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The managing director or manager are responsible for maintaining the books of accounts of a company ;

If the company has neither a managing director nor manager, then every director of the company are responsible for maintaining the books of accounts of a company ;

Every officer and other employee who has been authorised and to whom responsibility to maintain the books has been alloted by the Board of Directors.

If any of the persons referred to above fails to take all reasonable steps to maintain proper books of accounts or has by his own willful act been the cause of any default by the company in this respect, he is punishable with imprisonment up to six months or with fine which may extend to Rs. 1,000 or with both. However, no person can be sentenced to imprisonment unless it is proved that the contravention was committed by him wilfully.

Preparation of Balance Sheet and Profit and Loss Account

The company has to prepare its balance sheet and profit & loss account from the books of account maintained by it. Every Balance Sheet of a company must give a true and fair view of the state of affairs of the company as at the end of the financial year and must be in the prescribed format.

If the responsible for maintaining proper books of account fails to take all reasonable steps to secure compliance by the company with the requirement of law relating to the form and contents of the balance sheet, he is liable for each offence to imprisonment for a term extending up to six months or to fine up to Rs.1,000/- or to both.

Form of Balance Sheet,

Part 1 to Schedule VI of the Companies Act, 1956 gives the format in which the balance sheet is to be prepared. The schedule specifies 2 types of formats, the horizontal format and the vertical format. A company can prepare its balance sheet in either of the 2 formats. In the horizontal format, the liabilities including the share capital are placed on the left side and assets of all types on the right. The main heads in this form are arranged as under:


Share Capital (a) Fixed assets


Reserves and surplus (b) Investments


Loans (c) Current assets, loans and advances


Current liabilities and (d) Miscellaneous expenditure to the provisions extent not written off or adjusted


Profit & Loss Account

———– ———–


———– ———–

In the vertical format, the various heads of liabilities and assets are arranged vertically and current liabilities are shown as deduction, from current assets. Whatever information which is required to be given in the horizontal format must also be given in the vertical format. Summarised prescribed vertical form of balance sheet is given below:

I. Sources of Funds


Shareholders’ funds


Loan funds




II Application of Funds


Fixed assets




Current assets, loans and advances

Less: Current liabilities & provisions


(a) Miscellaneous expenditure to the extent not written off or adjusted

(b) Profit & Loss Account




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 as to matters to be stated in the company’s balance sheet or profit and loss account for adapting them to the circumstances of the company.

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