1. Provisions relating to Accounts in The Companies Act, 2013
Presentation By
CA Anil Sharma

2. CA, 2013 vs. CA, 1956 29 chapters against 13 in CA,1956
470 sections against 658 sections in CA,1956
7 schedules against 15 in CA, 1956
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3. CA, 2013 vs. CA, 1956
Substantial part of law shall be in the form of rules to be prescribed. More than 400 Rules are likely.
Applicability to the entire nation, no regional exemptions.
Very few exemptions to private limited companies as compared to under CA,1956.
Few transition provisions.
Very steep penalties and very harsh prosecution provisions.
Very strict regime for company auditors.
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4. Accounts
Chapter IX
Sections 128 to 138
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5. Section 128- Books of Accounts to be kept by the company
Prepare and keep at its registered office:
Books of accounts,
Other relevant books and papers and
Financial statement
For every financial year
To be kept on accrual basis and according to the Double Entry system of accounting
Which give a true and fair view of the state of affairs of the company including its branch office(s)
May keep in electronic mode in such manner as may be prescribed.
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6. Books of Accounts
Section 2(13) Books of accounts include records maintained in respect of:
All money received and expended
All sales and purchases of goods and services
The assets and liabilities and
The items of cost as may be prescribed under section 148.
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7. Book and Paper
Section 2(12) - Book and Paper include books of accounts, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronics mode.
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8. Financial Statement
Section 2(40) defines ‘Financial statement’ to include:
Balance sheet
Profit and loss Account
Cash Flow Statement
Statement of Changes in Equity , if applicable
Explanatory Notes
Cash flow statement not applicable to :
OPC,
small company and
dormant company.
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9. Financial Year
Section 2(41) – means the period ending on the 31st March every year
Exception could be made by a Tribunal if a company being holding or subsidiary of a company incorporated abroad and is required to maintain accounts for a different financial year outside India
In the first year of incorporation:
If incorporated before 1st Jan, then period ending 31st March of the same financial year
otherwise, period ending 31st March of the next financial year.
Existing companies to align within two years.
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10. Draft Rules(9.1)- Electronic mode of maintaining books of account
Conditions:
To remain accessible in India so as to be usable for subsequent reference.
To be retained in the same format in which originally generated.
To remain complete and unaltered.
To be capable of being displayed in a legible form.
To have proper system for storage, retrieval, display or printout of electronic records.
Not to dispose off or rendered unusable, unless permitted by law.
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11. Sec 129- financial Statement
It shall give true and fair view of the state of affairs of the company,
Shall comply with the accounting standards notified under section 133 and
Shall be in the form in Schedule III.
At every AGM of a company, the BOD shall lay before such meeting Financial statements for the financial year.
Where a company has one or more subsidiaries, it shall, in addition to stand alone financial statement shall also prepare a CFS of the co and all its subsidiaries in the same form and manner as that of its own.
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12. CFS
Sub-section (3) of section 129 provides for preparation of CFS by a company having one or more subsidiaries and lying the same in AGM
‘Subsidiary’ for the purpose of this clause includes ‘ associates’ and ‘joint venture’.
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13. Subsidiary company
Sec 2 (87) “subsidiary company” in relation to any other company means a company in which the holding company—
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies.
Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.
Explanation.—For the purposes of this clause,—
(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;
(b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;
(c) the expression “company” includes any body corporate;
(d) “layer” in relation to a holding company means its subsidiary or subsidiaries
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14. Associate company
Sec 2(6) “associate company”, in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.
Explanation.—For the purposes of this clause, “significant influence” means control of
at least twenty per cent. of total share capital, or
business decisions under an agreement;
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15. CFS Rules to be provided for consolidation.
Draft Rule (9.4): CFS shall be made in accordance with the accounting standards and in the manner and format as specified under Schedule III to the Act).
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16. CFS CFS in addition to stand alone financial statement.
Preparation and adoption of financial statements of a holding co shall apply mutatis mutandis to CFS.
First proviso to Section 129(3)-
A statement containing the salient features of the financial statement of subsidiaries to be attached to the financial statement of the holding company. (Draft form 9.1 as per Draft Rules 9.3)
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17. Revision of accounts
Distinction between reopen and recast and revision
Section 130- reopen and recast ( on judicial directions)-
can be done only with approval of Tribunal and no objections from the Central Government, Income Tax Authorities, SEBI or any other regulator/authority
Allowed only if it is established that earlier accounts were prepared fraudulently or the affairs were mismanaged during the period casting doubt on the reliability of financial statement.
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18. Revision of accounts
Section 131- revision ( voluntarily by the company with the approval of the Tribunal)
For the three preceding financial years
If the Board feels that financial statements are not prepared according to Section 129 ( accounting standards, format)
Procedure (Draft Rules 9.8)
While granting approval , Tribunal to issue notice and hear the auditor of the original financial statement, if the present auditor is different.
After approval a GM may be called . Notice to include reasons for change, copy of approval and to accompany revised statement of directors and auditors.
Notice to be publish in newspaper
Auditor to ensure every shareholder is informed and
After adoption to be filed with Registrar by the company.
To revise all subsequent accounts, if relevant period is in between.
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19. National Financial Reporting Authority (NFRA)
Section 132- Body with advisory role having quasi-judicial powers for ensuring compliance
make recommendations to the Central Government on formulation and laying down of accounting and auditing policies and standards for adoption by companies and their auditors and
monitor and enforce the compliance with accounting standards and auditing standards by companies and their auditors.
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20. Sec 134(3)- Board Report Report to include:
Extract of the annual return
Number of Board meetings
Directors Responsibility Statement
Statement of Declaration by Independent directors
Explanations or comments on every qualification, adverse remarks or disclaimer by the auditor
Particulars of loans, guarantees or investment under section 186
Particulars of related party transactions u/s 188
State of company’s affair
Proposed dividend and transfer to reserves
Material changes and commitments affecting the financial position of the company
CSR Policy, Risk Management Policy
Details on conservation of energy, technology absorption, forex earning and outgo
Such other matters as may be prescribed: ( Draft Rules 9.10)
Changes in the nature of business
Details of directs ,KMPs appointed or resigned
Changes in subsidiaries, associates or JVs
Details of deposits
Significant orders passed by the regulator impacting going concern status
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21. CSR Section135 read with Schedule VII
applicable to a co with capital of Rs. 500 Crores or more or
Turnover of Rs Crores or more or
Net profit of Rs. 5 Crores or more during any financial year
To spend in every financial year at least 2% of the average net profits of the co during the three immediately preceding financial years
Local area to be given preference, activities as mentioned in Schedule VII
To constitute a CSR Committee to formulate policy and monitor its implementation.
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22. CSR 27th Feb,2014- Section 135 made applicable w.e.f. 1.4.2014.
27th Feb, Companies ( Corporate Social Responsibility Policy) Rules, 2014 notified.
27th Feb,2014- Schedule VII modified.
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23. CSR Policy Rules, 2014 To be applicable from 1.4.2014.
Guiding Principle: Use CSR to integrate economic, environmental and social objectives with the company’s operations and growth.
CSR is not charity or mere donations. CSR activities to be generally conducted as projects or programme.
Net Profit not to include profits arising from branched outside India and dividend from other companies to which section 135 apply.
Company may set up an organisation of its own or may conduct/implement through organisations not owned by it.
Surplus arising out of CSR activities not to be part of business profits
Format for annual reporting prescribed.
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24. Schedule- VII
Eight projects/programs to be considered as CSR activities.
Can also make contributions to:
Prime minister Relief fund
Technology Incubators at academic institutions
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25. Sec 136- Copies of FS to members
FS including CFS, if any, auditors report and other documents required to be part of the Financial statements.
Draft Rules 9.13: In case of listed companies or such public company having net worth of more than one Crore Rupees or turnover of more than 10 Crores Rupees, the financial statement may be sent by:
Electronic mode to those who agreed to received
To others physical copies by any recognised mode of delivery
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26. Internal Audit
Sec 138-Such class of companies as may be prescribed shall be required to appoint an internal auditor to conduct internal audit of the functions and activities of the company.
The Central Govt. to prescribe by Rules, the manner and intervals in which the internal audit shall be conducted and reported to the Board.
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27. Workshop on Companies Act, 2013
Internal Audit
Such class or classes of companies as may be prescribed:
Draft Rule [9.15 (1)]:
(a) every listed company
(b) every public company having paid up share capital of Rs. 10 Crores or more;
(c) every other public company which has any outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 25 Crore or which has accepted deposits of Rs. 25 Crores rupees or more at any point of time during the last financial year.
No mandatory internal audit for Private Companies
No criteria on the basis of turnover
Workshop on Companies Act, 2013

28. Workshop on Companies Act, 2013
Internal Audit Plan
The Central Government may, by rules, prescribe the manner and the intervals in which the internal audit shall be conducted and reported to the Board:
Draft Rule 9.15 (2):
The Audit Committee of the company or the Board shall, in consultation with the Internal Auditor, formulate the:
scope,
functioning,
periodicity and
methodology for conducting the internal audit.
Workshop on Companies Act, 2013

29. THANK YOU Contact me at: 9811320203 anil54@gmail.com
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