Accounts_Module 6 Provisions of the Companies Act 1956

8/13/2019 Accounts_Module 6 Provisions of the Companies Act 1956

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Provisions Of The Companies Act

1956

What is a company?

The word company is derived from the Latin word

com i.e. with or together andpanisi.e. bread.

It denotes a group of persons and the effect of

registration under the companies Act is that such group

becomes a corporate body having perpetual succession and

common seal.


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Contd

The term company is defined in Section 2!"#. Thedefinition only says that a company means a company asdefined in Section $ of the Companies Act. Section $further e%plains the meaning of e%pression &company'(&e%isting company'( &private company' and &publiccompany'.

Apart from these categories the different )inds of

company are holding company( subsidiary company(foreign company and companies( which are limitedguarantee and lastly unlimited company.


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Maintenance of Books of Accounts

ection !"9 of the Companies Act states that the #ooks ofaccounts sha$$ #e maintaine% at the company&s re'istere% officeun$ess the Boar% of (irectors %eci%e to keep them at another p$acein )n%ia* )t is a %uty of the company to inform the +e'istrar ofCompanies ,ithin seven %ays of the %ecision in case of the #oar%of (irectors %eci%es to maintain #ooks at the p$ace other than there'istere% office*

-very company is re.uire% to keep proper #ooks of accountssho,in'

i* A$$ monies receive% an% spent an% the %etai$s thereof

ii* a$es an% purchases of 'oo%s/ an%

iii* Assets an% $ia#i$ities


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A company en'a'e% in pro%uction/ processin'/ manufacturin'or minin' activities has a$so to maintain/ if re.uire% #y theCentra$ 0overnment/ cost accountin' recor%s i*e*/ particu$arsre$atin' to uti$isation of materia$/ $a#our an% other items of cost*

Proper #ooks of accounts sha$$ not #e %eeme% to #e kept if thereare not kept such #ooks as are necessary to 'ive a true an% fairvie, of the state of affairs of the company or #ranch office/ as thecase may #e/ an% to ep$ain its transaction*

A$so if such #ooks are not kept on accrua$ #asis an% accor%in' tothe system of %ou#$e entry #ook keepin'/ proper #ooks ofaccounts sha$$ not #e %eeme% to have #een kept*


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tatutory Books

The following statutory boo)s are re*uired to bemaintained by a company under the different sections ofthe Companies Act+

!. ,egister of Investments of the company not held

in its own name

2. ,egister of mortgages and charges

$. ,egister of members and inde%-. ,egister of ebenture holders and inde%

/. 0oreign register of members and of debentures1

holders and their duplicates


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Contd..

. 3inutes 4oo)s

5. ,egister of contracts( companies and firms in which

directors are interested.

6. ,egister of directors( managing director( manager and secretary.

7. ,egister of directors' share1holding

!". ,egister of loans made( guarantees given or securities

provided to companies under the same management.!!. ,egister of investments in share and debentures of other

companies.


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,egisters and documents relating to the issue of shares arealso maintained vi8.(

i. Share application and allotment boo) ii. Share call boo)

iii. Certificate boo)

In respect of shares( the company in addition tomaintaining register of members( which it has tomaintain statutorily( it also maintains a# share transfer

boo) and b# dividend register


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Annua$ +eturn

9nder Section !-7 of the Companies

Act( every company having a share capital(

shall within si%ty days from the day ofwhich each of the annual general meeting is

held( prepare and file with the ,egistrar the

annual return containing the particulars

specified li)e the income( details of income(

details of the board of directors.


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2ina$ Accounts

9nder section 2!" of the Companies Act( at theannual general meeting of a company( the 4oard of

irectors of the company shall lay before the company+

A balance sheet as at the end of the period A profit and loss account for that period

In case of a company not carrying on business for profit(

an income and e%penditure account shall be laid before the

company at its annual general meeting instead of profit

and loss account.


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:very balance sheet of the company shall give a trueand fair view of the state of affairs of the company and atthe end of the financial year an shall sub;ect to the

provisions of the Section be in the form of the


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The #a$ance sheet can #e prepare% either in 4ori3onta$ 2orm

or ertica$ 2orm* 4o,ever there is no specifie% form of Profit

an% oss Account* che%u$e ) 7 Part )) 'ives on$y the

re.uirements as to the Profit an% oss Account* Part ))) of

che%u$e ) 'ives interpretation*

The Companies Act of 1956 a$so re.uire% to attach a Cash f$o,

statement in the Annua$ +eport of the companies*

An annua$ report of a company is report containin' the

(irector&s +eport an% the Au%itors report a#out the ,orkin' of

the company*

)t a$so contains the Profit an% oss Account an% Ba$ance heet

,ith a$$ the necessary sche%u$es an% su#8sche%u$es*


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Au%it of a company

Audit means a systematic verification of theboo)s of a company to give a true and fair viewabout its wor)ing and also about the financial

results of the company.

In India only a Chartered Accountant who haspassed the professional e%amination conducted by

the Institute of Chartered Accountant can conductthe audit and certify under his hand about hisopinion on the maintenance of the boo)s ofaccounts.


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(irectors& report

This is essentia$$y an account of a company&s performancein the previous year an% its prospects as seen #y its #oar% of%irectors*

The o#ective is to 'ive the rea%er a sense of the state of the#usiness* )t touches upon #oth .uantitative an% .ua$itative issues*

Typica$$y/ it starts ,ith a summary of the company&sperformance in the previous year/ an% the %ivi%en%s an% #onuses

%ec$are%*

Then/ it $aunches into a %iscussion of ,hich parts of the#usiness %i% ,e$$ an% ,hich %i%n&t/ ,hat ,ere the con%itions inthe in%ustry/ the ena#$in' factors an% the $imitations/ an% theout$ook for the #usiness*


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Provisions of Companies Act of 1956

+e'ar%in' 2inancia$ tatements

Sec 2"7 1 4oo)s of account to be )ept by company.

Sec 2"7A 1 Inspection of boo)s of account( etc.( of

companies.

Sec 2!" 1 Annual accounts and balance sheet.Sec 2!! 1 0orm and contents of balance sheet and profit

and loss account.

Sec 2!/ 1 Authentication of balance sheet and profit andand loss account

Sec 2!7 1 ,ight of members to copies of 4alance Sheet

and Auditor's ,eport .

Sec 22" 1 Three copies of 4alance Sheet( etc.( to befiled


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Provision of Companies Act of

1956 +e'ar%in' the Au%itors

Sec 22- 1 Appointment and remuneration of

Auditors

Sec 22 1 >ualifications and dis*ualifications

of Auditors.

Sec 225 1

Documents

Accounts_Module 6 Provisions of the Companies Act 1956