Maintenance of Books of Accounts for Start-ups
Books of accounts are an integral part of a business. They are a quantitative representation of the state of affairs of an entity. They provide necessary information about a business entity and tell users about its financial health. Without books of accounts it is almost impossible to judge a company. To Maintenance of Books of Accounts for Start-ups, One must maintain proper books of accounts all the time.
Every tax and act related to business compliance requires an entity to maintain proper books of accounts.
For instance, Companies Act, 2013 mandatorily requires a company to maintain books of accounts for at least 8 years preceding a financial year.
Books of accounts must be maintained by everyone irrespective of the fact that its a start-up. Many people do not maintain them properly citing that since they are start-ups they do not fall under any tax compliance.
This approach towards accounts is wrong and must not be encouraged. For example, Companies Act, 2013 enshrines that it is the responsibility of the management of the company to maintain its books of accounts as per applicable financial reporting framework.
Need for proper books of accounts
Books of accounts are like nerves of a business. It shares all the essential details about a business entity. It helps people understand financial structure of a company. It tells them about its performance and turnover.
Using the information in the financial statements, management can calculate its tax liabilities and pay them regularly.
Books of accounts tell us about the organizational structure of a company, that is, whether its registered as a private limited company, sole proprietorship or any other form.
Books of accounts provide a clarity about a company's position. It tells about the activities a business entity is involved in. It is required to ensure that a firm is doing business legally and according to government norms. Books of accounts are required for audit purpose to ensure that an entity complies with all the mandatory legal requirements.
Different books to be maintained
- Cash/ Bank Book: Cash book will record all your cash and bank transactions. It will record all your expenses you have incurred and incomes you have earned.
- Bank Statement/ pass-book: This is the bank's copy of your transactions and will help you reconcile your book balance with bank balance.
- Cheque Book register: In this you will maintain a record of all the cheques you have issued.
- Sales and Purchase register: The subsidiary book will help you calculate the turnover of the company. You will record all the purchase and sales transactions in them, whether credit or cash.
There are many other books that must be maintained like journal register, minutes book, employee register, shareholder's register etc.
I hope this article on 'Maintenance of Books of Accounts for Start-ups' was useful for you. For more information you can visit www.registrationsindia.com