PROVISIONS OF COMPANIES ACT 1956 THE PROVISIONS OF THE COMPANIES ACT 1956 REGARDING MAINTENANCE OF BOOKS OF ACCOUNTS ARE: 1.ACCORDING TO SECTION 209 OF COMPANIES ACT 1956, IT IS THE DUTY OF EVERY COMPANY TO KEEP AT ITS REGISTERED OFFICE PROPER BOOKS OF ACCOUNT WITH RESPECT TO: • ALL SUMS OF MONEY RECEIVED AND EXPENDED BY THE COMANT AND THE AMTTERS IN RESPECT OF WHICH THE RECEIPTS AND THE EXPENDITURE TAKE PLACE. • ALL SALES AND PURCHASES OF GOODS BY THE COMPANY. • ALL ASSETS AND LIABILTIES OF THE COMPANY. • IN CASE OF THE COMPANY WHICH IS ENGAGED IN PRODUCTION,PROCESSING,MANUFACTURING OR MINIG ACTIVITIES,THE PARTICULARS RELATING TO THE UTILISATION OF MATERIAL AND LABOUR OR TO OTHER ITEMS OF COST AS MAY BE PRESCRIBED IF SUCH A CLASS OF COMPANIES IS REQUIRED BY THE CENTRAL GOVERNMENT TO INCLUDE SUCH PARTICULARS IN THE BOOKS OF ACCOUNT.
2.BOOKS ARE NOT CONSIDERED TO BE PROPER BOOKS OF ACCOUNT • IF THERE ARE NOT KEPT SUCH BOOKS AS ARE NECESSARY TO GIVE TRUE AND FAIR VIEW OF THE
STATE OF AFFAIRS OF THE COMPANY OR BRANCH OFFICE,AS THE CASE MAY BE AND TO EXPLAIN ITS TRANSACTIONS,AND • IF SUCH BOOKS ARE NOT KEPT ON ACCRUAL BASIS AND ACCORDING TO THE DOUBLE ENTRY SYSTEM.
3.THE BOARD MUST DECIDE TO KEEP THE BOOKS OF ACCOUNT AT SOME OTHER PLACE IN INDIA.IN THAT CASE THE COMPANY SHOULD WITHIN SEVEN DAYS, FILE A NOTICE WITH THE REGISTRAR GIVING FULL ADDRESS OF THE NEW PLACE. 4.BOOKS OF ACCOUNT REALTING TO THE TRANSACTION AT THE BRANCH OFFICE SHOULD BE KEPT AT THAT OFFICE AND PROPER SUMMARISED RETURNS,MADE UPTO THE DATE OF INTERVALS OF NOT MORE THAN 3 MONTHS,SHOULD BE SENT BY THE BRANCH OFFICE TO THE COMPANY AT ITS REGISTERED OFFICE OS SUCH PLACE WHERE BOOKS OF ACCOUNT ARE KEPR AS DECIDED BY BOARD OF DIRECTORS. 5.THE BOOK OF ACCOUNT SHOULD BE SO KEPT AS TO GIVE TRUE AND FAIR VIEW OF STATE OF AFFAIRS OF THE COMPANY OF THE BRANCH OFFICE AND ALSO TO EXPLAIN ITS TRANSACTION 6.THE COMPANY MUST PRESERVE THE BOOKS OF ACCOUNT,VOUCHERS,ETC. FOR EIGHT YEARS IMMEDIATELY PRECEDING THE CURRENT YEAR. IF EIGHT YEARS HAVE NOT ELAPSED SINCE THE INCORPORATION OF THE COMPANY,THE BOOKS OF ACCOUNT FOR ALL YEARS SINCE THE INCORPORATION SHOULD BE PRESERVED BY THE COMPANY.
7.THE BOOKS OF THE ACCOUNT AND OTHER BOOKS AND PAPERS ARE OPEN TO INSPECTION BY ANY DIRECTORS DURING THE BUSINESS HOURS OF THE COMPANY.UNDER SECTION2(8),THE TERMS ‘BOOKS AND PAPERS’ INCLUDES ACCOUNTS,DEEDS,VOUCHERS AND DOCUMENTS. 8.IT IS THE DUTY OF THE FOLLOWING PERSON TO TAKE ALL RESPONSIBLE STEPS TO SEE THT BOOKS ARE MAINTAINED UNDER SECTION 209 OF THE COMPANIES ACT,1956. • THE MANAGER DIRECTOR OR MANAGER OF THE COMPANY • WHERE THE COMPANY HAS NO MANAGING DIRECTOR OR MANAGER,EVERY DIRECTOR OF THE COMPANY • EVERY OFFICER AND OTHER EMPLOYEES AND AGENTS OF THE COMPANY. 9.IN CASE OF AN OFFENCE, SUCH PERSON SHALL BE WITH IMPRISONMENT FOR A TERM WHICH MAY EXTEND SIX MONTHS OS WITH A FINE WHICH MAY EXTEND TO RUPEES ONE THOUSAND OR WITH BOTH.
10. UNDER SECTION 209A , BOOKS OF ACCOUNTS AND OTHER BOOKS,ETC.SHALL BE OPEN TO INSPECTION OF THE GOVERNMENT AS MAY BE AUTHORISED BY CENTRAL GOVERNMENT.
PRINCIPLES OF DISCLOSURE OF INFORMATION IN FINANCIAL STATEMENTS: The auditor should check the following principles while presenting the financial statements: 1. Relevance – This principal involves that only profit or loss of the year on the working of the company should be disclosed. Capital profit should be separated from revenue profit. 2. Accuracy and reliability – According to this principle, assets should be valued as per the universally accepted basis. 3. Intelligibility – This principle aims at making a simple, precise and accurate presentation of accounts.
4. Miscellaneous information – Keeping in mind the truth and fairness of the accounts relevant information should be accounts disclosed in the financial statements. Part II of the Schedule VI of the Companies Act, 1956 makes references to materiality at various places. It is a matter importance in relation to the items in the Balance Sheet. No Standards have been formulated by which materiality can be judged. It is decided on the basis of auditors’ professional experience and judgement. Financial Statements should disclose such information which is material.
PROVISIONS OF COMPANIES ACT, 1956 REGARDING PRESENTATION OF FINAL ACCOUNTS OF COMPANIES
Section 210 to 223 of Companies Act, 1956 deals with the preparation and presentation of final accounts of companies. Sec 210 lays down that at every Annual General Meeting, the Board of Directors of the Company should lay before the Company a Balance Sheet as at the end of the financial year and a Profit and Loss Account for the Financial Year. Financial Year of a Company may be a period which is less than a calendar year. It may be more than a calendar year also but cannot exceed fifteen months, except where a permission has been granted by the Registrar to extend it upto eighteen months.
Sec 210 also provides that the Profit and Loss Account shall relate:
• In the case of the first Annual General Meeting of the Company, to the period beginning with the incorporation of the Company and ending with day which should not preced the day of the meeting by more than nine months, and • In the case of the subsequent Annual General Meeting of the Company, to the period beginning with the day immediately after the period for which the account was last submitted and ending with a day which shall not precede the date of meeting by more than six months, or in cases where an extension of time has been granted for holding the meeting, by more than six months and the extension so granted. Any officer or a responsible person who fails to comply with these provisions shall be punishable with imprisonment for a term which may exceed to six months or with fine which may exceed to Rs.1000/- or both. Every Balance Sheet of the Company must give a true and fair view of the state of affairs of the Company as at the end of the Financial Year. The Balance Sheet has to be prepared in either of the terms set out in Part I, Schedule IV of the
Companies Act, 1956 or as near thereto as circumstances admit. Part I(A) gives the horizontal form of the Balance Sheet and (B) gives the vertical form of the Balance Sheet. A Company may prepare its Balance Sheet in such other form as allowed by the Central Government. Part I of Schedule VI prescribes the form in which the Balance Sheet of the Company can be prepared. But no form is prescribed for preparation of the Profit and Loss Account. Part II sets out the requirements as to the Profit and Loss Account. According to Clause(2) of Part II of Schedule VI, the Profit and Loss Account: • Shall be so made out as clearly to disclose the results of the working of the Company during the period covered by the account, and, • Shall disclose every material feature including credits or receipts and debts or expenses.
The above provisions of the Balance Sheet and the Profit and Loss Account do not apply to:
Insurance Companies Banking Companies Any Company engaged in the generation and the supply of electricity, and,
Any other class of companies for which forms of Balance Sheet and Profit and Loss Account as prescribed under any other Act.
