This article has been written by Ms.Taranjot Kaur, a 1st year law student of Panjab University,Chandigarh.

Introduction – 

Every company should prepare and keep its books of accounts and financial statement at the end of every financial year which give a true and fair view of the state of the affairs of the corporation and explains each transaction.The accounts should be maintained on accrual basis and double entry system of accounting.

According to section 2 (13) of Companies Act,books of account involve records maintained in connection with these:

The sum of money received or expanded by a company for which the receipts and expenditure has taken place.

The assets and liabilities of the company.

All sales and purchases of goods and services made by the company during the financial year.

According to section 148 of the Companies Act 2013 all the items of cost which belongs to any class of the companies specified under the said section.

The word “Book and paper” and “Book or Paper” is used to describe the books of account,vouchers,debt,minutes,documents,writings and registers maintained on paper or also in electronic form.

Board of directors must prepare a directors report in a proper format and must send it to shareholders along with audited accounts. The accounts should be maintained at the registered office of the company for every financial year.

A company can also maintain its books of accounts along with other documents if the company satisfies certain conditions as : 

Those records to be maintained in electronic form by the company should be accessible in India.

Records should be maintained completely in its original format without any alteration.

The information should be kept originally without any change or alteration as it was given by the branch office.

Books of accounts maintained should be kept in readable form.

There should be a proper system for storage,retrieval,display or printout of all the electronic records are in their place and all these records shall not be disposed unless guided by law.

Back up of all the records and books of accounts should keep in servers that are physically located in India periodically.

An intimation should file with registrar by the company annually at the time of filling of financial statement regarding the name of service provider,

Along with the internet protocol address of service provider,the location of the service provider,address of records maintained on cloud,as per the applicability.

The financial year of the company starts from 1^st April and ends on 31^st March of the relevant year.However,when a company incorporated on or after 1^st January of a year it has to end its account on 31^st March and financial year of the company would be from 1^st January to 31^st March.

Inspection of books of accounts – 

The company has to make all its records ready for inspection at registered office of the company or maybe the other place in India during business hours which includes all the financial information being maintained outside India.Further,a person who has given legal authority by the respective board of directors through a resolution can inspect the subsidiary company.

Section 240A-  Seizure of books and documents by inspector : 

(1) Where in the course of investigation under section 235 or section 237 or section 239 or section 247, the inspector has reasonable ground to believe that the books and papers of, or relating to, any company or other body corporate or managing director or manager of such company or other body corporate may be destroyed, mutilated, altered, falsified or secreted, the inspector may make an application to the Magistrate of the First Class or, as the case may be, the Presidency Magistrate, having jurisdiction for an order for the seizure of such books and papers.

(2) After considering the application and hearing the inspector, if necessary, the Magistrate may by order authorize the inspector

(a) to enter, with such assistance, as may be required, the place or places where such books and papers are kept ;

(b) to search that place or those places in the manner specified in the order ; and

(c) to seize books and papers he considers necessary for the purposes of his investigation.

(3) The inspector shall keep in his custody the books and papers seized under this section for such period not later than the conclusion of the investigation as he considers necessary and thereafter shall return the same to the company or the other body corporate, or, as the case may be, to the managing director or the manager or any other person, from whose custody or power they were seized and inform the Magistrate of such return :

Provided that the inspector may, before returning such books and papers as aforesaid, place identification marks on them or any part thereof.

Conclusion – 

Under company law the books of accounts are maintained by the company every financial year.They have to be prepared according to the accounting concepts and conventions i.e should be prepared on accrual basis and double entry system of accounting.Sometimes the need of inspection of these accounting books and documents arise because of misconduct or some fraudulent practices which lead the central government to appoint inspectors for investigation of these books and documents.The inspector have certain powers and duties among which there is the power of seizure of books which can be done whenever the need is felt.Inspector after the search of these books should return them to the magistrate of company and also inform them of doing so.On the other hand,company should also keep the records,books and documents ready and should present them whenever asked.

References – 

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