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Accounts and Audit Project
Legal Provision Regarding
Annual Accounts of a
Company

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CHANAKYANATIONALLAWUNIVERSITY
SUBMITTED TO : Mr. JYOTIRMAY
SUBMITTED BY :Amit Kumar
ROLL NO. : 1007, 1st
SEMESTER, BBA.LLB
AIMS AND OBJECTIVE:
The researcher aims to
1. Study annual accounts of a company and its company.
2. Study provisions of Company Act 1956 with regard to accounting of a company.
Hypothesis

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The researcher hypothesizes that all business organization have to follow some legal norms in
order to disclose the annual financial statement. Company Act 1956 and the accounting standards
are main directives for this purpose.
ResearchMethodology
As the research work of the researcher for this topic is confined to the library and books
and no field work has been done. Hence , researcher in his research work has opted the
doctrinal methodology of research .For doing the research work various sources has been
used . Researcher in the research work has relied upon the sources like various books
and online materials is also helpful source for the research .
Table of Content
Particulars Page no.
1. Introduction 4
2. Definitions, Nature and Objectives of accounting 5-7
3. Components of annual accounts&
Format of B/S & P/L Statement and gen. instruction 8-16
4. Provisions of Company Act 1956 and Accounting Standards 17-23
Acknowledgement
The present project on the “Legal Provisions regarding Annual Accounts of a Company” has
been able to get its final shape with the support and help of people from various quarters. My
sincere thanks go to all the members without whom the study could not have come to its present
state. I am proud to acknowledge gratitude to the individuals during my study and without whom
the study may not be completed. I have taken this opportunity to thank those who genuinely
helped me.

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With immense pleasure, I express my deepest sense of gratitude to Mr. Jyotirmay sir, Faculty for
Accounts and Audit,Chanakya National Law University for helping me in my project. I am also
thankful to the whole Chanakya National Law University family that provided me all the
material I required for the project. Not to forget thanking to my parents without the co-operation
of which completion of this project would not had been possible.
I have made every effort to acknowledge credits, but I apologies in advance for any omission
that may have inadvertently taken place.
Last but not least I would like to thank Almighty whose blessing helped me to complete the
project.
INTRODUCTION
An annual account is a comprehensive report on a company's activities throughout the
preceding year. Annual reports are intended to give shareholders and other interested people
information about the company's activities and financial performance. Most jurisdictions require
companies to prepare and disclose annual reports, and many require the annual report to be filed
at the company's registry.

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These are the financial statements of an organization at the end of the accounting year. It shows
the financial performance and financial position of the business. It includes Balance Sheet, Profit
and Loss account, Cash flow statement. The information in the financial statement is of useful
interest to a number of external and internal parties.
The nature of accounting information has been dictated from time immemorial by the needs of
the users of the day. The history of accounting reflects the pattern of social developments and the
forces which necessitate the changes in accounting system from time to time. Over the years
accountancy has made tremendous progress in the field of commerce and industry. Accounting
can be described as being concerned with measurement and management. Measurement of
recording transactions and management with the use of data for making decisions are the two
fundamental aspects.
There are certain legal provisions and accounting standards for its preparation which needs to be
followed while preparing the annual accounts of a company.
CHAPTER :- 1
A widely accepted definition of accounting has been provided by the American Accounting
Association. According to this definition accounting is the process of identifying, measuring and
communicating information to permit judgement and decisions by the users
of accounts. This definition implies that –
(1) there should be users of accounts who need relevant information,

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(2) the information should enable the users to make judgement and decisions, and
(3) transactions and events are measured and the data are processed and then
communicated to the users through accounting.
Accounting function is vital for every entity of the society whether individuals, house
wives, business entity, nonprofit making organizations like municipalities, panchyats,
clubs, etc. All are required to maintain accounts.
Accounting is commonly referred to as the “language of the business” as it is effectively
employed to communicate the financial performance of business to various interested parties
or stakeholders. It is concerned with the measurement and communicating financial data.
Financial Accounting is based on double entry system of accounting which comprises of
(i) recording of business transactions in the books of prime entry,
(ii) posting into respective ledger accounts,
(iii) striking balance, and
(iv) preparing the performance statement (profit and loss statement) and position statement
(balance sheet).
Financial Accounting is concerned with the collection, recording, classification and
presentation of financial data to serve the purposes of the management, shareholders and
stakeholders, such as, creditors, bankers, Government, etc.
The nature and purpose of accounting
The basic aim of accounting in a business entity is to provide financial information for
making decisions on its activities. Managers of an economic entity at various levels require
analysed financial information for planning and programming, for controlling expenditure,
for ascertaining the extent of profitability or otherwise of a department – even of each
production item for undertaking new jobs, etc.
Financial information in tabular forms and with graphs and charts are also required by the
outsiders, namely, bankers, financial institutions, creditors, investors, government agencies
and even by the labour unions and the general public who have some interest in the particular
business concern.
SUBDIVISION OF ACCOUNTING
Generally, accounting is subdivided as follows :
a) Book-Keeping :Book-keeping is the art and science of recording transactions of a
business enterprise or an organization carrying out non-business activities in a systematic
and appropriate manner to measure the working results and capital at periodical interval
depending upon needs of an entity.
(b) Measuring working results and capital of the economic entity and reporting :The

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most important aspect of accounting records is to measure the working results and the
capital of the economic entity and interpreting and reporting of results.
Objectives of accounting and users of annual accounts
The basic objectives of accounting are to provide financial information to the managers,
owners and the stakeholders i.e. the parties who are interested in an organization. To attain
such objectives various financial statements are prepared.
The users of financial statements may be broadly classified in the following groups –
(a) The investor– This group includes both existing and potential owners of shares in companies.
They are broadly interested in the performance of the entity and the dividend declared by such
entity. They also measure the social and economic policies of the company to decide whether
they will remain associated with such entity.
(b) The lender– This group includes both secured and unsecured lenders. Such creditorsmay be
financing long term or short term loans. The financial statements are analysed to determine an
organization’s ability as to
(i) pay the interest on due date,
(ii) the growth and stability of the organization,
(iii) capability of repaying the loan as agreed upon, and.
(iv) the book value of assets offered as security by the organization.
(c) The customers and suppliers– While customers are interested in the ability of the organization
to provide goods/services, the suppliers are interested in the capability of the organization to pay
their dues as and when due.
(d) The government– This group includes various taxation authorities viz. Income tax, Excise
department, Sales tax department etc. and also various other government authorities for statistical
purposes and for framing various economic and planning policies.
(e) The employee group– The employees are concerned with the capability of an organization to
pay their present emoluments and future retirement benefits. Moreover, financial statements help
them to asses job security.
(f) The analyst– Advisors to the management, investors, employees or public at large collect
various data from financial statements to advise their clients.
(g) The Management– Financial statements provide required information to different levels of
management to assist them in making decisions at each appropriate level.

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CHAPTER 2 :-
Balance sheet
In financial accounting, a balance sheet or statement of financial position is a summary of the
financial balances of a sole proprietorship, a business partnership, a corporation or other business
organization. Assets, liabilities andownership equity are listed as of a specific date, such as the
end of its financial year. A balance sheet is often described as a "snapshot of a company's

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financial condition".1 Of the four basic financial statements, the balance sheet is the only
statement which applies to a single point in time of a business' calendar year.
A standard company balance sheet has three parts: assets, liabilities and ownership equity. The
main categories of assets are usually listed first, and typically in order of liquidity.2 Assets are
followed by the liabilities. The difference between the assets and the liabilities is known as
equity or the net assets or the net worth or capital of the company and according to theaccounting
equation, net worth must equal assets minus liabilities.
Assets
Current assets:
1. Cash and cash equivalents
2. Accounts receivable
3. Prepaid expenses for future services that will be used within a year
Non-current assets (Fixed assets)
1. Property, plant and equipment
2. Investment property, such as real estate held for investment purposes
3. Intangible assets
4. Financial assets (excluding investments accounted for using the equity method, accounts
receivables, and cash and cash equivalents)
5. Investments accounted for using the equity method
6. Biological assets, which are living plants or animals. Bearer biological assets are plants
or animals which bear agricultural produce for harvest, such as apple trees grown to
produce apples and sheep raised to produce wool.
Liabilities
1. Accounts payable
2. Provisions for warranties or court decisions
3. Financial liabilities (excluding provisions and accounts payable), such as promissory
notes and corporate bonds
4. Liabilities and assets for current tax
5. Deferred tax liabilities and deferred tax assets
6. Unearned revenue for services paid for by customers but not yet provided.
1 Williams, Jan R.; Susan F. Haka, Mark S. Bettner, JosephV. Carcello (2008). Financial & Managerial Accounting.McGraw-Hill Irwin. p.40
2 Daniels, Mortimer(1980). CorporationFinancial Statements. NewYork: NewYork : Arno Press. p.13–14.

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Equity
The net assets shown by the balance sheet equals the third part of the balance sheet, which is
known as the shareholders' equity. It comprises::
1. Issued capital and reserves attributable to equity holders of the parent
company (controlling interest)
2. Non-controlling interest in equity
Formally, shareholders' equity is part of the company's liabilities: they are funds "owing" to
shareholders (after payment of all other liabilities); usually, however, "liabilities" is used in the
more restrictive sense of liabilities excluding shareholders' equity. The balance of assets and
liabilities (including shareholders' equity) is not a coincidence. Records of the values of each
account in the balance sheet are maintained using a system of accounting known as double-entry
bookkeeping. In this sense, shareholders' equity by construction must equal assets minus
liabilities, and are a residual.
Regarding the items in equity section, the following disclosures are required:
1. Numbers of shares authorized, issued and fully paid, and issued but not fully paid
2. Par value of shares
3. Reconciliation of shares outstanding at the beginning and the end of the period
4. Description of rights, preferences, and restrictions of shares
5. Treasury shares, including shares held by subsidiaries and associates
6. Shares reserved for issuance under options and contracts
7. A description of the nature and purpose of each reserve within owners' equity.
Profit and Loss account
An income statement or profit and loss account (also referred to as a profit and loss statement )
is one of the financial statements of a company and shows the
company's revenues and expenses during a particular period.3 It indicates how the revenueare
transformed into the net income. It displays the revenues recognized for a specific period, and
the cost and expenses charged against these revenues, including write-
offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of the income
statement is to showmanagers and investors whether the company made or lost money during the
period being reported.One important thing to remember about an income statement is that it
represents a period of time like the cash flow statement.This contrasts with the balance sheet,
which represents a single moment in time.
Cash Flow Statement
In financial accounting, a cash flow statement, also known as statement of cash flows,4 is
a financial statement that shows how changes in balance sheet accounts and income affect cash
3 Professional Englishin Use - Finance, Cambridge University Press, p.10
4 Helfert, ErichA. (2001). "TheNature of Financial Statements: The Cash FlowStatement".Financial Analysis - Tools andTechniques - A Guide
for Managers. McGraw-Hill.p. 42.

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and cash equivalents, and breaks the analysis down to operating, investing, and financing
activities. Essentially, the cash flow statement is concerned with the flow of cash in and out of
the business. The statement captures both the current operating results and the accompanying
changes in the balance sheet. As an analytical tool, the statement of cash flows is useful in
determining the short-term viability of a company, particularly its ability to pay bills.
People and groups interested in cash flow statements include:
 Accounting personnel, who need to know whether the organization will be able to cover
payroll and other immediate expenses
 Potential lenders or creditors, who want a clear picture of a company's ability to repay
 Potential investors, who need to judge whether the company is financially sound
 Potential employees or contractors, who need to know whether the company will be able to
afford compensation
 Shareholders of the business.
The cash flow statement was previously known as the flow of Cash statement. The cash flow
statement reflects a firm's liquidity.
The balance sheet is a snapshot of a firm's financial resources and obligations at a single point in
time, and the income statement summarizes a firm's financial transactions over an interval of
time. These two financial statements reflect the accrual basis accounting used by firms to match
revenues with the expenses associated with generating those revenues. The cash flow statement
includes only inflows and outflows of cash and cash equivalents; it excludes transactions that do
not directly affect cash receipts and payments. These non-cash transactions include depreciation
or write-offs on bad debts or credit losses to name a few.5 The cash flow statement is a cash
basis report on three types of financial activities: operating activities, investing activities, and
financing activities. Non-cash activities are usually reported in footnotes.
The cash flow statement is intended to
1. provide information on a firm's liquidity and solvency and its ability to change cash
flows in future circumstances
2. provide additional information for evaluating changes in assets, liabilities and equity
3. improve the comparability of different firms' operating performance by eliminating the
effects of different accounting methods.
4. indicate the amount, timing and probability of future cash flows.
The cash flow statement has been adopted as a standard financial statement because it eliminates
allocations, which might be derived from different accounting methods, such as various
timeframes for depreciating fixed assets.
The cash flow statement is partitioned into three segments, namely:
1) cash flow resulting from operating activities;
5 Epstein, BarryJ.; Eva K. Jermakowicz (2007). Interpretationand Applicationof International Financial Reporting Standards. JohnWiley &
Sons. p. 91–97.

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2) cash flow resulting from investing activities;
3) cash flow resulting from financing activities.
The money coming into the business is called cash inflow, and money going out from the
business is called cash outflow.
GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET AND
STATEMENT OF PROFIT AND LOSS OF A COMPANY AS PER REVISED SCHEDULE
VI(SECTION 221)
Where compliance with the requirements of the Act including Accounting Standards as
applicable to the companies require any change in treatment or disclosure including addition,
amendment, substitution or deletion in the head/sub-head or any changes inter se, in the financial
statements or statements forming part thereof, the same shall be made and the requirements of
the Schedule VI shall stand modified accordingly.
The disclosure requirements specified in Part I and Part II of this Schedule are in addition to and
not in substitution of the disclosure requirements specified in the Accounting Standards
prescribed under the Companies Act, 1956. Additional disclosures specified in the Accounting
Standards shall be made in the notes to accounts or by way of additional statement unless
required to be disclosed on the face of the Financial Statements. Similarly, all other disclosures
as required by the Companies Act shall be made in the notes to accounts in addition to the
requirements set out in this Schedule.
Notes to accounts shall contain information in addition to that presented in the Financial
Statements and shall provide where required (a) narrative descriptions or disaggregation of items
recognized in those statements and (b) information about items that not qualify for recognition in
those statements.
Each item on the face of the Balance Sheet and Statement of Profit and Loss shall be cross-
referenced to any related information in the notes to accounts. In preparing the Financial
Statements including the notes to accounts, a balance shall be maintained between providing
excessive detail that may not assist users of Financial Statements and not providing important
information as a result of too much aggregation.
Depending upon the turnover of the Company, the figures appearing in the Financial Statements
may be rounded as below:
Sr.
No.
Turnover Rounding off

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(i)
Less than one
hundred crore
rupees
To the nearest
hundreds, thousands,
lakhs or millions, or
decimals thereof
(ii)
one hundred crore
rupees or more
To the nearest lakhs or
millions or crores, or
decimals thereof
Once a unit of measurement is used, it should be used uniformly in the Financial Statements.
Except in the case of the first Financial Statements laid before the Company (after its
incorporation) the corresponding amounts (comparatives) for the immediately preceding
reporting period for all items shown in the Financial Statements including notes shall also be
given.
For the purpose of this Schedule, the terms used her in shall be as per the applicable Accounting
Standards.
Form of Balance Sheet
Name of the company________
Balance sheet as at__________ (Rupees in ___)
Particulars Note no. Figures as at the
end of the
current reporting
period
Figures as at the
end of the
previous
reporting period
1 2 3 4
1. Equity and liabilities
(a)shareholders fund
-share capital
-reserves and surplus
-money received against share
warrants
(b)share application money
pending allotment
(c)non-current liabilities

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-long term borrowings
-deferred tax liabilities(NET)
-other long term liabilities
-long term provisions
(d)current liabilities
-short term borrowings
-trade payables
-other current liabilities
-short term provisions
TOTAL
2. Assets
Non-current assets
(a)fixed assets
-tangible assets
-intangible assets
-capital work-in-progress
-intangible assets under
development
(b)non-current investment
(c)deferred tax assets(NET)
(d)long-term loan and advances
(e)other non-current assets
Current assets

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(a)current investments
(b)inventories
(c)trade receivables
(d)cash and cash equivalents
(e)short-term loans and advances
(f)other current assets
Form of Statement of Profit and Loss
Name of the Company______
Profit and Loss Statement for the year ended________
(Rupees in _____)
Particulars Note no. Figures as at the
end of the current
reporting period
Figures as at the
end of the
previous
reporting period
1. Revenue from
operations
xxx xxx
2. Other income xxx xxx
3. Total revenue(1+2) xxx xxx
4. Expenses:
-cost of materials
consumed
xxx Xxx
-purchases of stock in
trade
-changes in
inventories of
finished goods works
in progress and stock
xxx
xxx
xxx
xxx

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in trade
-employee benefit
expense
-finance cost
depreciation and
amortization expense
-other expense
xxx
xxx
xxx
xxx
xxx
xxx
Total expense xxx xxx
5. Profit before
exceptional and
extraordinary items
and tax(3-4)
xxx xxx
6. Exceptional items xxx xxx
7. Profit before
extraordinary items
and tax(5-6)
xxx xxx
8. Extraordinary items xxx xxx
9. Profit before tax(7-8) xxx xxx
10. Tax expense:
(a)current tax
(b)deferred tax
xxx
xxx
xxx
xxx
11. Profit/loss for the
period from
continuing operations
xxx xxx
12. Profit/loss from
discontinuing
operation
xxx xxx
13. Tax expense of
discontinuing
operations
xxx xxx
14. Profit/loss from
discontinuing
operations after tax
xxx xxx
15. Profit/loss for period xxx xxx
16. Earnings per equity
share:
(a)basic
(b)diluted
xxx
xxx
xxx
xxx

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CHAPTER 3:-
1. According to section 209, every company shall keep at its registered office proper books
of account. In case of a branch, the proper books of account relating to transactions
effected at such branch, shall be kept at that office and proper summarized returns made
up to dates at intervals of not more than three months, are sent by the branch office to the

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company at its registered office or such other place as may be decided by the Board of
Directors.
2. The books of account and other books and other papers shall be open for inspection
(sections 209/209A) during business hours to:
i. Any Director
ii. Registrar
iii. Any officer duly authorized by the Central Government/SEBI
3. According to section 210 at every Annual General Meeting of a company held in
pursuance with section 166, the Board of Directors shall lay before the company:
i. Balance Sheet as at the end of the period.
ii. Profit & Loss Account for the period.
iii. In case of a company not carrying on business for profit, an Income &
Expenditure A/c for the period ended.
iv. Balance Sheet of holding company to include certain particulars as to its
subsidiaries. (Section 212)
4. According to the section 210 the profit and loss account shall relate —
a. In the case of the first Annual General Meeting of the company, to the period
beginning with incorporation of the company and ending with a day which shall
not precede the day of the meeting by more than nine months.
b. In the case of any subsequent Annual General Meeting of the company, to the
period beginning with the day immediately after the period for which the accounts
was last submitted and ending with a day which shall not precede the day of the
meeting by more than six months, or in cases where an extension has been
granted for holding the meeting under the second proviso to the sub-section (1) of
sec. 166, by more than six months and the extension so granted.
c. The period to which the account relates is referred as a "Financial Year" and
itmay be less or more than a calendar year but shall not exceed fifteen months. It
may be extended to eighteen months provided special permission has been
obtained from the concerned Registrar of Companies.
d. The company has to maintain the books of account together with the vouchers and
preserve in good order for a period of not less than eight years immediately
preceding the current year. (Section 209(4A))

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5. If the Director of the company or a person not being a Director of the company having
been charged by the Board of Directors with the duty of seeing that the provisions of this
section are complied, fails to comply with the provisions of section 209/210 or take all
the reasonable steps, he shall in respect of each offence, be punishable with imprisonment
up to six months or a fine of up to ten thousand rupees or with both. Provided that in any
proceedings against a person in respect of an offence, it shall be a defence to prove that a
competent and reliable person was charged with the duty of seeing that the provisions of
this section are complied with. Provided further that no person shall be sent to
imprisonment for any such offence, unless it was committed wilfully. (Section 209(5))
6. Every Balance Sheet and every Profit & Loss Account of a company (other than a
banking company) shall be signed by its manager or secretary, if any, and by not less than
two directors of the company one of whom shall be a managing director where there is
one (Section 215). In case of banking company, by persons specified as per the
provisions of Banking Companies Act, 1949.
7. Every Profit & Loss Account of company shall be annexed to the Balance Sheet and the
Auditor’s Report (Section 216) and Board’s Report (Section 217).
8. Three copies of the balance sheet and the profit & loss account for the period shall be
filed (Section 220) with the concerned Registrar: —
a. within thirty days from the date on which the balance sheet, etc., were laid and
adopted at the AGM; and
b. where the AGM is not so held, within 30 days of the latest day on which the
AGM should have been held.
Accounting Standards
Indian Accounting Standards, (abbreviated as india AS) are a set of accounting standards notified
by the Ministry of Corporate Affairswhich are converged with International Financial Reporting
Standards (IFRS). These accounting standards are formulated by Accounting Standards Board
of Institute of Chartered Accountants of India. Now India will have two sets of accounting
standards viz. existing accounting standards under Companies (Accounting Standard) Rules,
2006 and IFRS converged Indian Accounting Standards(Ind AS). The Ind AS are named and
numbered in the same way as the corresponding IFRS. NACAS recommend these standards to
the Ministry of Corporate Affairs. The Ministry of Corporate Affairs has to spell out the
accounting standards applicable for companies in India. As on date the Ministry of Corporate
Affairs notified 35 Indian Accounting Standards(Ind AS). But it has not notified the date of
implementation of the same.6
6 "Indian AccountingStandards Convergedwith IFRSNotified"

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The basic objective of Accounting Standards is to remove variations in the treatment of several
accounting aspects and to bring about standardization in presentation. They intent to harmonize
the diverse accounting policies followed in the preparation and presentation of financial
statements by different reporting enterprises so as to facilitate intra-firm and inter-firm
comparison.
Indian Accounting Standards
The following are the mandatory Accounting Standards (AS) as on July 1, 2012 as listed on the
site of The Institute of Chartered Accountants of India (ICAI) –
'*AS 1 Disclosure of Accounting policies
*AS 2 Valuation of Inventories
*AS 3 Cash Flow Statement
*AS 4 Contingencies and Events Occurring after the Balance Sheet Date
*AS 5 Net Profit or Loss for the period,Prior Period Items and Changes in Accounting Policies
* AS 6 Depreciation Accounting
*AS 7 Construction Contracts (revised 2002)'''
*AS 8 Accounting for Research and Development (AS-8 is no longer in force since it was
merged with AS-26)
*AS 9 Revenue Recognition
*AS 10 Accounting for Fixed Assets
*AS 11 The Effects of Changes in Foreign Exchange Rates (revised 2003),
*AS 12 Accounting for Government Grants
*AS 13 Accounting for Investments
*AS 14 Accounting for Amalgamations
*AS 15 Employee Benefits (revised 2005)
*AS 16 Borrowing Costs
*AS 17 Segment Reporting
*AS 18 Related Party Disclosures
*AS 19 Leases
*AS 20 Earnings Per Share
*AS 21 Consolidated Financial Statements
*AS 22 Accounting for Taxes on Income.
*AS 23 Accounting for Investments in Associates in Consolidated Financial Statements

21. Page | 21
*AS 24 Discontinuing Operations
*AS 25 Interim Financial Reporting
*AS 26 Intangible Assets
*AS 27 Financial Reporting of Interests in Joint Ventures
'*AS 28 Impairment of Assets
*AS 29 Provisions,Contingent` Liabilities and Contingent Assets
*AS 30 Financial Instruments: Recognition and Measurement and Limited Revisions to AS 2,
AS 11 revised 2003), AS 21, AS 23, AS 26, AS 27, AS 28 and AS 29
*AS 31, Financial Instruments: Presentation
*AS 32, Financial Instruments: Disclosures, and limited revision to Accounting Standard.
PROVISIONS of ACCOUNTING as per COMPANIES ACT 1956
209. BOOKS OF ACCOUNT TO BE KEPT BY COMPANY
(1) Every company shall keep at its registered office proper books of account with respect to -
(a) all sums of money received and expended by the company and the matters in respect of
which the receipt and expenditure take place ;
(b) all sales and purchases of goods by the company ;
(c) the assets and liabilities of the company ; and
(d) in the case of a company pertaining to any class of companies engaged in production,
processing, manufacturing or mining activities, such particulars relating to utilisation of material
or labour or to other items of cost as may be prescribed.
210. ANNUAL ACCOUNTS AND BALANCE SHEET
(1) At every annual general meeting of a company held in pursuance of section 166, the Board of
directors of the company shall lay before the company -
(a) a balance sheet as at the end of the period specified in sub-section (3), and
(b) a profit and loss account for that period.
(2) In the case of a company not carrying on business for profit, an income and expenditure
account shall be laid before the company at its annual general meeting instead of a profit and loss
account, and all references to "profit and loss account", "profit" and "loss" in this section and
elsewhere in this Act, shall be construed, in relation to such a company, as references
respectively to the "income and expenditure account", "the excess of income over expenditure",
and "the excess of expenditure over income".
(3) The profit and loss account shall relate –
(a) in the case of the first annual general meeting of the company, to the period beginning with
the incorporation of the company and ending with a day which shall not precede the day of the
meeting by more than nine months ; and

22. Page | 22
(b) in the case of any subsequent annual general meeting of the company, to the period beginning
with the day immediately after the period for which the account was last submitted and ending
with a day which shall not precede the day of the meeting by more than six months, or in cases
where an extension of time has been granted for holding the meeting under the second proviso to
sub-section (1) of section 166, by more than six months and the extension so granted.
(4) The period to which the account aforesaid relates is referred to in this Act as a "financial
year" ; and it may be less or more than a calendar year, but it shall not exceed fifteen months :
Provided that it may extend to eighteen months where special permission has been granted in
that behalf by the Registrar.
(5) If any person, being a director of a company, fails to take all reasonable steps to comply with
the provisions of this section, he shall, in respect of each offence, be punishable with
imprisonment for a term which may extend to six months, or with fine which may extend to ten
thousand rupees, or with both :
Provided that in any proceedings against a person in respect of an offence under this section, it
shall be a defence to prove that a competent and reliable person was charged with the duty of
seeing that the provisions of this section were complied with and was in a position to discharge
that duty :
Provided further that no person shall be sentenced to imprisonment for any such offence unless it
was committed wilfully.
(6) If any person, not being a director of the company, having been charged by the Board of
directors with the duty of seeing that the provisions of this section are complied with, makes
default in doing so, he shall, in respect of each offence, be punishable with imprisonment for a
term which may extend to six months, or with fine which may extend to ten thousand rupees, or
with both :
Provided that no person shall be sentenced to imprisonment for any such offence unless it was
committed willfully.
211. FORM AND CONTENTS OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT
(1) Every balance sheet of a company shall give a true and fair view of the state of affairs of the
company as at the end of the financial year and shall, subject to the provisions of this section, be
in the form set out in Part I of Schedule VI, or as near thereto as circumstances admit or in such
other form as may be approved by the Central Government either generally or in any particular
case ; and in preparing the balance sheet due regard shall be had, as far as may be, to the general
instructions for preparation of balance sheet under the heading "Notes" at the end of that Part :
Provided that nothing contained in this sub-section shall apply to any insurance or a banking
company or any company engaged in the generation or supply of electricity, or to any other class
of company for which a form of balance sheet has been specified in or under the Act governing
such class of company.
(2) Every profit and loss account of a company shall give a true and fair view of the profit or loss
of the company for the financial year and shall, subject as aforesaid, comply with the
requirements of Part II of Schedule VI, so far as they are applicable thereto :
Provided that nothing contained in this sub-section shall apply to any insurance or banking
company or any company engaged in the generation or supply of electricity, or to any other class
of company for which a form of profit and loss account has been specified in or under the Act
governing such class of company.

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(3) The Central Government may, by notification in the Official Gazette, exempt any class of
companies from
compliance with any of the requirements in Schedule VI if, in its opinion, it is necessary to grant
the exemption in the public interest.
Any such exemption may be granted either unconditionally or subject to such conditions as may
be specified in the notification.
(3A) Every profit and loss account and balance sheet of the company shall comply with the
accounting standards. (3B) Where the profit and loss account and the balance sheet of the
company do not comply with the accounting standards, such companies shall disclose in its
profit and loss account and balance sheet, the following, namely:-
(a) the deviation from the accounting standards ;
(b) the reasons for such deviation ; and
(c) the financial effect, if any, arising due to such deviation.
(3C) For the purposes of this section, the expression "accounting standards" means the standards
of accounting recommended by the Institute of Chartered Accountants of India constituted under
the Chartered Accountants Act,
1949 (38 of 1949), as may be prescribed by the Central Government in consultation with the
National Advisory Committee on Accounting Standards established under sub-section (1) of
section 210A :
Provided that the standards of accounting specified by the Institute of Chartered Accountants of
India shall be deemed to be the Accounting Standards until the accounting standards are
prescribed by the Central Government under this sub-section.
(4) The Central Government may, on the application, or with the consent of the Board of
directors of the company, by order, modify in relation to that company any of the requirements
of this Act as to the matters to be stated in the company's balance sheet or profit and loss account
for the purpose of adapting them to the circumstances of the company.
(5) The balance sheet and the profit and loss account of a company shall not be treated as not
disclosing a true and fair view of the state of affairs of the company, merely by reason of the fact
that they do not disclose.
213. FINANCIAL YEAR OF HOLDING COMPANY AND SUBSIDIARY
(1) Where it appears to the Central Government desirable for a holding company or a holding
company's subsidiary, to extend its financial year so that the subsidiary's financial year may end
with that of the holding company, and for that purpose to postpone the submission of the relevant
accounts to a general meeting, the Central Government may, on the application or with the
consent of the Board of directors of the company whose financial year is to be extended, direct
that in the case of that company, the submission of accounts to a general meeting, the holding of
an annual general meeting or the making of an annual return, shall not be required to be
submitted, held or made, earlier than the dates specified in the direction, notwithstanding
anything to the contrary in this Act or in any other Act for the time being in force.
(2) The Central Government shall, on the application of the Board of directors of a holding
company or a holding company's subsidiary, exercise the powers conferred on that Government
by sub-section (1) if it is necessary so to do, in order to secure that the end of the financial year
of the subsidiary does not precede the end of the holding company's financial year by more than
six months, where that is not the case at the commencement of this Act, or at the date on which

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the relationship of holding company and subsidiary comes into existence, where that date is later
than the commencement of this Act.
215. AUTHENTICATION OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT
(1) Save as provided by sub-section (2), every balance sheet and every profit and loss account of
a company shall be signed on behalf of the Board of directors -
(i) in the case of a banking company, by the persons specified in clause (a) or clause (b), as the
case may be, of subsection
(2) of section 29 of the Banking Companies Act, 1949 (10 of 1949) ;
(ii) in the case of any other company, by its manager or secretary if any, and by not less than two
directors of the company one of whom shall be a managing director where there is one.
(2) In the case of a company not being a banking company, when only one of its directors is for
the time being in India, the balance sheet and the profit and loss account shall be signed by such
director; but in such a case there shall be attached to the balance sheet and the profit and loss
account a statement signed by him explaining the reason for non- compliance with the provisions
of sub-section (1).
(3) The balance sheet and the profit and loss account shall be approved by the Board of directors
before they are signed on behalf of the Board in accordance with the provisions of this section
and before they are submitted to the auditors for their report thereon.
BIBLIOGRAPHY
 Company Act 1956


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