MCA Notification for accounting software

MCA Notification for accounting software

1. Introduction:

♦ As per Section 128 of the Companies Act, 2013 (Act), every company shall prepare and keep at its registered office books of account, other relevant books and papers and financial statement for every financial year which give a true and fair view of the state of the affairs of the company, including that of its branch office or offices, if any, and explain the transactions effected both at the registered office and its branches and such books shall be kept on accrual basis and according to the double entry system of accounting.

♦ However, all or any of the aforesaid books of account and other relevant papers may be kept at such other place in India as the Board of Directors may approve.

♦ Provided further that, the company may keep such books of account or other relevant papers in electronic mode.

♦ Rule 3 of Chapter IX of The Companies (Accounts) Rules, 2014 provides guidance on the Manner of Books of Account to be Kept in Electronic Mode.

2. Recent Amendment to the Rule 3(1) of Chapter IX of The Companies (Accounts) Rules, 2014

♦  Vide MCA notification dated March 24, 2021, the following proviso was inserted to the Rule 3(1) of Chapter IX of The Companies (Accounts) Rules, 2014:

Provided that for the financial year commencing on or after the 1st day of April, 2021, every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled. 

♦  According to this notification, every company maintaining its books of accounts in electronic manner shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled w.e.f. April 01, 2021.

♦  Later, MCA vide its notification dated April 01, 2021 deferred the requirement of having such accounting software for a period of 1 (one) year to April 01, 2022.

3. Accordingly, every company maintaining its books of accounts in electronic manner shall use only such accounting software which has following features w.e.f. April 01, 2022:

i. recording audit trail of each and every transaction,

ii. creating an edit log of each change made in books of account

iii. state the date when such changes were made and

iv. ensuring that the audit trail cannot be disabled

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