Note on Preparing books of accounts to be maintained under Section 44AA of Income Tax Act, 1961

Some important points to be considered white completing the Books of Accounts and preparing of the Balance sheet for business or profession by an accountant and an assessee.

Sometimes it is seen that when an assessee is required to maintain the books of accounts as per the Income tax provisions, but the following mistakes are done in general by an assessee and a person preparing accounts i.e. an accountant. Balance sheets are prepared in consent with the innocent clients without acknowledging the grave consequences ahead.

A Balance sheet is never to be prepared without completing the tally data and it should never be expected from a CA without tally to get it audited u/s 44AB of the Act which is principally wrong and against law and the moral ethics of the Profession. An assessee and a good accountant should not approach a CA without complete tally data.

Tally data has to be prepared much earlier to the last date of filing the return u/s 139(1). Balance sheet is not to be prepared on the excell sheet keeping in mind that the tally data shall be completed later on which is never completed once return is filed unless case is selected in scrutiny. Tally data has to be completed first only then balance sheet has to be prepared.

Even suspense entries has to be made clear from the tally data and balance sheets are not to be prepared removing debit and credit side of the suspense on excel sheet.Make clear all the suspense entries of the bank in tally data itself.

Opening balances are to be checked sure and with differences balance sheets are never to be prepared.

Gross profit is not to be determined first then position of stock is calculated on the basis of GP ratio. It is wrong if It is not determined what GP ratio has come putting figure of closing stock. It is absolutely wrong if GP ratio is first determined than stock figure is taken on the basis of Gross Profit.

Section 40(A)(3) has to kept in mind regarding payment of Rs. 10000.00 in a single day.

Expense vouchers are to be maintained on day to day basis.

Cash expenses are never to put in tally on the last date of the year i.e. 31st March. Expenses are to be feeded day to day in tally.

Cross verification of the debtors and creditors are to be made but make sure debtors and creditors are not wiped off from the balance sheet of their own choice of the assessee as well as accountant.

With every single invoice GST reconciliation is required

Complete bank reconciliation is required.

Complete debtors and creditors with cross examination is required.

Stock reconciliation is required.

Every expense voucher is required to be maintained.

Purchase and sales reconciliation is required along with debit and credit notes.

Which expense is of revenue nature and which expense is of capital nature a broad view is required.

Whether ITC is allowable or not allowable it is required to be checked by a good accountant.

RCM under GST law is to be checked where applicable

Opening balances has to be checked with the last year balance sheet.

Depreciation has to be calculated as per the prescribed rates.

Expenses payable and its time of payment has to been checked by an accountant.

Sections 269SS, 269T and 269ST has to be kept in mind.

Determine the income with proper tax planning.

These are the minimum important points and these are to be kept in view while writing books and preparing balance sheet so that people may not suffer when they are put to question by the Revenue authorities.

Author Bio

Qualification: LL.B / Advocate
Company: S.K.Jain & Co.
Location: Faridabad, Haryana, India
Member Since: 16 May 2019 | Total Posts: 60
I am S.K.Jain , Tax Consultant cum Advocate practising in Income Tax , GST , Company Matters . The name of the concern is S.K.Jain & Co. and I am prop. of this concern . I am in practice for the last 30 years . Those who have joined the profession recently and want to discuss on the particular i View Full Profile

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