ACCOUNTS AND ANNUAL RETURN

Question 1

Book and paper / Book or Paper

Answer 1

Includes books of account, cost accounting records, deeds, vouchers, writings, documents,
minutes and registers maintained on paper or in electronic form.

Question 2

Books of Accounts

Answer 2

Include records maintained in respect of
▪ all sums of money received and expended by a company and matters in relation to which
the receipts and expenditure take place;
▪ all sales and purchases of goods and services by the company;
▪ all assets and liabilities of the company; and
▪ items of cost in respect of production, processing, manufacturing or mining activities;

Question 3

proper books of accounts

Answer 3

A company must maintain proper books of accounts
(which fairly present the state of the affairs of the company and a fair record of all its
transactions)

Question 4

Proper books of accounts for Manufacturing Companies

Answer 4

For companies engaged in production, processing, manufacturing or mining, specified
particulars of cost accounts (material/labour or other inputs) shall also be maintained

Question 5

Manner in which books of accounts shall be maintained

Answer 5

For companies engaged in production, processing, manufacturing or mining, specified
particulars of cost accounts (material/labour or other inputs) shall also be maintained

Question 6

Keeping the books

Answer 6

▪ Books must be kept at registered office of the company
▪ Directors may opt to keep these books at some other place
(Pass a resolution in directors meeting and intimate registrar within 7 days of that)
▪ If company has a branch office
- Proper books of that branch may be maintained at branch
- Proper summarized returns should reach registered office or other specified place
periodically.

Question 7

Inspection of books of accounts by Directors

Answer 7

▪ Directors are entitled to inspect books during business hours.
▪ If some financial information is maintained outside country
- Copies shall be maintained and shall be make available for inspection by any director.
- Employees shall give full assistance to director for inspection

Question 8

Inspection of books of accounts by Members

Answer 8

Members do not have absolute right to inspect books of accounts. However, Companies Act
2017, or directors or general meeting may authorize member(s) to inspect books of accounts.

Question 9

Financial Statements

Answer 9

▪ Statement of financial position as at the end of the period;
▪ Statement of profit or loss and other comprehensive income
(or an income and expenditure statement in case of not for profit);
▪ Statement of changes in equity for the period;
▪ Statement of cash flows for the period;
▪ Notes, comprising a summary of significant accounting policies and other explanatory
information;
▪ Comparative information in respect of the preceding period; and
▪ Any other statement as may be prescribed;

Question 10

Financial year

Answer 10

In relation to a company or any other body corporate, means the period in respect of which
any financial statement of the company or the body corporate, as the case may be, laid before
it in general meeting, is made up, whether that period is a year or not.

Question 11

Time Limit for presentation of Financial Statements

Answer 11

▪ Once in every calendar year, directors are required to present the financial statements, in a
general meeting of company, within 120 days of close of financial year
(not applicable to Single Member Companies)
▪ In case of first accounts of the company, it shall be presented in a general meeting within
16 months of date of incorporation
▪ Company can apply for 30 days extension in presenting accounts
- Listed company shall apply to SECP
- Other companies apply to registrar
▪ Company should not prepare accounts for more than12 months
(On application of company the registrar may extend this period)

Question 12

Audit of financial statements

Answer 12

▪ Such accounts shall be audited and the auditor’s report shall accompany the accounts.
▪ The requirement of audit is not applicable to a private company having paid up capital not
exceeding Rupees 1 million or such higher amount as may be notified by SECP

Question 13

Sending copies of financial statements

Answer 13

▪ Copy of these financial statements along with auditor’s and directors’ report (+ chairman’s
review report; for listed) shall be sent to every member at least 21 days before meeting
▪ A listed company shall dispatch at least 3 copies of these documents to SECP, registrar and
Stock exchange simultaneously with sending these to members.
▪ A copy of these documents should also be filed electronically to SECP by listed company
▪ Company shall also retain a copy at its registered office and every member shall be allowed
to inspect such copy
▪ Reports shall be made available on website of company for time period as may be specified

Question 14

Authentication of Financial Statements

Answer 14

▪ Directors authenticate financial statements in meeting by passing resolution.
▪ Members only receive accounts and can ask any questions in AGM.
▪ Chief executive and at least 1 director put their signatures on it.
(For listed companies CFO shall also sign the financial statements)
▪ If chief executive is out of Pakistan at the time of signing, then at least 2 directors shall sign
the financial statements
▪ For private company having paid up capital up to Rs. 1 Million, financial statements shall
be accompanied by an affidavit by Chief Executive (if accounts signed by him) or by any
director (if accounts have been signed by 2 directors), that the financial statements have
been approved by the board
▪ Financial statements of a SMC shall be signed by 1 director.

Question 15

Chief financial officer (CFO)

Answer 15

Means an individual appointed to perform such functions and duties as are customarily
performed by a CFO

Question 16

Filing of Accounts (after AGM)

Answer 16

▪ Companies shall send 1 copy of its financial statements (adopted in AGM along with other
required reports & documents), signed as per the requirements of act, to registrar within
- 30 days of AGM, in case of listed companies
- 15 days of AGM, in case of other companies.
▪ If general meeting does not adopt these accounts and reports, the fact shall be mentioned
to registrar along with such copies
▪ This filing requirement shall not apply to a private company having paid up capital not
exceeding Rs. 10 million or such higher amount as may be notified by SECP

Question 17

QUARTERLY ACCOUNTS OF LISTED COMPANIES

Answer 17

▪ Every listed company shall prepare quarterly financial statements within the period of-
- 30 days of the close of 1st and 3rd quarters of its year of accounts; and
- 60 days of the close of 2nd quarter of its year of accounts:
▪ SECP may, on application by company, extend the period of filing 1st quarter accounts for a
period not exceeding 30 days (if company was allowed extension in previous year AGM)
▪ Half yearly accounts (i.e. 2nd Quarter) shall be subject to limited scope review by auditors of
company in such manner, term and conditions as may be determined by ICAP and
approved by SECP.
▪ Quarterly financial statements shall be
- Posted on company’s website for information of its members
(for such time as may be specified by SECP)
- Transmitted electronically to SECP, securities exchange and registrar within 30/60 days
- Dispatched in physical form, if so requested by any member, without any fee
▪ Requirements of approval & authentication of final accounts are also applicable to the
quarterly accounts

Question 18

Requirements of Consolidated financial statements (Sec 228)

Answer 18

▪ With financial statements of holding company having subsidiary/ subsidiaries at year end;
attach consolidated financial statements of group presented as a single enterprise
▪ Consolidated financial statements shall comply with disclosure requirement of 4th
Schedule and International Accounting Standards
▪ Where financial year of a subsidiary precedes holding’s financial year end by more than 90
days, such subsidiary shall make an interim closing on holding’s financial year end and
prepare financial statements for consolidation purposes.
▪ Every auditor of holding company shall also report on consolidated financial statements
and exercise all powers and duties of an auditor
▪ Disclose in the consolidated financial statements:
- Any qualifications contained in auditors’ reports of subsidiary/subsidiaries; and
- Any note or saving contained in such accounts to call attention to a significant matter
▪ Every consolidated financial statement shall be signed by the same persons by whom
individual financial statements of holding company required to be signed.
▪ All provisions of accounts & filling shall apply to these consolidated accounts as well
▪ SECP may (on application of a holding company) direct that in relation to any subsidiary,
provisions of this section shall not apply to such extent as may be specified in the direction.
▪ Any contravention of this section shall be an offence liable to a penalty of level 2
This section shall not apply to a private company and its subsidiary if both have paid up capital
of not more than Rs 1 million.

Question 19

Financial year of holding company and subsidiary (Sec 229)

Answer 19

▪ BOD of a holding Co shall ensure that financial year of each of its subsidiaries coincides
with its own financial year (except where there are good reasons against it)
▪ SECP may (on application of holding/subsidiary)
- Extend the financial year of any such company
- Grant such other relaxations as may be necessary while granting extension

Question 20

Who are required to prepare Director’s Report

Answer 20

▪ Board shall prepare a directors’ report for each financial year.
▪ Not applicable to a private company, not being a subsidiary of public company, having paid
up capital up to Rs. 3 million
▪ SECP may by general or special order, direct such class or classes of companies to prepare a
statement of compliance with such contents as may be specified.

Question 21

Contents for every directors report

Answer 21

Directors shall make and attach to the accounts a report containing
▪ Statements regarding state of affairs of the company
▪ Particulars of any dividend recommended
▪ Particulars of any amount transferred/proposed to be transferred to any reserve account.
Additional contents for public company & their subsidiaries
▪ Names of persons who, at any time during the financial year, were directors of company.
▪ Any specific changes and commitments affecting the financial position of company,
occurring between financial year end date and the date of report.
▪ All material changes occurred during financial year which affect
- business of the company; or
- its holding company; or
- any of its subsidiaries; or
- any other company where it has made investments.
▪ Discuss the reservations, observations qualification etc. or any adverse remarks pointed
out by the auditors.
▪ State the earnings per shares (EPS) and reasons for incurring loss and also contain the
reasonable indication of future profit if any
▪ Pattern of shareholding shall also be circulated along with it
▪ Name and place of incorporation of its holding company
(if such holding company is incorporated outside Pakistan)
▪ Information regarding default in repayments of loans or interests on loans, if any.
▪ Remuneration package of each director and CEO (salary, benefits, bonuses, stock options,
pension and other incentives etc)
▪ Description of principal risks & uncertainties facing the company and shall contain the
comments in respect of adequacy of internal financial controls.
Additional contents for Listed Company (Business review of listed company)
Must at least cover the following:
▪ Main trends and factors likely to affect the future development, performance and position
of the company’s business;
▪ Impact of the company’s business on the environment;
▪ Activities undertaken by company in regard to corporate social responsibility during year;
▪ Directors’ responsibility in for adequacy of internal financial controls as may be specified
▪ Reasons for not declaring dividend if earning profits & future prospects of dividend, if any
Director’s Report and statement of compliance must be approved by board and signed by chief
executive officer and a director

Question 22

ANNUAL RETURN

Answer 22

▪ It is an overview of general information about company as on a specific date, giving details
of company’s officers, auditors, registered office address, members and share capital.
▪ Company having a share capital (Form A) and companies not having share capital (Form B)
shall once in each year, prepare and file with registrar an annual return containing
particulars in a specified form as on the
- Date of the AGM; or
- Last day of the calendar year, where no such meeting is held or if held is not concluded
▪ Annual return shall be filed with the registrar within 30 days from the above date
(For listed company, registrar may for special reasons extend the period till 15 more days)
▪ All the particulars required to be submitted shall have been previously entered in one or
more registers kept by the company for the purpose.
▪ No need to file return in case there is no change of particulars in the last annual return filed
- Inform the registrar in specified manner that there is no change of particulars (Form C)
- SMC and private companies having capital up to Rs 3 million need not to inform
▪ Any contravention of this section shall be an offence liable:
- For listed company, to a penalty of level 2
- For other company, to a penalty of level 1