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CMA Foundation · Fundamentals of Financial and Cost Accounting · Four Frameworks of Accounting and Forms of Organization

Under the Companies Act, 2013, which of the following correctly describes the books of account that a company must maintain?

A company must keep proper books of account on the accrual basis and double entry system. These are kept at the registered office or another place decided by the Board. Cash-basis or single-entry records, or relying only on tax requirements, do not meet the Companies Act requirement.

  1. AOnly a cash book, because other records are optional for private companies
  2. BBooks on accrual basis and double entry system, kept at the registered office or another place decided by the BoardCorrect
  3. CBooks on cash basis and single entry system, kept at the place of the auditor
  4. DBooks only as required by the income tax authorities, with no requirement under company law

Explanation

The Companies Act requires every company to keep proper books of account on the accrual basis and the double entry system. They are kept at the registered office, or at another place the Board decides, with notice to the Registrar. Cash-basis or single-entry maintenance does not satisfy this requirement.

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