Where does a company keep its books of account?
A company keeps its books of account at its registered office. The board may decide to keep them at any other place in India, and the company then files a notice of that full address with the Registrar within seven days of the decision. The books are kept on the accrual basis and according to the double-entry system, and they are preserved for eight years.
Where are the books kept?
Section 128(1) places the books at the registered office. The other place, if the board chooses one, has to be in India. The notice is not a permission sought in advance. It tells the Registrar, within seven days, where the books are. Electronic records are allowed in the manner the rules prescribe. They are still the company’s books, and they are still kept at that place in India.
A branch office, in India or outside India, keeps proper books for the branch at the branch. Summarised returns of that branch are sent periodically to the registered office, or to the other place in India where the company’s books are kept. The branch outside India does not become the place where the company’s own books are kept.
What do the books contain?
Books of account include the sums received and spent and the matters for which they are received and spent, the sales and purchases, the assets and liabilities, and, where section 148 applies, the items of cost. They show a true and fair view of the state of the affairs of the company, including its branches. They are kept for not less than eight financial years immediately preceding the current year, together with the vouchers. A company that has not existed for eight years keeps them for its whole life.
Cost records are an addition for the class of companies engaged in production, processing, manufacturing, or mining that the Central Government prescribes. They are not a second set that every company keeps. Filing the financial statements is also a different act. Those statements go to the Registrar in Form AOC-4 within 30 days of the annual general meeting. Keeping the books is not that filing.
Who is responsible if they are not kept?
The duty sits with the managing director, the whole-time director in charge of finance, the chief financial officer, or any other person of the company whom the board charges with complying with section 128. If that person contravenes the section, the penalty is ₹50,000. The older punishment, a fine of ₹50,000 which could extend to ₹5 lakh, is not the present subsection. The registers of members and of directors are a separate set of records, described on the registers page.
Frequently asked questions
Four questions cover a place outside India, the seven days, cost records, and the penalty.
Can the books of the registered office stay outside India?
No. The books are kept at the registered office or at another place in India that the board decides. A branch outside India keeps its own books at that branch and sends summarised returns to India.
Is seven days counted from the year end?
No. The seven days run from the board’s decision to keep the books at another place in India. Filing the financial statements is a different form, with its own count from the annual general meeting.
Does every company keep cost records?
No. Particulars of cost are kept by the class of companies the Central Government prescribes under section 148. Section 128 applies to every company whether or not that class includes it.
Is the penalty still a fine of up to ₹5 lakh?
No. The person charged with the duty pays a penalty of ₹50,000. The older fine, which could extend to ₹5 lakh, is not the present subsection.
Sources
Books of account are section 128 of the Companies Act, 2013. The notice that the books are kept at another place in India is filed within seven days of the board’s decision. Financial statements are filed in Form AOC-4.