Corporate Accounting and Financial Management · Introduction to Corporate Accounting

Books of Account and Financial Statements under the Companies Act

Updated 11 October 2026 · Fact-checked

Section 128 requires every company to keep books of account on the accrual basis and double entry system at its registered office. Section 129 requires financial statements that give a true and fair view, follow notified accounting standards and use the Schedule III format. Answer by stating the provision, applying it to the facts, then concluding.

Understand Books of Account and Financial Statements under Companies Act

Books of account are the company's permanent record of transactions. Financial statements are the summary built from them. The Companies Act, 2013 controls both. Section 128 governs how the records are kept. Section 129 governs how the summary is prepared and presented.

Under section 128(1), every company must keep, at its registered office, books of account and other relevant books and papers. They must give a true and fair view of the company's affairs, including branches. They must be kept on the accrual basis and the double entry system. The Board may decide to keep them at another place in India. If it does, the company must file a written notice with the Registrar within seven days, giving the full address. Books may also be kept in electronic mode in the prescribed manner.

A company with a branch in India or abroad is deemed to comply if proper books for the branch transactions are kept at the branch, and proper summarised returns are sent periodically to the registered office or the other place. Any director may inspect the books during business hours. Inspection of a subsidiary's books needs a person authorised by a Board resolution. Officers and employees must give reasonable assistance.

Books of not less than eight financial years immediately preceding a financial year must be kept in good order, with the vouchers. If the company has existed for less than eight years, all the preceding years are covered. If an investigation is ordered under Chapter XIV, the Central Government may direct a longer period.

Section 129 deals with financial statements. They must give a true and fair view, comply with the accounting standards notified under section 133, and follow the Schedule III form. They are laid before every annual general meeting. The notes forming part of the statements are included in the term. A company with subsidiaries must also prepare consolidated financial statements and lay them before the AGM. Under Schedule III, the main components are the Balance Sheet, the Statement of Profit and Loss, and the notes. Cash flow statement and statement of changes in equity are covered in the related standards and Schedule III; confirm the exact component list in your ICSI study material.

Key rules to remember

Basis and system of books (s.128(1)): Books of account = accrual basis + double entry system; Kept at the registered office, or another place in India with notice to the Registrar within 7 days.
Retention period (s.128(5)): Keep books for not less than 8 financial years immediately preceding, with vouchers; For a company under 8 years old, keep all preceding years. The Central Government can direct longer if an investigation is ordered under Chapter XIV.
Penalty for s.128 default (s.128(6)): Fine: minimum ₹50,000, maximum ₹5,00,000; Applies to the MD, whole-time director in charge of finance, CFO or other person charged by the Board. No imprisonment now.
Standard of financial statements (s.129(1)): True and fair view + notified accounting standards (s.133) + Schedule III form; Insurance, banking and electricity companies, and others with a form under their own Act, are excluded from this sub-section.
Penalty for s.129 default (s.129(7)): Imprisonment up to 1 year, or fine ₹50,000 to ₹5,00,000, or both; Falls on the MD, whole-time director in charge of finance, CFO or other person charged by the Board; if none, all directors.
Reopening of accounts (s.130): Only on a court/Tribunal order for fraud or mismanagement; not earlier than 8 financial years back; Application may come from the Central Government, Income-tax authorities, SEBI, other regulators or a person concerned.

How to solve Books of Account and Financial Statements under Companies Act questions

Use the same sequence for any theory or case-based question on this topic. It matches the ICSI answer style: provision, analysis, conclusion.

1Identify what is asked: keeping of books (s.128), preparation and presentation (s.129), reopening (s.130), or a special company (s.378ZE, s.381).
2State the rule in plain words and cite the section and sub-section.
3List the exact conditions: place, basis, system, time limits, who is liable.
4Apply each condition to the facts given. Note dates, number of days, years and the officer involved.
5Check for exceptions, such as the branch deeming rule, electronic mode or the s.129(1) provisos.
6Check the consequence: penalty, who is punishable, and the amount.
7Write a one-line conclusion that answers the question directly.

Quickest way: Three-question check

When to use it: Use this for short case questions when you have only a few minutes.

Where and how are the books kept? Registered office or other place, accrual basis, double entry.
How long? Eight financial years, with vouchers.
Who is liable and what is the penalty? Name the officer and the fine range.
Then write the section number next to each answer and conclude in one line.

Common mistakes in Books of Account and Financial Statements under Companies Act

Saying books must be kept only at the registered office.
Students remember the main rule and skip the first proviso.
Fix: Add that the Board may decide on another place in India and must file a notice with the Registrar within seven days.
Writing that books must be kept for 8 years from the date of the entry.
The wording is remembered loosely.
Fix: Say not less than eight financial years immediately preceding a financial year, with the relevant vouchers.
Stating imprisonment as a penalty under section 128.
Older versions of the Act are remembered, and section 129 does carry imprisonment.
Fix: For s.128(6) write fine of ₹50,000 to ₹5,00,000 only. Imprisonment up to one year applies under s.129(7).
Treating notes as separate from financial statements.
Students think only of the balance sheet and profit and loss.
Fix: Quote the Explanation to s.129: a reference to financial statements includes notes annexed to or forming part of them.
Ignoring consolidated financial statements for a company with subsidiaries.
Students focus on standalone statements.
Fix: Mention s.129(3): consolidated statements are prepared in addition and laid before the AGM, with a separate statement of salient features of subsidiaries.
Letting a director inspect a subsidiary's books freely.
The inspection right under s.128(3) is remembered without its proviso.
Fix: Inspection of a subsidiary is done only by a person authorised by a Board resolution.

Worked examples

Example 1

Nilgiri Tea Ltd. decides by a Board resolution to keep its books of account at its factory office in Coonoor, Tamil Nadu, while its registered office is in Chennai. Is this permitted? What must the company do?

Show the solution

Provision: s.128(1) requires books to be kept at the registered office.
The first proviso allows the Board to decide on another place in India.
Condition: within seven days of the decision, the company must file a written notice with the Registrar giving the full address of that place.
Application: Coonoor is in India and the Board has decided, so the arrangement is allowed if the notice is filed.

Answer: Yes. The Board may keep the books at the Coonoor office, provided the company files a notice with the Registrar within seven days of the decision giving the full address.

Example 2

Kaveri Textiles Ltd. was incorporated 5 years ago. Its current financial year is 2026-27. For what period must it keep its books of account? Also state the penalty if the officer responsible fails to comply with section 128.

Show the solution

Provision: s.128(5) requires books for not less than eight financial years immediately preceding a financial year.
If the company has existed for less than eight years, books for all the preceding years must be kept, together with the relevant vouchers.
Application: the company is 5 years old, so it must keep the books for all preceding years since incorporation.
Penalty under s.128(6): the managing director, whole-time director in charge of finance, CFO or other person charged by the Board is liable.
The punishment is a fine of not less than ₹50,000 and up to ₹5,00,000.

Answer: Kaveri Textiles must keep books and vouchers for all preceding years since incorporation, as it is under eight years old. The responsible officer faces a fine of ₹50,000 to ₹5,00,000 for default.

Exam tips

Write section numbers with sub-sections, such as s.128(1) and s.129(7). It shows precision.
Learn the two penalty provisions side by side. Only s.129(7) has imprisonment.
In case questions, count days and years carefully: seven days for the notice, eight financial years for retention.
End each answer with a clear conclusion in one sentence, as ICSI expects.
Link s.129 with accounting standards and Schedule III. Examiners often combine them.

Practice questions from Introduction to Corporate Accounting

Books of Account and Financial Statements under Companies Act in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Books of Account and Financial Statements under Companies Act: frequently asked questions

Where must a company keep its books of account under section 128?

At its registered office. The Board may decide on another place in India, and the company must then file a notice with the Registrar within seven days giving the full address. Books may also be kept in electronic mode as prescribed.

For how long must books of account be kept?

For not less than eight financial years immediately preceding a financial year, with the relevant vouchers. A company under eight years old keeps all preceding years. The Central Government can direct a longer period if an investigation is ordered.

What must financial statements comply with under section 129?

They must give a true and fair view, comply with the accounting standards notified under section 133 and follow the Schedule III form. They are laid before the AGM. Deviations from the standards must be disclosed with reasons and financial effects.

Can a company reopen its books of account?

Only if a court or the Tribunal orders it under section 130, on an application, because earlier accounts were prepared fraudulently or the affairs were mismanaged. No order can cover a period earlier than eight financial years immediately preceding the current one, unless a longer retention period was directed.