Accounts of Companies

Companies Act, 2013 as amended, per the May 2026 syllabus.

How the chapter fits together

Chapter IX — Accounts of Companies — is Sections 128 to 138 read with the Companies (Accounts) Rules, 2014. Memory hook from the source map: “B-F-R-V-N-A-F-C-R-F-I” — Books (128), Financial statement (129/129A), Re-opening (130), Voluntary revision (131), NFRA (132), Accounting Standards (133), FS/Board’s report (134), CSR (135), Right of members to copies (136), Filing with ROC (137), Internal audit (138).

Books of account and financial statements — Sections 128, 129, 129A

Section 128 — keeping the books. Books of account are kept at the registered office, must give a true and fair view, and must be on accrual basis with double entry — mandatory for ALL companies, no exceptions ever (cash basis or single entry is never permitted). Preservation: 8 years of books plus vouchers; the CG may extend this where an investigation under Chapter XIV has been ordered.

Section 129 — the financial statement. FS must give a true and fair view, comply with the accounting standards, and follow Schedule III (Division I/II). The Schedule III form does not apply to insurance companies, banking companies, electricity companies, or companies governed by a special Act with their own FS form. Under Section 129(6) the CG may grant exemptions in public interest — e.g. Government companies in defence production get a segment-reporting exemption (if no default u/s 137/92).

Consolidated financial statements (CFS) are mandatory if the company has at least one subsidiary or associate, in the same form and manner as its own FS, with salient features of subsidiaries in Form AOC-1. CFS exemption needs all three: (a) wholly/partly owned subsidiary whose other members do not object; (b) securities not listed and not in the process of listing; (c) the ultimate or intermediate holding company files CFS. (Companies with only associates/JVs and no subsidiary were not required to consolidate for FY 1.4.2014–31.3.2015.)

Section 129A lets the CG prescribe periodical financial statements (with audit and filing within 30 days) for classes of unlisted companies — no rules had been notified as on 30.4.24.

Penalty contrast: Section 128(6) — MD, WTD-finance, CFO or the person charged by the Board: fine ₹50,000 to ₹5,00,000, no imprisonment. Section 129(7) — same persons (all directors if none charged): imprisonment up to 1 year OR fine ₹50,000 to ₹5,00,000 OR both.

Re-opening, voluntary revision, NFRA and standards — Sections 130 to 133

Section 130 — re-opening of accounts is involuntary: a Court or Tribunal order following an application, on grounds of fraud or mismanagement, with a look-back cap of 8 financial years; the revised accounts are final.

Section 131 — voluntary revision is Board-initiated, to cure non-compliance with Section 129 or 134, covers only the 3 preceding financial years, needs Tribunal approval via Form NCLT-1 within 14 days of the Board decision (advertised at least 14 days before the hearing — Rule 77, NCLT Rules), the order/revised FS filed with the ROC within 30 days — and it can be done at most once a year.

Section 132 — NFRA (National Financial Reporting Authority): constituted 1.10.2018, headquartered New Delhi, an independent quasi-judicial regulator overseeing auditing and accounting standards — its jurisdiction is not universal. It covers: listed companies; unlisted public companies with paid-up capital ≥ ₹500 cr OR turnover ≥ ₹1000 cr OR outstanding loans/debentures/deposits ≥ ₹500 cr; insurance/banking/electricity/special-Act companies; CG referrals; and foreign subsidiaries/associates whose income or net worth exceeds 20% of consolidated figures.

Section 133 — accounting standards are prescribed by the CG on ICAI’s recommendation after NFRA’s examination (NACAS, the earlier advisory body, is defunct).

Board’s report and CSR — Sections 134 and 135

Section 134 — signing and the Board’s report. The FS is signed per Section 134(1); an OPC needs only ONE director’s signature (not the chairperson / two directors + CEO + CFO + CS combination). The Board’s report content comes from Rule 8; OPC and small companies use Rule 8A (abridged) instead. The Directors’ Responsibility Statement (DRS) has 6 points. Government-company relaxations (all subject to no default u/s 137/92): director-policy disclosure under 134(3)(e) and Board-evaluation statement under 134(3)(p) do not apply; defence-equipment producers are exempt from conservation-of-energy disclosure under 134(3)(m). Penalty under 134(8): company ₹3,00,000; every officer in default ₹50,000.

Section 135 — CSR. Applicability is disjunctive — ANY ONE of the three in the immediately preceding FY triggers it: net worth ≥ ₹500 cr OR turnover ≥ ₹1000 cr OR net profit ≥ ₹5 cr. The obligation: spend 2% of the average net profit of the 3 immediately preceding FYs (if the company is younger than 3 FYs — average of the years since incorporation, not zero, not pro-rated).

CSR Committee: normally 3 or more directors with at least 1 independent director; if no independent director is required u/s 149(4) — 2+ directors with no ID; a private company with only 2 directors — those 2; a foreign company — 2 persons (one under Section 380(1)(d) plus one nominated). Skip the Committee entirely if the spend obligation is ≤ ₹50 lakh — the Board itself discharges its functions. A company holding a balance in its Unspent CSR Account continues CSR Committee/compliance even after falling below the thresholds. Specified IFSC public/private companies: Section 135 does not apply for 5 years from commencement of business.

The unspent-CSR flow — memorise both branches:

More CSR rules to lock in:

• Not CSR (Rule 2(d)): normal business activities; activities outside India (except training Indian sportspersons); political donations (Sec 182); employee-benefit activities; sponsorship for marketing benefit; discharging other statutory obligations; one-off events (marathons/awards/TV sponsorships).
• Admin overheads (Rule 2(b)): capped at 5% of total CSR expenditure — general management/administration cost, excluding direct project expense.
• Impact assessment (Rule 8(3)): mandatory if average CSR obligation ≥ ₹10 crore in the 3 preceding FYs, for projects with outlay ≥ ₹1 crore completed at least 1 year before the study; its cost cap is 2% of CSR expenditure or ₹50 lakh, whichever is HIGHER.
• International organisations (Rule 2(g), CG-notified under the UN (Privileges & Immunities) Act 1947): only for design/monitoring/evaluation and capacity building — never direct implementation.
• Form CSR-1 registration is mandatory for CSR-implementing entities from 1.4.2021; capital assets created before the CSR Amendment Rules 2021 got 180 days (+90 extendable) to comply (Rule 7(4), with “public authority” per RTI Act 2005, Sec 2(h)).
• Schedule VII is read liberally (MCA Circular 21/2014); PM CARES Fund contribution is valid CSR (MCA OM 28.3.2021).
• Penalty (135(7)): company — twice the amount required to be transferred OR ₹1 crore, whichever is LESS; officer — one-tenth of that amount OR ₹2 lakh, whichever is LESS.

Circulation, filing with the ROC, and internal audit — Sections 136 to 138

Section 136 — members’ right to copies. FS + CFS + auditor’s report go to members at least 21 days before the AGM (a Section 8 company: 14 days). Shorter circulation is deemed compliant if members holding 95% (by value/voting power) consent. Listed companies comply via 21-day inspection at the registered office plus dispatch of salient features in AOC-3/3A. Nidhi companies: for small members (shares of face value ≤ ₹1000 or ≤ 1% of paid-up capital), a public notice in a newspaper suffices. Penalty: company ₹25,000; officer ₹5,000.

Section 137 — filing with the Registrar (AOC-4 family). Adopted FS within 30 days of the AGM; un-adopted FS filed as provisional within 30 days of the AGM, then within 30 days of the adjourned AGM once adopted; OPC: 180 days from FY closure (no AGM); AGM not held — within 30 days of the date it ought to have been held. A foreign subsidiary not required to get (or not getting) its FS audited: unaudited FS + declaration + English translation suffice — this relief runs under both Section 136 (website hosting) and Section 137 (filing). Penalty: ₹10,000 + ₹100/day continuing — cap ₹2,00,000 for the company and ₹50,000 for the MD & CFO (or director charged; else all directors).

XBRL filing applies to: listed companies and their Indian subsidiaries; paid-up capital ≥ ₹5 cr; turnover ≥ ₹100 cr; and Ind AS-compliant companies. “Once XBRL, always XBRL” — no reverting even if the company later falls below the threshold.

Section 138 — internal audit (Rule 13). The internal auditor can be a CA, CMA, or other professional as the Board decides, and may be in-house. Existing companies got 6 months from commencement to comply; IFSC companies are covered only if their articles so provide.

Key timelines and penalties

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