By Milonee Shah | Samir Parmar, Chartered Accountants
Bookkeeping is a way of recording a company’s financial transactions in an organised manner. Bookkeeping creates a trail of all the transactions and serves as evidence for financial reporting. This practice of bookkeeping or maintaining books of account is not an option; multiple laws, like the Companies Act, 2013, Income Tax Act, and Good and Service Tax (GST), mandate maintenance and retention of the books of account in a prescribed manner.
As maintenance of books of account has transitioned from physical record-keeping to electronic mode, the bookkeeping laws have evolved. Section 128 (1) of the Companies Act, 2013 stipulates that every company shall prepare and keep its books of account and other relevant books, papers, and financial statements annually. It also mentions that these books can be kept in electronic mode. While Section 128(1) mentions the allowance for maintaining books in electronic mode, the specific requirements for electronic bookkeeping, like format, accessibility, and security, are provided in the rules made under the Act. For example, the Companies (Accounts) Rules, 2014, especially Rule 3, provides detailed requirements for maintaining books of account in electronic form.
Most of the provisions related to physical books apply to books maintained in electronic mode. The common points between manual and digital books are as follows:
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