Accounting For Companies
Maintaining Company Accounts
Maintaining of company Book of Accounts is mandatory for all types of companies under the Companies Act, 2013. Private Limited Company, One Person Company and Limited Company including Small Companies are required to maintain proper book of accounts. Further, the Books of Accounts of a Company is the basis on which financial statements of a Company are prepared for company annual return filing. Therefore, maintenance of proper company account is both mandatory and necessary. In this article, we look at the procedure for maintaining company account of book of accounts.
Company Book of Accounts
A company accounts or company book of accounts is includes the books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form pertaining to the transactions of the Company.
According to the Companies Act, 2013, a Company’s Book of Accounts are considered to be maintained properly if it satisfies the following two conditions:
- Books which are necessary to give a true and fair view of the state of affairs of the company is kept along with the documents required to explain the transactions.
- Books are kept on accrual basis and according to the double entry system of accounting.
Maintaining Company Accounts
The Company Accounts can be maintained in document format or as an electronic document. With advancements in technology, it is recommended that the accounts be maintained in electronic format through accounting softwares like Tally or Quick Books.
Both of the above accounting softwares maintain company accounts in accrual basis and on double entry system of accounting, thereby complying with the rules of the Companies Act, 2013. Further, accounting softwares like Quick Books are very easy to use and intuitive. Therefore, company accounts can be maintained properly with little or no prior accounting knowledge or experience.
Preserving Company Accounts
The Companies Act, 2013 casts an obligation upon a company to preserve in good condition the book of accounts together with relevant vouchers to any entry for upto 8 years. Newly incorporated companies are required to maintain accounts and vouchers for upto 8 years from date of incorporation. In case any other regulation requires books to be maintained for a longer period, then the company would be obliged to maintain books for a longer period.
Penalty for NOT Maintaining Company Accounts
The Managing Director, the Whole-Time Director, in charge of finance, Chief Financial Officer or any other person of a company nominated by the Board of Directors is responsible for ensuring that the book of accounts of the company is maintained properly.
In case, the Company does not maintain proper Book of Accounts, imprisonment or penalty of upto Rs.5 lakh can be levied under the Act. Therefore, it is vital to maintain the books of accounts of a company properly with professional help.