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Annual Filing Private Limited Company – Book of Accounts

Narendra Kumar

| Updated: Nov 25, 2017 | Category: Annual Compliance

Book of Accounts

Each company whether a Private Limited Company, Limited Company or One-Person Company is required to file the annual return after the end of each financial year. The procedure of the annual filing of a company is simple.

Maintenance of Book of Accounts

To comply with the laws, it is mandatory for every type of company to maintain the Book of Accounts in the specified format as per the Companies Act 2013. Maintenance of the book of accounts also helps in control over the business.

Without maintaining the book of accounts, directors of the company will not be even aware of whether the company is incurring losses or profits. Filing of income tax return would also be difficult without a proper book of accounts.

Therefore with the help of following information company will maintain proper Book of Accounts of the company:

  • Details regarding the money received and expended by the company and the matter in respect of which the transaction took place;
  • All sales and purchases of the company;
  • All the assets and liabilities of the company;
  • All other financial or business transactions.

Preparation of the Financial Statements of the Company

It is required for each type of company to prepare financial statements of the company on the basis of the Book of Accounts.

A financial statement is a statement which provides necessary information regarding the financial position, performance, and changes in the financial position.

Financial Statement includes a balance sheet, profit and loss account and explanatory notes forming part thereof.

Maintenance of Statutory Registers and Records

It is required for Private Limited Company to maintain various statutory registers and records as required under the Company law such as Register of shares, Register of Members, Register of Directors etc.

With the incorporation documents of the company, Board Resolutions, Minutes of the Board Meetings and Annual General Meeting are also required to be preserved by the Company. These records are required to be kept at the registered office of the company and shall be open for inspection to its members during business hours.

Books of account of every company relating to a period of at least eight financial years should be preserved and kept.

Appointment of the Auditor

Within one month of the company incorporation[1], it is required for every company to appoint its first Auditor. A qualified Chartered Accountant in practice, or a firm of Chartered Accountants can be appointed as the Auditors of the Company.

However, following persons/entities cannot be appointed as Auditor of a Company:

  • A body corporate;
  • An officer or employee of the company (irrespective of if he/she is a qualified Chartered Accountant);
  • A person who is a Partner or Director of the company;
  • A person who is indebted to the company;
  • A person who is in whole-time employment elsewhere;

Auditor of the Company must be independent. An auditor of the company will be appointed for the period of Five years and form ADT-1 will be filed for an appointment within 30 days of appointment.

Statutory Audit of the Accounts of the Company

In the management of the company, audit plays an important role. As per Companies Act, 2013 it is required for every company to appoint an Auditor to audit the accounts of the company and present their report on the accounts.

The auditor would audit the financial statements of the Company and submit a report to the members on the accounts of the Company.

The auditor will mention in his report whether the accounts of the Company give a true and fair view of the affairs of the Company.

In case auditor is not satisfied with the information/clarification provided in the financial statements of the Company, or auditor has any reservation in respect of the book of accounts maintained by the Company, then it is the duty of the auditor to bring the facts to the attention of the stakeholders by qualifying the Audit report.

Director’s Report

Directors’ Report will be prepared with all the necessary information as per Section 134 of the Companies Act, 2013.

Annual General Meeting

It is required for every company to hold its Annual General Meeting of the shareholders every year. According to The Companies Act, 2013[2] it is mandatory for every type of company except One Person Company to hold one Annual General Meeting every year. There is no exemption.

The next Annual General Meeting of the company must be held within 15 months from the date of immediately preceding Annual General Meeting. However first Annual General Meeting of the company must be held within 18 months from the date of incorporation of the Company.

Audited financial statements of the Company with the Auditor’s Report and Directors Report are placed before the members of the Company in the Annual General Meeting.

After satisfying with the financial statement of the company members can adopt the Annual Accounts of the company after due consideration. Only after the approval by the shareholders in the meeting, financial statements of a company are considered final.

Filing of Financial Statements (AOC-4)

Within 30 days of the Annual General Meeting of the company, it is required for every Private Limited Company to file its Balance Sheet along with Profit and Loss Account and Director Report in form AOC-4 with the Registrar of Companies.

Annual Return (MGT-7)

After the audited financial statements are adopted by the Company at the Annual General Meeting it must be filed with the Registrar of Company. Annual Return consists the filing of the audited financial statements of the company in the prescribed format to the Ministry of Corporate Affairs. Within 60 days of the annual general meeting of the company, the annual return of the company must be filed with the registrar in Form MGT-7.

Non-Compliance

In case the Company fails to comply with the rules and regulations of the Companies Act, then the Company and every officer in default shall be punishable with fine for the period for which default continues.

Additional fees are required to be paid in case of delay filing, which keeps on increasing as the time period of non-compliance increases.

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Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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