hereinafter also referred to as “the Act” or “this Act”), consisting of Sections 128 to 
138 dealing with the accounts of companies. Chapter will also explain procedural 
aspects described in relevant rules notified in this context. Following diagram 
depicts the arrangement of relevant sections. 
 
Accounts of Companies
(Section 128- 138)
Types of accounts to be 
maintained
(Section 128 and 129)
Books of account
Relevant books and papers
Financial statement
Periodical Financial Results (Section 129A)
Re-opening and recasting of accounts on Court's or 
Tribunal's Orders (Section 130)
Voluntary revision of accounts (Section 131)
Constitution of NFRA & power of CG to prescribe 
accounting standards (Section 132- 133)
Financial Statements, Board reports,etc (Section 134)
Corporate Social Responsibility (Section 135)
Right of members & Filing of Financial statement with 
Registrar (Section 136- 137)
Internal Audit (Section 138)
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
ACCOUNTS OF COMPANIES 
 
a
    
 9.3 
 1. INTRODUCTION 
Chapter IX Consists of sections 128 to 138 as well as the Companies 
(Accounts) Rules, 2014. 
Directors who are agents of shareholders and acting in fiduciary capacity, required 
to report in order to disclose financial results (financial performance and position 
through financial results) to shareholders so that the shareholders remain aware of 
the working and affairs of the company.  As stated earlier also, chapter IX of the 
Companies Act, 2013, lays down various provisions related to maintenance of 
proper books of account of the companies and allied aspects that are explained in 
this chapter. 
 2. BOOKS OF ACCOUNT, ETC., TO BE KEPT BY 
COMPANY [SECTION 128] 
 
Company shall prepare 
Books of account 
Books and papers 
Financial statement 
Keep at its registered office/any other place in India as 
the Board of Directors (BOD) may decide 
Open for inspection by directors 
Preserved for 8 years 
Fine (` 50,000 to 5 lacs) 
Failure in compliance 
Other 
financial 
information 
outside 
India-on 
written 
request by 
director 
himself 
Inspection of 
Books of 
account of the 
subsidiary by a 
person -Only on 
authorisation by 
BOD’s resolution 
 
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 9.4 
Every company shall prepare books of account and other relevant books and 
records and financial statement for every financial year.  
Note: 
(Despite th es e definition clauses already covered in chapter 1, a quick 
reference shall be handy to recapitulate)  
1.  As defined in Section 2(13) of the Act, the “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 under section 148 (Cost Audit) of the 
Companies Act 2013 (“Act”) in the case of a company which belongs to any 
class of companies specified under that section. 
2.  As per section 2(12) of this Act, the “book and paper” and “book or paper” 
include books of account, deeds, vouchers, writings, documents, minutes and 
registers maintained on paper or in electronic form. 
3.  Further as per section 2(40) of this Act, the “financial statement” in relation 
to a company, includes- 
? A balance sheet as at the end of the financial year; 
? 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; 
? Cash flow statement for the financial year with exception in case of one 
person company, small company, dormant company and private company (if 
such private company is a start-up and has not committed a default in filing 
its financial statements under section 137 of the said Act or annual return 
under section 92 of the said Act with the Registrar
1
); 
? A statement of changes in equity, if applicable; and 
 
1
 Vide exemption notification GSR 583(E) dated 13th June, 2017 
© The Institute of Chartered Accountants of India
 
 
ACCOUNTS OF COMPANIES 
 
a
    
 9.5 
? Any explanatory note annexed to, or forming part of, any document referred 
to in sub-clause (i) to sub-clause (iv) 
 It is worth noting here that for the purposes of this Act, the term ‘start-up’ 
or “start-up company” means a private company incorporated under the 
Companies Act, 2013 or the Companies Act, 1956 and recognised as start-
up in accordance with the notification issued by the Department of Industrial 
Policy and Promotion, Ministry of Commerce and Industry. 
4.  As per section 2(41) of this Act, the Financial Year, in relation to any 
company or body corporate, means the period ending on the 31st day of 
March every year, and where it has been incorporated on or after the 1st day 
of January of a year, the period ending on the 31st day of March of the 
following year, in respect whereof financial statement of the company or body 
corporate is made up. 
Example 1 - Mahindra Limited was incorporated as a company on 22
nd
 February 
2022. Its first financial year shall comprises the period ending on the 31
st
 day of the 
March of the following year i.e. 31
st
 March 2023.  
Two-year time from the date commencement of this Act was given to corporates 
to align their financial year to the provisions contained in 2(41).  
Provided that on an application made by a company or body corporate, which is a 
holding company or a subsidiary or associate company of a company incorporated 
outside India and which is required to follow a different financial year for 
consolidation of its accounts outside India, the Central Government may, on the 
basis of such application made in such form and manner as may be prescribed, 
allow any period as its financial year, whether or not that period is a year. 
It is worth noting that in case of a specified IFSC public company
2
 and specified 
IFSC private company
3
 that is a subsidiary of a foreign company, the financial year 
of the subsidiary may be same as the financial year of its holding company and 
approval of the Tribunal shall not be required.  
 
2
 Vide notification GSR 08(E) dated 5th January, 2017 
3
 Vide notification GSR 09(E) dated 5th January, 2017 
© The Institute of Chartered Accountants of India