Role of Book Keeping in Your Business & Effect of Edit Log Feature Thereon

Many of the businesses register as a Private Limited entities and then they start doing business without knowing the basics of book-keeping, accounting & compliances regarding the Private Limited Companies. Actually, they are the beginners and new to the field of finance, taxes & accounting. In this article I specially focused for the people who are new and layman to these areas.

What is Book-keeping & Accounting & why it being necessary??

Book keeping simply means recording of the transactions in your business. Once, after company registration, you need to open the bank account for the business. Now, the day to day routine transactions like receipts, payments, deposits, withdrawals from Bank will be made. Thereafter, analyzing classifying, interpreting and reporting this data into various statements like Trial Balance, Ledgers, Income & Expense or Profit & Loss statement and Balance sheet preparation shall form a part of accounting. These transactions should be recorded in an accounting software like Tally, Busy, Marg, Excel etc. . Now what happens.

Since, these were the only recording of transactions into the software. But now w.e.f. April 2023, all the transactions which will be recorded in the software or electronic mode shall have Edit Log feature mandatorily as per law. Simply meaning, whatever you are recording, adding, deleting, or doing any modifications with the records or with the transactions, these activities will be recorded and called as Edit Log or Audit Trail & this feature can’t be disabled at any time during the year by the company.

How it will affect your businesses?

If you newly started your business, then either you should have a Full time accountant in your office or you must have outsourced the book keeping and accounting services to any organization or professional. So if someone else is doing book keeping and accounting work for your company, he should be well aware about the details of the transactions you made or you have to provide the true and correct details and description of the transaction activities took place in the account during the year. Otherwise, at the time of audit, auditor may arise so many queries on the transactions validity & you may face so much of inconvenience and difficulty while audit. Moreover, in the future years while you will be focusing to grow your business, the govt departments (MCA, Income Tax, GST etc) have the power to send you the show cause notice for scrutiny of books of accounts of your company which also included Edit Log. So Now onwards the book keeping and accounting should not be overlooked by the companies even it has very small business in the initial years or very few transactions in the year. Applicability of Edit Log is for every corporate irrespective of the volume of business you do.

Consequences for non compliance of Audit trail Provisions.

Penalty as per Income Tax Act 1961: Amount of penalty payable under section 271A of Income Tax Act, 1961 If the person fails to keep / maintain the books of accounts / documents or fails to retain the required books of accounts / documents, then, such person shall be liable to pay the penalty under section 271A to the extent of INR 25,000.

Penalty as per Companies Act 2013: Penalties for Non-Compliance In case of Non-Compliance or Contravention of provisions mentioned, such managing director, whole-time director in charge of finance, Chief Financial officer or such other person of the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to 5 lakhs Rupees.

Penalty Under CGST Act 2017: In terms of Section 122(1)(xvi) of the CGST Act, 2017 failure to keep, maintain or retain books of account and other documents in accordance with provisions of the CGST Act or the rules made thereunder attracts penalty as higher of the following: 20,000/- (CGST+SGST/IGST) or an amount equivalent as applicable for offence- Tax evaded or Tax not deducted/collected or short deducted / collected U/s 51 & 52 Input tax availed or passed on or distributed irregularly, or Refund claimed fraudulently.

Recommendations for best practices

• Book keeping & Accounting should not be ignored at any cost otherwise then you may face disturbing consequences in future. Better either to hire a full time competent accountant in your office or outsource it to any accounting organization with full disclosure of details of transactions correctly at once.
• Implement software for accounting which have a Edit Log feature & enable the edit log from the April 01, 2023 into it.
• Do not account for the transactions for the months at once or maintain the books of accounts on regular basis without any delays. Otherwise, the date on which you captured the transactions shall also be reflected and that’s not correct.
  This is all about the latest changes in accounting world of companies took place & every director & stakeholder should be aware of it.