The new law of Companies Act, 2013 has introduced major changes in the provisions related to Accounting and Financial Reporting. Some of the key changes related to Books of Accounts are as follows:
| Broad Areas | The Companies Act, 2013 | The Companies Act, 1956 |
| Depreciation | Schedule II
– It deals with depreciation of tangible assets as well as amortization of intangible assets. – It deals with only useful lives of tangible assets and does not prescribe depreciation rates. – Omits the provision for 100% depreciation on immaterial items i.e., assets whose actual cost does not exceed Rs. 5,000/- per item – Extra Shift Depreciation (ESD) working has been simplified. |
Schedule XIV
– It deals with only depreciation of tangible assets. – It contained rates of depreciation of tangible assets. – 100% Depreciation may be charged on assets whose actual cost does not exceed Rs. 5,000/- per item – Extra Shift Depreciation (ESD) for double and triple shifts had to be made separately in proportion of number of days. |
| Books of Accounts | Section 2(13) has given an inclusive definition of what constitutes ‘Books of Accounts’ | No separate definition prescribed. |
| Proper Books of Accounts | Section 128(1) states every company shall prepare & keep at its Registered Office, Books of Accounts and other relevant papers and Financial Statements for every Financial Year including its branch offices. Further, Books of Accounts shall be kept on accrual basis and according to double entry system of accounting |
Section 209(3) stated proper books of accounts shall not be deemed to be kept with (a) if they are not kept as are necessary to give a true and fair view of the state of affairs of the company/or branch office and to explain its transactions; and (b) if books are not kept on accrual basis and according to the double entry system of accounting |
| Books and Papers | As per section 2(12) Books and Paper includes, Books of Account, Deeds, Vouchers, Writings, Documents, Minutes and Registers maintained on paper or in electronic form | As per Section 2(8) Books and Paper include, Accounts, Deeds, Vouchers, Writings and Documents |
| Maintenance of Books of Accounts in electronic mode | Second proviso to section 128 permits to keep books of account or other relevant papers in electronic mode | No specific provisions regarding maintenance of books of accounts on electronic mode. |
| Financial Statement | Section 2(40) defines Financial Statements to include: -Balance Sheet as at the end of Financial Year – Profit & Loss Account/ Income & Expenditure Account -Cash Flow Statement -Statement of changes in Equity -Any explanatory note annexed to or forming part of any of the above (Note: One Person Company, Small Company and Dormant Company are exempted from the requirement of Cash Flow Statement) |
Definition of Financial Statement was neither available under the Act nor the term was used as reference in any of sections in the Act
As per Companies Rules, 2006 only Small Medium Enterprises are exempted from preparation of Cash Flow Statement |
| Financial Year | As per section 2(41)
-All companies should adopt to a uniform financial year of 01stApril to 31st March (12 month period) -All existing companies, not having their Financial Year closing on 31st March have to align to this requirement latest by 31st March 2016. |
-Financial Year was not defined in section 2, it mentioned that, – Financial year of a company will normally not exceed 15 months. – It can be extended to 18 months, after getting special permission from the Registrar |
| Summarized returns from branch offices | As per section 128(2) summarized returns of transactions effected at the branch office have to be sent to Registered Office or the other office as permitted in terms of section 128(1) periodically, though no specific time period has been defined. | As per section 209(2)summarized returns of transactions effected at the branch office have to be sent to Registered Office or the other office periodically within three months |
| Penalties in case of default in maintaining Books of Accounts | As per section 128(6), ManagingDirector, the Whole Time Director in charge of finance, the Chief Financial Officer or any other person of the company with the duty of complying with the provisions of this section is punishable with, – Imprisonment for a term which may extend to one year – Fine which shall not be less than Rs. 50,000 but may extend to Rs. 5 Lakhs – or both |
As per section 209 (5) (6) & (7)Managing Director, Manager, all Officers and other employees of the company with the duty of complying with this compliance were punishable with,
-Imprisonment for a term which could have extended to six months |
| Consolidated Financial Statement | Sub-Section (3) of Section 129provides that where a company has one or more subsidiaries, it shall prepare a Consolidated Financial Statement of the company. | Section 212 required the Balance Sheet of the Holding Company to include certain particulars as to its subsidiary company. |
We hope the above insights would help you to understand the changes related to Books and Accounts under Companies Act, 2013 in a much better way. You may get back to us for any more details on this topic at below mentioned contact details-
Malavika Bhatia | <malavika.bhatia@bluelotusstrategy.com> | M +91 98733 18440
Monika Bhardwaj | <monika.bhardwaj@bluelotusstrategy.com> |M +91 98915 60525
We will do our best to assist you with the compliance’s and removal of doubts / queries. However, please note that since the Act is new, certain clarifications are needed as there are lot many areas where operational issues are to be sorted out.
In case of queries that require clarification from Ministry of Corporate Affairs, we will come back to you after seeking necessary clarifications from the Ministry.
