ACCOUNTS OF THE COMPANY AS PER COMPANIES ACT 2013
A company has to maintain certain accounts and other relevant books to record the financial transactions during a financial year, these accounts gives a clear picture of what all transactions took place in that financial year. The company has to maintain books such as the cash flow statement which deals with all the cash transactions, the revenue of that year from all its areas, whether it be from operational activities, whether it be from its investing activities that where all the company had invested in that year and how much did the company lose or gained in that financial year, it also keeps the record of all the financing activities it dealt in that year.
The company has to maintain a record of all the sales and purchases that happened in that financial year. The company has to keep the record of its assets and liabilities that are currently available with the company in that financial year in the balance sheet of the company.
The company needs to record all these so as to manage the availability of funds, the company has to pay certain taxes each year and for that it is necessary to present a record of all the transactions that took place by the company to be able to pay the required taxes which the company is liable to pay, the company pays dividends to its shareholders according to the profits and losses that occurred during that financial year and those could only be calculated only through the record of all the transactions that took place during that financial year. (a financial year starts from 1st of April every year and it ends in 31st March, next year).
The section 129 sub-section (1) of the companies act states that the financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133 of the companies act and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III. There are certain cases in which certain companies dealing with certain matters are allowed to not disclose each and everything in the financial statements, as there are certain acts that are made to safeguard things related to those matters.
For example, an insurance company is allowed to not to disclose matters which are not required to be disclosed under the Insurance act, 1938.
Section 128 of the companies act 2013 deals with the books of accounts that has to be maintained by a company during a financial year. The subsection (1) of section 128 deals states that the record of transactions that has to be maintained by a company must be on accrual basis which means that transactions must be recorded at the time when the transaction took place not during the time of payments of the transaction.
It also states that the company could keep these records anywhere in the country, in any branch or place decided by the board of directors, but it has file with a registrar, writing a notice that where all the books od accounts and related documents are to be kept with full address within 7 days of the time, the decision is taken. The company could also maintain the books of accounts on electronic mode in the prescribed manners.
The sub-section (3) of section 128 states that the books of accounts and other related documents maintained by the company within India must be open for inspection at the registration office by the directors at any time during the business hours, and if in case the accounts of the company are maintained outside India, then the copy of such accounts must be kept at the registered office.
The inspection could only be done by the board of directors of the company or any other person who is authorized to do such operation by the company. The officers and all the other employees has to give full cooperation when an inspection is done, it is stated under the sub-section (4) of section 128.
If any director or any member of the board of directors intervenes or contravenes any provisions that are mentioned in the sub-sections (3) or (4), the person or the member of board of director is liable for imprisonment for a period of up to one year or a minimum fine of ₹50,000 which may extend up to ₹5 lakhs and in certain cases it could lead to both.
The sub-section (2) of section 129 of the companies act 2013 states that the board of directors of the company are required to showcase the financial statements in the annual general meetings before the shareholders for the financial year. In case the company has one or more subsidiaries, it shall also present the financial statements of it to the public in the annual general meeting.
According to section 130 of the companies act 2013, a company shall not re-open and recast its books of accounts unless an application for it has been made by the Central government, the Securities and Exchange Board of India (SEBI) or any other statutory regulatory body or authority or any concerned person and an order is made by the court of competent jurisdiction, that the accounts were earlier made in a fraudulent manner or the accounts were mismanaged in that period, proposing a doubt on the financial statements of that year.
If the board of directors of a company feels that the financial statements of the company or the report of the board of directors do not comply with the provisions of section 129 or 134 of the companies act 2013, they may prepare revised report or revised balance sheet as required in respect of any of the three preceding financial years, after obtaining approval from the required authorities or tribunals on an application made by the company in such account.
Author: Harsh Chaudhary,
LLOYD LAW COLLEGE 1st year