In start-ups, it would be putting it quite mildly to say that things can be out of place. It’s very common to not even maintain accounts, leave alone keep them in order. But this can be very problematic, particularly at the time of fund-raising. Moreover, how does one take proper business decisions without them?
That said, businesses do have, by law, an obligation to maintain their accounts. The Companies Act, 2013, for example, mandates that all companies maintain their accounts for the previous eight years, along with all the receipts, bills and vouchers. It also specifies that the accounts be maintained on accrual basis and following the double-entry system, whether manually or electronically.
Failure to maintain the books of accounts could result in high penalties, including imprisonment, for the managing director, whole-time director, independent director, chief executive officer or chief financial officer, who are responsible for maintaining the books.
All companies must end their financial year on March 31. If, in its first year, the company has begun on or after January 1, the end of the financial year will be March 31 of the following year.