BOOKS OF A/Cs - LEGAL REQ. FOR COs.


(Guest)

 

BOOKS OF ACCOUNTS - LEGAL REQUIREMENTS FOR COMPANIES    
                 
Auditor is required by sec.227 of the companies act,1956 to carry out investications  
as will enable him to form an opinion as to whether proper accounting records have been
kept by the company.            
                 
The question of what accounting records need to be kept by a company is also dealt  
within statute.              
                 
Section 209. Books of account to be kept by company        
                 
1[(1) Every company shall keep at its registered office proper books of account with respect to-
                 
                 
(a) all sums of money received and expended by the company and the matters   
  in respect of which the receipt and expenditure take place;    
                 
(b) all sales and purchases of goods by the company;         
                 
(c) the assets and liabilities of the company; and        
                 
3[(d) in the case of a company pertaining to any class of companies engaged in production, 
processing, manufacturing or mining activities, such particulars relating to utilisation of   
material or labour or to other items of cost as may be prescribed, if such class of companies is 
required by the Central Government to include such particulars in the books of account:]  
                 
Provided that all or any of the books of account aforesaid may be kept at such other place
 in India as the Board of directors may decide and when the Board of    
 directors so decides, the company shall, within seven days of the decision,     
file with the Registrar a notice in writing giving the full address of that other place.]  
                 
(2) Where a company has a branch office, whether in or outside India, the company shall be 
deemed to have complied with the provisions of sub-section (1),       
if proper books of account relating to the transactions effected at the branch office   
are kept at that office and proper summarised returns, made up to dates     
at intervals of not more than three months, are sent by the branch office to    
 the company at its registered office or the other place referred to in sub-section (1).  
                 
Note :                
                 
Sec.209 does not name the books of account that a company shall keep.    
                 
It may maintain whatever books it likes provided all the aforesaid transactions are   
recorded therein.              
                 
As per sec.2(8) books and paper and book or paper include accounts, deeds,  
vouchers,writings and documents.          
                 
So,                
                 
Proper books of accounts means          
                 
  books necessary to give a true and fair view of the state of affairs of the company
  and to explain its transaction.          
                 
  must be kept on accrual basis of accounting & according to double entry system
  of accounting.            
                 
As per sec.541(2)              
                 
The records must include as a minimum :        
                 
Cash book(cash/bank) containing entries on day to day basis      
                 
Purchase/Sales journals or some similar type of record supported by invoices.  
  (i.e) Buyers and sellers are capable of being identified.      
  (Detailed records are not required for goods sold by way of ordinary retail trade)
                 
                 
Year end stock summaries ( Prepared from stock records or physical counts)  
together with statements of ant stocktakings on which those summaries are based.  
  (Statement of stock counted on a cyclical basis during the year should be  
  retained)              
                 
Nominal Ledger.              
                 
Note :                
                 
Sec.209 says Transactions            
                 
Sec.541(2) says Minimum Records          
                 
Proper books of account as required by law are those which contain a record of all  
the transactions specified both in sec.209 and sec.541(2) in a manner that they present  
a true and fair view of the state of affairs of the financial position and profitability of the company.