Maintaining a company book of Accounts is mandatory and is to be followed by all types of the companies under the Companies Act, 2013. Private Limited, One Person Company and Limited Companies include small companies which are supposed to maintain a book of accounts.
Therefore, the book of accounts of a particular company is prepared on the basis of the financial statements of a Company, which are in turn prepared from the company annual return filing.
Therefore, proper maintaining of the company accounts is necessary as well as mandatory.
Here is a brief on the overall procedure of the maintenance of the company’s book of accounts.
A company’s Book of Accounts includes all, namely: the book of accounts, vouchers, deeds, documents, writings, registers and minutes maintained in electronic form or on paper which all pertains to the transactions of the Company.
As per the Companies Act, 2013, a Company’s Book of Accounts is considered to be maintained properly if following two conditions are met:
The Accounts of the Company can be retained in a document format or as an electronic document. With the massive advancements in the field of technology; it is now recommended to keep all records in electronic format using software like QuickBooks or Tally.
This way, work can be done in a more organised manner with lesser efforts and at the same time, it is easy to access.
The accounting software mentioned above are very efficient in maintaining the accounts of the company in accrual basis and also on the double entry system of accounting which complies with the regulations of the Companies Act, 2013.
Also, software like QuickBooks is very user-friendly and can be operated without any specialised training on accounting.
As per the Companies Act, 2013, there are obligations upon a company for the maintenance of the book of accounts in good condition with relevant vouchers to any entry for up to eight years.
Newly incorporated companies are required to maintain the accounts and the vouchers for at least eight years from the date of incorporation.
In a situation where any regulation requires the books to be maintained for a longer period, then the concerned company would have to maintain the books even for a longer period.
The Managing Director, the Whole-Time Director, Chief Financial Officer, in charge of finance or any other individual associated with the company nominated by the concerned company’s Board of Directors, is responsible for ensuring the book of accounts of the enterprise.
In case any company does not maintain a Book of Accounts as per the rules laid down under the Company’s Act, a sum of 5 lakhs or imprisonment of 5 years can be levied as a penalty. Therefore, it is extremely crucial for a company to maintain the accounts of the company properly.