Updated: 17 September 2026
Sections 128 and 129 of the Companies Act, 2013: Books of Account and Financial Statements
Sections 128 and 129 of the Companies Act, 2013 form the core statutory framework for maintaining company books of account and preparing financial statements. Section 128 deals with where and how accounting records are maintained, inspection and preservation. Section 129 requires financial statements to present a true and fair view, comply with notified accounting standards and follow the applicable statutory form.
Key definitions under the Companies Act, 2013
Book and paper or book or paper: Section 2(12) includes books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form.
Books of account: Section 2(13) includes records concerning money received and spent, sales and purchases of goods and services, assets and liabilities, and prescribed cost items for companies covered by section 148.
Financial statement: Section 2(40), subject to the statutory provisos, includes the balance sheet, profit and loss account or income and expenditure account, cash flow statement, statement of changes in equity where applicable, and explanatory notes forming part of those documents.
Section 128 - Books of account, etc., to be kept by company
Section 128 requires every company to prepare and keep books of account, relevant books and papers and financial statements for every financial year that give a true and fair view of the company's affairs, including its branches, and explain transactions at the registered office and branches. The books must be maintained on an accrual basis and according to the double-entry system of accounting.
Place of keeping books
The normal place is the registered office. The Board may decide to keep all or any books of account and relevant papers at another place in India, in which event the company must notify the Registrar in writing of the full address within seven days.
Branch offices
A branch in or outside India may keep proper books relating to its own transactions, provided proper summarised returns are periodically sent to the registered office or other approved place in India.
Inspection by directors
Books and papers maintained within India are open to inspection by directors during business hours. Financial information maintained outside India is subject to the prescribed requirements for maintaining and producing copies. Inspection relating to a subsidiary is subject to authorisation by a Board resolution.
Retention
Books of account and relevant vouchers must ordinarily be preserved in good order for at least eight financial years immediately preceding the relevant financial year. Where the company has existed for less than eight years, records for all preceding years are to be kept. The Central Government may require longer preservation where an investigation under Chapter XIV has been ordered.
Contravention
Under section 128(6), the managing director, whole-time director in charge of finance, Chief Financial Officer or other person charged by the Board with compliance may, for contravention, be punishable with a fine of not less than Rs. 50,000 and up to Rs. 5,00,000. The imprisonment language formerly appearing in this provision was omitted by the Companies (Amendment) Act, 2020 with effect from 21 December 2020.
Electronic books of account: Rule 3 compliance
Section 128 expressly permits books of account and relevant papers to be kept electronically in the prescribed manner. Rule 3 of the Companies (Accounts) Rules, 2014 adds operational requirements for electronic records.
| Requirement | Practical rule |
|---|---|
| Accessibility in India | Electronic books and relevant books and papers must remain accessible in India at all times for subsequent reference. |
| Daily backup | Backup of electronic books and papers, including records maintained outside India, must be kept on servers physically located in India on a daily basis. |
| Audit trail | For financial years commencing on or after 1 April 2023, accounting software used to maintain books must record an audit trail for each transaction, create an edit log of changes with dates, and ensure that the audit trail cannot be disabled. |
| Annual information to Registrar | The prescribed details concerning the electronic service provider and location of records are to be intimated annually at the time of filing the financial statement. |
Section 129 - Financial statement
Section 129 requires financial statements to give a true and fair view of the state of affairs of the company or companies, comply with accounting standards notified under section 133, and follow the applicable form under Schedule III. Special statutory formats applicable to banking, insurance, electricity and other specially regulated classes are preserved by the section.
Financial statements at the annual general meeting
At every annual general meeting, the Board of Directors must lay the financial statements for the financial year before the meeting.
Consolidated financial statements
Where a company has one or more subsidiaries, section 129(3) requires a consolidated financial statement in addition to the company's own financial statements. It must be prepared in the same form and manner and laid before the annual general meeting. A separate statement containing salient features of the financial statements of subsidiaries must also be attached in the prescribed form.
Accounting-standard deviations
If financial statements do not comply with the accounting standards referred to in section 129(1), the company must disclose the deviation, reasons for the deviation and its financial effects, if any.
Exemptions
The Central Government may, in the public interest and by notification, exempt a class or classes of companies from requirements of section 129 or the rules, either unconditionally or subject to stated conditions.
Contravention
Section 129(7) provides consequences for contravention by the managing director, whole-time director in charge of finance, Chief Financial Officer, another person charged by the Board with compliance, and, where such officers are absent, the directors. The statutory provision should be checked with the latest official text before acting on a potential offence or prosecution.
Section 129A - Periodical financial results
Section 129A, inserted by the Companies (Amendment) Act, 2020 with effect from 22 January 2021, enables the Central Government to require prescribed classes of unlisted companies to prepare periodical financial results in the prescribed form, obtain Board approval and audit or limited review as prescribed, and file a copy with the Registrar within thirty days of completion of the relevant period with the prescribed fees.
Quick compliance summary
- Maintain complete books on accrual basis using double-entry accounting.
- Keep books at the registered office or follow the statutory procedure for another place in India.
- Preserve books and supporting vouchers for at least eight financial years, subject to longer retention where directed.
- For electronic books, ensure continuous accessibility in India and daily backup on servers physically located in India.
- Use compliant accounting software with audit-trail and edit-log functionality where Rule 3 applies.
- Prepare financial statements that give a true and fair view, comply with section 133 accounting standards and follow the applicable Schedule III or special statutory format.
- Prepare consolidated financial statements where section 129(3) applies.
This page is a general legal information resource. For filing, adjudication or litigation, verify the latest Act, rules, notifications, exemptions and applicable accounting standards for the relevant company and financial year.