Accounting & Bookkeeping

Bookkeeping is the systematic recording and classifying of daily financial transactions, such as sales, purchases, receipts and payments, into ledgers. Accounting builds on that foundation, summarising and interpreting the recorded data to prepare financial statements and provide insight for decisions. Put simply, bookkeeping captures the data accurately, and accounting turns it into reports and analysis. Both rely on the same underlying records, which is why accurate bookkeeping is the basis for reliable accounting.

In most cases, yes. Companies must maintain books under Section 128 of the Companies Act 2013, with no turnover threshold, from the date of incorporation. LLPs must maintain books under the LLP Act. For income-tax purposes, an individual or Hindu undivided family carrying on business must maintain books under Section 44AA [ITA 2025: s. 62] if business income exceeds Rs 2,50,000 or turnover or gross receipts exceed Rs 25,00,000 in any of the three preceding years; for other persons, the corresponding thresholds are Rs 1,20,000 and Rs 10,00,000. Specified professions and presumptive-taxation cases have separate tests. GST-registered persons must also keep prescribed records under the CGST Act.

A complete set usually includes a sales register and a purchase register, general and subsidiary ledgers, a cash and bank book, monthly bank reconciliation statements, a fixed asset register, and a stock register where inventory is held. GST records such as GSTR-1 and GSTR-3B data, the input tax credit register and e-way bill records are needed for registered businesses, along with TDS records and the supporting vouchers, bills and receipts behind every entry.

Retention periods differ by law. Companies keep books and vouchers for 8 financial years under the Companies Act 2013. GST records are kept for 72 months, that is 6 years, from the due date of the annual return for the relevant year. For prescribed income-tax books, Rule 6F [ITR 2026: r. 46] requires retention for 6 years from the end of the relevant assessment year under the legacy Rules and for 7 tax years from the end of the relevant tax year under the 2026 Rules. Because the periods differ, eight years is a practical baseline, and records must be kept longer where a reopened assessment, appeal or other proceeding remains possible or pending under the applicable provision.

Electronic and cloud-based books are permitted, subject to the applicable Companies (Accounts) Rules and income-tax recordkeeping rules. Rule 6F [ITR 2026: r. 46] governs income-tax recordkeeping; Income-tax Rules 2026 Rule 46(8) specifically requires electronic books to remain accessible and usable in India, to be backed up in India, and to be kept on a computer server physically located in India. The applicable Companies Act backup requirements must be checked separately. We verify both rule sets and the provider's storage architecture before treating a cloud system as compliant.

It depends on the entity. Indian Accounting Standards (Ind AS) apply to all listed companies, other than those listed on the SME exchange, and to unlisted companies with a net worth of Rs 250 crore or more, together with their holding, subsidiary, associate and joint venture companies. Companies below these limits follow the Accounting Standards (AS) notified under the Companies (Accounting Standards) Rules 2021. Most small businesses, startups and firms follow AS, not Ind AS. We apply the framework that fits your entity.

E-invoicing becomes mandatory once a business has crossed an aggregate annual turnover of Rs 5 crore in any financial year from 2017-18 onwards. Once crossed, it stays applicable even if turnover later falls below Rs 5 crore. It applies to B2B invoices, exports and supplies to SEZ units, and not to B2C sales. A business that has never crossed Rs 5 crore, for example one at around Rs 1 crore, is not required to issue e-invoices. An invoice without a valid Invoice Reference Number is invalid, and the buyer cannot claim input tax credit on it.

Certain categories are exempt regardless of turnover. These include Special Economic Zone (SEZ) units, banks, insurance companies and other financial institutions including NBFCs, goods transport agencies carrying goods by road, passenger transport services, admission to cinema in multiplexes, and government departments and local authorities. We check whether an exemption applies before configuring your invoicing.

From 1 April 2025, businesses with an aggregate annual turnover of Rs 10 crore or more must report each invoice, credit note and debit note to the Invoice Registration Portal within 30 days of its date. After 30 days the portal will not accept the document and no Invoice Reference Number can be generated, which makes the invoice invalid. Businesses below Rs 10 crore currently face no such time limit, though prompt reporting remains good practice. We track this window for affected clients.

Input tax credit is claimed on the basis of GSTR-2B. GSTR-2B is a static, auto-drafted statement generated each month that lists eligible and ineligible credit for that period and does not change later. GSTR-2A is dynamic and keeps updating as suppliers file, so it is no longer the basis for the claim. We reconcile GSTR-2B against your purchase register each month, so credit is claimed only on invoices that actually appear in it.

The Invoice Management System is a portal facility where a buyer accepts, rejects or keeps pending each invoice, credit note and debit note uploaded by suppliers. Accepted documents flow into GSTR-2B and then into GSTR-3B as eligible credit, rejected ones are excluded, and pending ones do not flow until actioned. If no action is taken before GSTR-2B is generated, the document is treated as accepted. Because the outward-liability side of GSTR-3B is already locked to the auto-populated figures, with input tax credit expected to follow, acting on each item in IMS now matters.

If a supplier has not filed their GSTR-1, the invoice will not appear in your GSTR-2B, and the credit cannot be claimed for that period even though you hold the invoice. The practical step is to keep the item pending in IMS and follow up with the supplier to file or correct it, so the credit appears in a later month. We flag such gaps during reconciliation and track them with vendor follow-up until the credit becomes available.

Bank reconciliation matches your bank statement with your books to surface missing entries, bank charges, timing differences and errors. Doing it monthly keeps the ledgers accurate before the GST return window closes, which matters because the portal validates the data and an inaccurate ledger can hold up filing or produce wrong figures. Clean, reconciled records also support accurate input tax credit and a clear audit trail.

The right software depends on transaction volume, the number of users and whether e-invoicing applies to you. For most GST-registered businesses the practical requirement is software that connects to the Invoice Registration Portal for e-invoicing where applicable, prepares GSTR data, and supports the multi-factor authentication the portal has required since April 2025. We help select and set up a system suited to your size, rather than recommending a single product for every business.

Penalties apply under more than one law. Failure to keep, maintain or retain prescribed income-tax books or documents attracts a penalty of Rs 25,000 under Section 271A [ITA 2025: s. 441]. Under the Companies Act 2013, the responsible officers can face a fine between Rs 50,000 and Rs 5,00,000. Under GST, a taxable person who fails to keep, maintain or retain required records can face Rs 10,000 or the tax evaded, whichever is higher. Beyond the penalty, weak records make audits, GST filing and loan applications harder.