Chapter IX of Companies Act – Accounts of Company

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 Chapter IX ACCOUNTS OF COMPANY
Section 128 – Books of Account to be kept by company

1. Books of Company can also

Every company account If books kept at any
keep the aforesaid
shall prepare and 2. Financial other place, company
documents at any
keep at registered statements shall inform ROC with a
other place in
office 3. Relevant books notice in writing within
India if BOD
and papers 7 days of the decision in
decides
FORM AOC-5. The notice
Of the company shall give the address of
and its branch the other place
offices
• Such books should be made on accrual basis and according to double entry system of accounting

• They shall explain all the transactions effected at registered office and branches

• The financial statements should give a true and fair view of the affairs of the company.

• Company can keep the books and papers in ELECTRONIC MODE in the manner as prescribed.

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In case of branch office(whether in India or outside
• The books (in India) shall be open for inspection by
India) it is even allowed that
any director during business hours.
❖ The books of accounts are kept at branch office
AND
• In case of financial Information maintained outside
❖ Periodic summarised returns are sent by branch
India, copies of such information shall be
office to the registered office or such other place.
maintained and produced for inspection by any
director subject to conditions prescribed.

• The inspection in respect of books of subsidiary

company shall be done only by person authorised
The officers and employees shall give all assistance to by BOD by a resolution
the person making inspection

Financial statements means:-

• Balance sheet
• Profit & Loss A/c
• Cash flow statement
• Notes and annexures to
financial statements

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Company shall maintain books of accounts and
vouchers for a period of atleast 8 financial years.
(In case of company having existence less than 8 years,
it shall keep books and vouchers for all the preceding
years.)
Where investigation has been ordered in respect of
the company, CG can ask the company to keep books
for period exceeding 8 years.

Penalty for contravention for above provisions

Penalty on • Imprisonment – Maximum 1 year
• Managing Director,
• Whole time director in charge of finance, • Fine- Minimum Rs. 50 Thousand
• Chief Financial Officer or Maximum Rs. 5 Lakh
• any other person who has to comply with
the provisions of this section OR BOTH

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 Extract of Rule 3 of The Companies (Accounts) Rules (NOT RELEVANT)

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

6) The company shall intimate to the Registrar on an annual basis at the time of filing of financial statement-
(a) the name of the service provider;
(b) the internet protocol address of service provider;
(c) the location of the service provider (wherever applicable);
(d) where the books of account and other books and papers are maintained on cloud, such address as provided by the service provider.

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 Extract of Rule 4 of The Companies (Accounts) Rules

❖ The summarised returns of the books of account of the company kept and maintained outside India shall be sent to the
registered office at quarterly intervals, which shall be kept and maintained at the registered office of the company and
kept open to directors for inspection.

❖ Where any other financial information maintained outside the country is required by a director, the director shall furnish
a request to the company setting out the full details of the financial information sought, the period for which such
information is sought.

❖ The company shall produce such financial information to the director within fifteen days of the date of receipt of the
written request.

❖ The financial information required shall be sought for by the director himself and not by or through his power of agent or
representative.

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 Concept Check

Can the books of account be kept at any place other than registered office?

Yes, they can be kept at any other place other than registered office. About such place, a notice shall be
given to ROC within 7 days of the decision in FORM AOC 5
 Practice Questions

For atleast how many years a company shall keep books of account and vouchers for particular financial year?

1. 5 years
2. 3 years
3. 8 years
4. 10 years

Ans: Option 3

What shall be the maximum penalty that can be imposed on a the person in default if books of account are not kept for the
minimum period?
1. 5 Lacs
2. 10 Lacs
3. 15 Lacs
4. 25 Lacs

Ans: Option 1
 Chapter IX Account of Companies --> Section 129 --> Financial Statement

The Financial statements shall

Comply with
Give True
+ accounting + Shall be in Point to remember:- If the
and fair view
standards as form as per financial statements of
of the affairs
per section Schedule III these companies do not
of company
133 disclose such facts which
are not required to be
disclosed by their
respective governing acts,
there is no problem.
Exceptions:- This section shall not apply to
Nobody will say that they
✓ Insurance Company
are not disclosing true and
✓ Banking company
fair view.
✓ Electricity company
✓ Any other company governed by a special act

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 Holding
Company

Owns/ Controls> 50% Owns/ control- 20% to

total share capital 49.9% share capital

Subsidiary Associate
company company
At AGM of the company, BOD shall lay the financial
statements for that financial year before the Provisions of this act shall apply to consolidated financial
company. statements also.

In case company has subsidiaries company or Company shall attach a statement containing salient
associate companies, company shall also prepare features of financial statements of its subsidiary or
consolidated financial statements in the same manner associate companies in Form AOC-1.
and lay them in AGM before the shareholders.

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If the company is not complying with the accounting
standards under section 133, company shall disclose
in the financial statements
o The deviation from the accounting standards
o The reasons for deviation
o The financial effect of the deviation.
CG has the power to exempt certain class of
companies, (if it considers in public interest), for
complying with certain provisions of this section with
conditions or unconditionally.

Penalty for contravention

Penalty on
• Managing Director, • Imprisonment – Maximum 1 year
• Whole time director in charge of finance,
• Chief Financial Officer or • Fine- Minimum Rs. 50 Thousand
• any other person who has to comply Maximum Rs. 5 Lakh
with the provisions of this section.
• In absence of any officers mentioned OR BOTH
above, ALL DIRECTORS

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 Concept Check

When can CG exempt any class of companies for complying with provisions of Section 129?

CG has the power to exempt certain class of companies, (if it considers in public interest), for complying
with certain provisions of this section
 Practice Questions

Section 129 is not applicable to?

1. Insurance company
2. Electricity company
3. Banking company
4. All of the above

Ans: Option 4

Statement containing salient features of subsidiary company’s financial statement shall be attached in Form No……..
1. AOC 1
2. AOC 2
3. AOC 3
4. AOC 4

Ans: Option 1
 Thanks

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