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CSEET · Fundamentals of Accounting · Introduction to Company Accounts

Under the Companies Act, 2013 text given, a company may re-open its books of account or recast its financial statements only when:

Section 130 allows re-opening or recasting only on an application by a specified authority or person concerned, followed by an order of a court of competent jurisdiction or the Tribunal finding fraudulent preparation or mismanagement that casts doubt on the accounts' reliability.

  1. AThe directors pass a board resolution to that effect
  2. BThe auditor requests it in the annual report
  3. CA majority of shareholders vote for it at the general meeting
  4. DAn application is made by a specified authority or person concerned and a court of competent jurisdiction or the Tribunal orders it on grounds of fraudulent preparation or mismanagement casting doubt on reliabilityCorrect

Explanation

Section 130(1) bars re-opening or recasting unless an application is made by the Central Government, Income-tax authorities, SEBI, another statutory regulator or a person concerned, and a court or the Tribunal orders it because earlier accounts were fraudulently prepared or affairs were mismanaged. Board or shareholder decisions alone are not enough.

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