Book Of Accounts

Loose-leaf Books of Account

Loose-leaf books of account are printed and bounded journals and ledgers. Recording can be done using Microsoft Excel.

Computerized Books of Account

Computerized book of account is an accounting program that facilitate efficient and fast record keeping.

Books of Accounts – Minimum Requirements

The type of books the business will maintain depends on many factors such as the size of the business and financial capacity. However, regardless of the type of book of accounts the company would maintain, below are the minimum requirement:

• General Journal – General journal is referred to as the book of original entry. It records business transaction in order of date using the principle of “debit and credit”.
• General Ledger – General ledger is referred to as the book of final entry.  It summarized all the journal entries of an account to get the ending balances.
• Cash Receipt Journal – Cash receipt journal is a special journal used to record cash sales and/or collection of receivables.
• Cash Disbursement Journal – Cash disbursement journal is a special journal used to record cash payments of expenses and/or payables.
• Sales Journal – Sales journal is a special journal used to record sales on credit (receivable from customer)
• Purchase Journal – Purchase journal is a special journal used to record purchases on credit (payable to supplier)

Maintaining Book of Accounts for Company

All companies incorporated in India are required to mandatorily maintain book of accounts under the Companies Act, 2013. In addition, the Companies Act, a company registered in India will also be mandated by the Income Tax Act to maintain records.

Books of accounts/accounting records have to be maintained if the gross receipts are more than Rs. 1,50,000 in 3 preceding years for an existing profession. This also applies to a newly set up profession whose gross receipts are expected to be more than Rs. 1,50,000.

How long should these books be maintained?

Each year’s books must be kept for a period of 6 years from the end of that year.

Failure to maintain books of accounts: If you fail to maintain books of accounts as prescribed, you may be charged a penalty of Rs 25,000 or in some cases where you may have international transactions and you have failed to maintain information and documents for such transactions – 2% of the value of each international transaction.It would be diligent to maintain your books of accounts and keep track of all your expense and income in a methodical way.

Who is needed to keep books of accounts if they are covered by section 44AA (1)?

The following books of accounts and papers must be kept in accordance with Rule 6F:

1. A cash register,
2. If the accounts are kept under the commercial style of accounting, keep a journal.
3. The ledger
4. serially numbered carbon copies of invoices and carbon copies or counterfoils of receipts issued in excess of INR 25.
5. Original invoices for costs over INR 50, as well as petty expense payment vouchers. However, if the person’s cash book provides sufficient details about the expenditures spent, vouchers are not required for expenses up to INR 50.

Persons engaged in the medical profession are also expected to keep a daily case register in the specified Performa (Form No. 3C) and an inventory of stock of pharmaceuticals, medicines, and other consumables accessories used for the purpose of the profession at the beginning and end of the year.

Ledgers, day-books, cash books, account-books, and other books, whether retained in printed form or as print-outs of data saved in a floppy, disc, tape, or any other type of electro-magnetic data storage device, have also been specified u/s 2(12A).

The electronic record as specified in clause (t) of sub section (1) of section 2 of the Information Technology Act, 2000, has been included in the document u/s 2(22AA).