Statutory Provisions regarding Maintenance of Accounts by Company Section 128, 129, 134

The Companies Act, 2013 lays down comprehensive rules for the maintenance, preparation, and approval of financial statements by companies in India. Sections 128, 129, and 134 specifically deal with the books of accounts, financial statements, and their presentation and reporting respectively. These provisions ensure transparency, accountability, and standardization in corporate financial reporting.

Section 128: Books of Account, etc., to be kept by Company:

Section 128 mandates every company to maintain proper books of account that are necessary to give a true and fair view of the financial affairs of the company.

Key Provisions:

1. Mandatory Maintenance:
   Every company must prepare and maintain books of account and other relevant books and papers along with financial statements for each financial year.

2. True and Fair View:
   The books must provide a true and fair view of the company’s state of affairs including:

   • All sums of money received and expended.

   • All sales and purchases of goods.

   • The assets and liabilities of the company.

3. Place of Maintenance:
   Books of account should be maintained at the registered office of the company. However, the Board may decide to maintain them at any other place in India, provided the company files a notice with the Registrar in the prescribed form within seven days.

4. Electronic Form:
   Companies are permitted to maintain books of account in electronic mode, ensuring accessibility, reliability, and safety of data.

5. Branch Offices:
   If a company has branch offices, proper books of account must also be maintained at those branches.

6. Inspection Rights:
   Directors have the right to inspect books of accounts and relevant papers during business hours, either at the registered office or where they are maintained.

7. Retention Period:
   Books of account must be preserved for at least 8 financial years immediately preceding the current year.

8. Penal Provisions:
   Failure to comply attracts penalties. The Managing Director, Whole-time Director (in charge of finance), CFO, or any person charged with the duty shall be punishable with:

   • Imprisonment up to 1 year, or

   • Fine between ₹50,000 to ₹5,00,000, or both.

Section 129: Financial Statements:

Section 129 outlines the legal framework for the preparation and presentation of financial statements.

Key Provisions:

1. True and Fair View:
   Every company must prepare financial statements that give a true and fair view of the state of affairs and comply with the accounting standards notified under Section 133.

2. Form and Content:
   The financial statements must be prepared in the form prescribed under Schedule III of the Act and must include:

   • Balance Sheet

   • Profit and Loss Account (or Statement of Profit and Loss)

   • Cash Flow Statement

   • Statement of Changes in Equity (for companies following Ind AS)

   • Explanatory notes

3. Consolidated Financial Statements:
   If a company has one or more subsidiaries (including associate companies or joint ventures), it must prepare a consolidated financial statement (CFS) in addition to its standalone financial statements.

4. Laying Before AGM:
   Financial statements must be approved by the Board and then laid before the Annual General Meeting (AGM) for adoption.

5. Filing with ROC:
   A copy of the financial statements, including consolidated ones (if applicable), must be filed with the Registrar of Companies (ROC) within 30 days of the AGM.

6. Deviations and Disclosures:
   In case of any deviation from accounting standards, the company must disclose:

   • The deviation

   • Reasons for such deviation

   • Financial effect of the deviation

7. Penal Provisions:
   Contravention may result in:

   • Fine between ₹50,000 to ₹5,00,000 for officers.

   • Imprisonment up to 1 year or fine for directors and CFO.

Section 134: Financial Statements, Board’s Report, etc.

Section 134 relates to the approval, authentication, and reporting of financial statements and the Board’s Report.

Key Provisions:

1. Board Approval:
   Financial statements must be approved by the Board before being signed and submitted to the auditors for their report.

2. Authentication:
   The financial statements must be signed by:

   • The Chairperson of the company (if authorized by the Board), or

   • Two directors, including the Managing Director, and

   • The CEO (if he is a director), CFO, and Company Secretary (if appointed)

3. Board’s Report:
   The Board must prepare a Report to shareholders, which should include:

   • Company’s performance and financial position

   • State of company’s affairs

   • Material changes and commitments affecting financial position

   • Details of directors, auditors, and managerial remuneration

   • CSR activities (if applicable)

   • Extract of annual return (MGT-9 or web-link)

   • Directors’ responsibility statement

4. Directors’ Responsibility Statement:
   It must confirm that:

   • Financial statements are prepared in compliance with applicable laws.

   • Accounting standards have been followed.

   • Proper accounting policies are consistently applied.

   • Adequate accounting records and internal controls are maintained.

5. Circulation and Filing:
   The approved financial statements and Board’s Report must be circulated to members and filed with the ROC in prescribed time and manner.

6. Penalties:
   Contravention of Section 134 can attract:

   • Fine up to ₹3,00,000 for the company.

   • For officers in default: imprisonment up to 3 years, or fine up to ₹5,00,000, or both.