Bookkeeping and Accountancy

The term bookkeeping refers to the activity or occupation of keeping records of the financial affairs of a business.

Without book keeping its not possible to measure the true success and failure of the business at any particular time, book keeping is a process that helps in keeping accurate financial records of the company.

Hence in order to have a true and fair view of the state of affairs of the company and for the purpose of financial management and budgetary control measures it is recommended to keep the books of accounts of the company in an organized manner.

Apart from the practical need of the book keeping, there are some cases where the law has mandated the keeping of books of accounts:

Section 44AA of the  Income Tax Act, 1961 deals with the provisions related to the maintenance of books of accounts in certain cases:

As per sub-section 1 of section 44AA of the Act, every person carrying on the profession of legal, medical, engineering and architectural, accountancy and professional consultancy or interior decoration shall mandatorily keep their books of accounts and other relevant documents as may enable the assessing officer to compute his total income in accordance with the provisions of this act.

As per sub-section 2 of section 44AA of the Act Every person carrying on business or profession other than those professions mentioned above shall keep their books of accounts if:

1. The income from business or profession exceeds Rupees one lakh twenty thousand rupees or total sales, gross receipts or turnover of the business or profession exceeds Rupees ten lakhs in any of the three years immediately preceding the relevant financial year or
2. If the business or profession is newly set-up in any previous year if the income from business or profession is likely to exceed Rupees one lakh twenty thousand or total sales, turnover or gross receipts of the business is likely to exceed rupees ten lakhs in that previous year or
3. Where the profits and gains from business and profession are deemed to be the profits and gains of the assessee  under section 44AE or Section 44BB and 44BBB as the case may be and the assessee has claimed his income to be lower than the deemed profits under the respective sections during such previous year or
4. Where the profits and gains from business and profession are deemed to be the profits and gains of the assessee  under section 44AD and the income exceeds the maximum amount which is not chargeable to tax in any previous year.

Apart from the Income Tax Act, 1961, Companies Act, 2013 also contains a provision for keeping the books of accounts and it is to be noted here that the Companies Act, 2013 will be applicable on all companies registered  under the Companies Act, 2013 but the other business concerns like individuals, proprietors and partnership firm are not required to comply with the provisions of the companies act, 2013

As per section 128:

1. Every company shall at its registered office prepare and keep the books of accounts and other relevant documents and financial statements for each financial year which give a true and fair view of the state of affairs of the company including its other offices or branches if any.

2. The books of accounts can be kept in electronic or physical form

3. The accrual basis of financial accounting and double entry system shall be adopted by the company for the preparation of its books of accounts and financial statements

4. The board may decide to keep all or any of the books of accounts or financial papers at such other place in India and the intimation of the same shall be filed with the registrar of companies within 7 days

5. The books of accounts of the company shall be open for inspection by the director during the business hours

6. The summary books of accounts of the company kept and maintained outside India shall be sent to the registered office of the company on a quarterly basis.

7. The books of accounts shall be kept related to a period not less than eight financial years immediately preceding financial year, where the company was not in existence for a period of eight years the books of accounts related to the financial years from the date of incorporation of the company shall be kept.