Maintenance of Books of Accounts (Section 209(1)(d))
Section 209 deals with the books of accounts required to be maintained by the company. Section
209(1) requires that every company is required to maintain at its registered offi ce proper books of
accounts 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 utilization of material or labour
or to other items of cost as may be prescribed, if such class of companies is required by the Central
Government to include such particulars in the books of account:
Provided that all or any of the books of account aforesaid may be kept at such other place in India as the
Board of Directors may decide and when the Board of Directors so decides, the company shall, within
seven days of the decision, fi le with the Registrar a notice in writing giving the full address of that other
place.
The Central Government has so far prescribed separate Cost Accounting Records Rules with respect
to 44 classes of products or activities, which have been explained in detail in subsequent chapters.
These Rules require the books of account to be kept in a manner that the cost of production and
cost of sales during the fi nancial year can be properly calculated in the formats prescribed for
the respective industries. The books of accounts should also provide all the details required with
respect to other elements of cost such as materials, wages, stores and overheads etc. However, most
of these rules provide exemptions to small scale units having total annual turnover of less than Rs.
10 crores. In other words, Section 209(1)(d) deals with the maintenance of cost records and provides
that in the case of a company (pertaining to any class of companies), which is engaged in either production or processing or manufacturing or mining activities, the company will also be required
to maintain such particulars in its books of accounts relating to utilization of material or labour or
to other items of cost as may be prescribed by the Central Government.
Section 209(2) provides that where a company has a branch offi ce, whether in or outside India, the
company shall be deemed to have complied with the provisions, if proper books of account relating
to the transactions effected at the branch offi ce are kept at that offi ce and proper summarized
returns, made up to dates at intervals of not more than three months, are sent by the branch offi ce
to the company at its registered offi ce or the other place referred to in sub-Section (1).
The reading of Section 209(1), prima facie stipulates that the cost accounting records are to be
maintained in the registered offi ce of the company. However, a reasonable interpretation of Section
209(2) provides that maintenance of records at the factory, or other locations with periodical returns
to registered offi ce may also satisfy the letter and spirit of law. However, it may be clarifi ed here
that cost records are generally never exclusively maintained at the factory. Since marketing costs,
administrative costs and other items of expenses incurred in corporate, registered and sales offi ces
are also subject matter of cost accounting records and cost audit, these post manufacturing expenses
including marketing would be incurred in places other than the factory.
Section 209(3) requires the books to give a true and fair view of the state of affairs of the company
and to explain its transactions. Books are to be kept on `accrual’ basis and according to double entry
system of accounting.
Section 209(4) provides that the books of account and other books and papers shall be open to
inspection by any director during business hours.
Section 209(4)(a) provides that the books of accounts of every company relating to a period of not
less than eight years immediately preceding the current year together with the vouchers relevant
to any entry in such books of account shall be preserved in good order. However, in case of a
company incorporated less than eight years before the current year, the books of account for the
entire period preceding the current year to be preserved.
Section 209(5) provides that if any of the persons referred to in sub-Section (6) of Section 209 fails to
take all reasonable steps to secure compliance by the company with the requirements of Section 209
of the Companies Act or has by his own willful act been the cause of any default by the company,
he shall, in respect of each offence, be punishable with imprisonment for a term which may extend
to six months, or with fi ne which may extend to ten thousand rupees, or with both. This sub-Section
further provides that no person shall be sentenced to imprisonment for any such offence, unless it
was willfully committed.
Section 209(6) clarifi es that the persons referred to in sub-Section (5) of Section 209 for punishment
are as under:
(a) Where the company has a managing director or manager, such managing director or manager
and all offi cers and other employees of the company; and
(b) Where the company has neither a managing director nor manager, every director of the
company.
Section 209(7) provides that if any person, not being a person referred to in sub-Section (6), having been charged by the managing director, manager or Board of Directors, as the case may be with the
duty of seeing that requirements of this Section are complied with, makes a 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 fi ne which may extend to ten thousand rupees, or with both
These rules require the books of accounts to be kept in a manner that the cost of production and cost
of sales of each item (as covered in Section 209(1)(d)) produced or manufactured during the year
can be determined in the prescribed format i.e., separate fi gures for materials, wages, overheads
etc.
If a company is engaged in manufacture of production of products or activities other than those class
of industries as are covered under Section 209(1)(d) also, the cost records may not be maintained for
such other products or activities as are not covered under the provisions of cost accounting records
rules.
Section 209 deals with the books of accounts required to be maintained by the company. Section
209(1) requires that every company is required to maintain at its registered offi ce proper books of
accounts 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 utilization of material or labour
or to other items of cost as may be prescribed, if such class of companies is required by the Central
Government to include such particulars in the books of account:
Provided that all or any of the books of account aforesaid may be kept at such other place in India as the
Board of Directors may decide and when the Board of Directors so decides, the company shall, within
seven days of the decision, fi le with the Registrar a notice in writing giving the full address of that other
place.
The Central Government has so far prescribed separate Cost Accounting Records Rules with respect
to 44 classes of products or activities, which have been explained in detail in subsequent chapters.
These Rules require the books of account to be kept in a manner that the cost of production and
cost of sales during the fi nancial year can be properly calculated in the formats prescribed for
the respective industries. The books of accounts should also provide all the details required with
respect to other elements of cost such as materials, wages, stores and overheads etc. However, most
of these rules provide exemptions to small scale units having total annual turnover of less than Rs.
10 crores. In other words, Section 209(1)(d) deals with the maintenance of cost records and provides
that in the case of a company (pertaining to any class of companies), which is engaged in either production or processing or manufacturing or mining activities, the company will also be required
to maintain such particulars in its books of accounts relating to utilization of material or labour or
to other items of cost as may be prescribed by the Central Government.
Section 209(2) provides that where a company has a branch offi ce, whether in or outside India, the
company shall be deemed to have complied with the provisions, if proper books of account relating
to the transactions effected at the branch offi ce are kept at that offi ce and proper summarized
returns, made up to dates at intervals of not more than three months, are sent by the branch offi ce
to the company at its registered offi ce or the other place referred to in sub-Section (1).
The reading of Section 209(1), prima facie stipulates that the cost accounting records are to be
maintained in the registered offi ce of the company. However, a reasonable interpretation of Section
209(2) provides that maintenance of records at the factory, or other locations with periodical returns
to registered offi ce may also satisfy the letter and spirit of law. However, it may be clarifi ed here
that cost records are generally never exclusively maintained at the factory. Since marketing costs,
administrative costs and other items of expenses incurred in corporate, registered and sales offi ces
are also subject matter of cost accounting records and cost audit, these post manufacturing expenses
including marketing would be incurred in places other than the factory.
Section 209(3) requires the books to give a true and fair view of the state of affairs of the company
and to explain its transactions. Books are to be kept on `accrual’ basis and according to double entry
system of accounting.
Section 209(4) provides that the books of account and other books and papers shall be open to
inspection by any director during business hours.
Section 209(4)(a) provides that the books of accounts of every company relating to a period of not
less than eight years immediately preceding the current year together with the vouchers relevant
to any entry in such books of account shall be preserved in good order. However, in case of a
company incorporated less than eight years before the current year, the books of account for the
entire period preceding the current year to be preserved.
Section 209(5) provides that if any of the persons referred to in sub-Section (6) of Section 209 fails to
take all reasonable steps to secure compliance by the company with the requirements of Section 209
of the Companies Act or has by his own willful act been the cause of any default by the company,
he shall, in respect of each offence, be punishable with imprisonment for a term which may extend
to six months, or with fi ne which may extend to ten thousand rupees, or with both. This sub-Section
further provides that no person shall be sentenced to imprisonment for any such offence, unless it
was willfully committed.
Section 209(6) clarifi es that the persons referred to in sub-Section (5) of Section 209 for punishment
are as under:
(a) Where the company has a managing director or manager, such managing director or manager
and all offi cers and other employees of the company; and
(b) Where the company has neither a managing director nor manager, every director of the
company.
Section 209(7) provides that if any person, not being a person referred to in sub-Section (6), having been charged by the managing director, manager or Board of Directors, as the case may be with the
duty of seeing that requirements of this Section are complied with, makes a 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 fi ne which may extend to ten thousand rupees, or with both
These rules require the books of accounts to be kept in a manner that the cost of production and cost
of sales of each item (as covered in Section 209(1)(d)) produced or manufactured during the year
can be determined in the prescribed format i.e., separate fi gures for materials, wages, overheads
etc.
If a company is engaged in manufacture of production of products or activities other than those class
of industries as are covered under Section 209(1)(d) also, the cost records may not be maintained for
such other products or activities as are not covered under the provisions of cost accounting records
rules.
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