It is mandatory to maintain Company Accounts under Companies Act, 2013 and Income Tax Act, 1961. All Private Limited Companies, Limited Companies, Limited Liability Partnership, One Person Company etc are required to maintain their books of accounts as per the related Acts. There are different rules regarding how to maintain company books of accounts, how many years the books of accounts should be preserved and what is the penalty for non maintenance of books of accounts. In this article we will discuss few rules regarding maintenance of Company Accounts as per Companies Act, 2013.
Maintaining Company Books of Accounts
As per Companies Act, 2013 books of accounts of the Company should be maintained on accrual basis and according to double entry system of accounting. The Books of Account of Company must give true and fair view of the state of affairs of the Company including its branches, if any.
Every Company has to end its financial year on 31st March every year.
If a Company has incorporated on or after 1st day of January, First Financial Year of the Company shall end on 31st March of the following year.
Every Company is required to prepare financial statements. Financial Statements include Balance Sheet, Profit & Loss Account / Income Expenditure Account, Cash Flow Statement and statement of changes in equity.
The Company Accounts can be maintained manually or electronically through accounting software. There are many accounting software available in market e.g. QuickBooks Online or Tally Accounting Software.
How many years should Company Accounts be preserved ?
As per Companies Act, 2013 the books of accounts of Company should be maintained upto eight years. This means all the vouchers, bills, invoices etc should be maintained in good condition upto eight years. If by virtue of any other applicable law, the Company is required to preserve the books of accounts for longer period than eight years, the Company is obliged to do so.
Consequences of not maintaining books of accounts
Companies Act, 2013 has given huge responsibility of maintenance of Books of Accounts of Company to the Managing Director, Directors, CEO, CFO, Whole Time Director, Independent Director to ensure compliance. There is provision of penalty ranging from Rs. 50000/- to Rs. 500000/- and/or imprisonment up to one year in case of violation.
It is therefore, very important to maintain books of accounts of the Company as per law.