Books of account

Updated: Aug 20, 2021

Those books in which tli transactions of a business are recorded. The term is often prefaced by the word ‘proper’. Proper books of account are those that the law demands shall be kept by certain categories of businesses. For limited companics, proper books of account are loosely defined in the Companies Act 1985 and consist of records that enable the annual accounts to be prepared, and contain details of all receipts and payments, asset and liabilities and sales and purchases. The need for proper books of account is most apparent in a liquidation, when directors and other officers of a company may be liable in tort for not keeping sufficient records to identify various transactions and parties thereto.

Proper books are also required to be kept by any by any trader for the same reason, should he become bankrupt. The law also requires that the books and records kept shall be retained for a certain period. The period varies with the type of business, but it is well to remember that the tax authorities have power, in circumstances where failure to disclose is suspected, to go back many years and, if proper records are not available to prove otherwise, to make arbitrary assesments of taxable income with the onus on the person charged to provide evidence that such assesments are not correct.

Reference: The Penguin Business Dictionary, 3rd edt.

Sources & references
Risk disclaimer
James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.