Every form of the company is it a private limited company, 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.
The books of the accounts of every company shall be maintained on accrual and double entry basis. Further, all the accounts of the company shall be kept at the registered of the company or at such other place in India as approved by the board of directors of the company.
What do books of accounts include?
The books of accounts of the company include the deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form pertaining to the transactions of the Company.
Rules regarding maintaining Company Accounts
- As per Companies Act 2013 every company is required to end its financial year on 31st March every year and prepare the Books of accounts accordingly.
- The Books of Account of Company prepared must give the true and fair view of the state of affairs of the Company including its branches if any.
- The accounts of the company shall be maintained manually or in electronic form.
- It is mandatory for every company 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 time period for preserving Company Accounts
As per the Companies Act, 2013it is mandatory for every form of company to preserve in good condition the book of accounts together with relevant vouchers to any entry for up to 8 years. Further, the freshly incorporated companies are required to maintain accounts and vouchers for up to 8 years from the date of incorporation. However, in case any other regulation requires books to be maintained for a longer period then it will be the obligation of the company to maintain books for a longer period.
Consequences of failing to maintain the Company Accounts
It is the responsibility of 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 to ensure that the book of accounts of the company is maintained properly.
It is very significant for the directors to fulfill their responsibility as in case they fail to do so a hefty penalty can be levied and the imprisonment can also be levied. In case of violation the amount of penalty range from Rs. 50000/- to Rs. 500000/- and/or imprisonment up to one year.