Legal requirements of Accountancy

I wish to discuss about legal requirement of accountancy in this article. Accounting is not limited to certain industry. Even engineer, Lawyer, Doctor, or business man require an Accountant. Using financial statements, management can take decisions as well as forecast.

Requirement under companies act

According to the sec. 148 of companies act Every company shall keep accounting records which correctly record and explain the company’s transactions.

If any company fails to comply with such requirement, every director as well as company shall guilty of an offence and liable for penalty not exceeding Rs. 200,000/=

in the sec. 150 of companies act determined that every company shall prepare financial statements for every financial year within six month or within such extended period as may be determined by the Registrar after the balance sheet date of the company. Here company means, any company registered under companies act. It can be Limited Company, Unlimited company or company limited by guarantee.

If any company fails to comply with such requirement, every director as well as company shall guilty of an offence and liable for penalty not exceeding Rs. 100,000/=

Requirements under inland revenue act

According to the sec. 107 of inland revenue act Assessor is empowered to call any financial statement or schedule from any person. Notwithstanding the absence of notice , following persons are required to submit the statement of accounts.

• Quoted Public Company
• Any other company having Turnover more than 250 Mn or Profit 100 Mn
• Partnership or any other person turnover more than 50 Mn or Profit 25 Mn ( in the case of profit partnership is divisible profit )

those financial statement shall be audited accounts.

But in practice every person or partnership should furnish statement of accounts together with return of income. Because department has printed on tax return the notice to furnish financial statements instead of sending notice to unique taxpayer.

For other approvals

Some institutions asking accounts for giving approval or permission to undertake certain activities or businesses