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A. Introduction  

1. Section 128 of the Companies Act deals with the books of accounts to be kept by the company. As per this section every company shall prepare and keep at its registered office books of account and other relevant books and papers and financial statement for every financial year which gives a true and fair view of the state of affairs of the company, including that of its branch office or offices if any.

2. The Act recognizes the fact that books of accounts may be kept in electronic form also.

3. The books of accounts explain the transactions effected both at the registered office and its branches and such books shall be kept on accrual basis according to the double entry system of account.

4. All or any of the books of account aforesaid and other relevant papers may be kept at such other place in India as the Board of Directors may decide and the company shall within 7 days file with the registrar  and notice in writing.

5. The books of account and other relevant books and papers referred to above shall be retained completely in the format in which they were originally generated, sent or received.

6. Where a company has a branch office in India or outside, summarized returns must be sent periodically by the branch office to the company at its registered office.

7. The books of accounts of the company shall be open for inspection by the director during the business hours.

8. The summarized returns of the books of account of the company kept and maintained outside India shall be sent to the registered office at quarterly intervals.

9. Where any other financial information maintained outside the country is required by the director, the director shall furnish a request to the company. The company shall produce such financial information to the director within fifteen days of the date of receipt of the written request.

10. The financial information required under point 2.5 and 2.6 shall be sought for by the director himself and not by or through his power of attorney holder or agent or representative.

11. The inspection of any subsidiary of the company shall be done only by the person authorized in this behalf by a resolution of the Board of Directors.

12. The books of account of every company relating to a period of not less than eight financial years immediately preceding a financial year, or where a company has been in existence for a period less than eight years, in respect of all preceding years together with vouchers relevant to any entry in such books of account shall be kept in good order.

B. Manner of books of account to be kept in electronic mode-Company rules

1. The books of account and other relevant books and papers maintained in electronic mode shall remain accessible in India so as to be usable for subsequent reference.

2. The books of account and other relevant books and papers shall be retained completely in the format in which they were originally generated, sent or received or in a format which shall present accurately the information generated, sent or received, or in a format which shall present accurately the information generated, sent or received and the information contained in the electronic records shall remain complete and unaltered.

3. The information received from branch offices shall not be altered and shall be kept in a manner where it shall depict what was originally received from the branches.

4. The information in the electronic record of the document shall be capable of being displayed in a legible form.

5. There shall be a proper system for storage, retrieval, display or printout of the electronic records as the Audit Committee, if any or the Board may deem appropriate and such records shall not be disposed of or rendered unusable, unless permitted by law.

(The break-up of the books of account and other books and papers of the company maintained in  mode, including at a place outside India, if any, shall be kept in servers physically located in India on a periodic basis)

6. The company shall intimate to the Registrar on an annual basis at the time of filing of financial statement-

i. The name of the service provider

ii. The internet protocol address of the service provider

iii. The location of the service provider(wherever applicable)

iv. Where the books of account and other books and papers are maintained on cloud, such address as provided by the service provider.

7.  Instead of providing the list of Books of Accounts to be prepared in the section, the same has been provided by way of definition of “Books of Accounts”

C. Consequence of non-compliance

Person responsible for non-compliance

Imprisonment

Fine

Managing director, Whole time director in charge if finance, the CFO or any other person of the company charged by the board.

May extend to one year OR

Rs. 50000 or both.

D. Books of Account – Definition under Sec 2(13)

“books of account” includes records maintained in respect of—

(i) all sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place;

(ii) all sales and purchases of goods and services by the company;

(iii) the assets and liabilities of the company; and

(iv)  the items of cost as may be prescribed under section 148 in the case of a company which belongs to any class of companies specified under that section;

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Category Corporate Law, Other Articles by - CA Sripriya K 



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