Chapter 11 Flashcards
Book and Paper/Book or Paper:
Includes: Books of account, cost accounting records, deeds, vouchers, writings, documents, minutes, and registers.
Forms: Can be maintained in hardcopy or electronic form.
Books of Accounts:
Includes records maintain in rspect of;
All sums of money received and expended, and related matters.
All sales and purchases of goods and services.
All assets and liabilities.
Items of cost related to production, processing, manufacturing, or mining activities.
Requirements:
(Book of Accounts)
Books must fairly present the state of affairs of the company and record all transactions accurately.
Companies engaged in production or manufacturing must also maintain detailed cost accounts.
Records may be maintained in either hardcopy or computerized systems.
Books must be preserved for at least 10 years.
Liquidators must also maintain these books during the winding-up process.
Inspection of Books:
By Directors:
Directors are entitled to inspect books during business hours.
If financial information is maintained abroad, copies must be available for inspection by any director.
Employees must assist directors during inspection.
By Members:
Members do not have an absolute right to inspect the books.
Inspection may be authorized by the Companies Act 2017, directors, or a general meeting.
Financial Statements:
Contents:
Statement of financial position at the end of the period.
Statement of profit or loss and other comprehensive income (or an income and expenditure statement for not-for-profit entities).
Statement of changes in equity for the period.
Statement of cash flows for the period.
Notes including summary of significant accounting policies and other explanatory information.
Comparative information for the preceding period.
Any other prescribed statements.
Financial Year:
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
Time Limit for Presentation Of Financial statements
Annual Requirement: Directors must present financial statements within 120 days of the end of the financial year in a general meeting (not applicable to Single Member Companies).
First Accounts: Must be presented within 16 months of incorporation.
Extension: Companies can apply for a 30-day extension. Listed companies apply to SECP; other companies apply to the registrar.
Maximum Period: Accounts should not cover more than 12 months. Extensions can be granted by the registrar on application.
Keeping the Books:
Must be kept at the company’s registered office.
Directors can choose to keep them at another location if a resolution is passed and the registrar is notified within 7 days.
For companies with branch offices, books must be kept at the branch with summarized returns sent to the registered office periodically.
Chief Financial Officer (CFO):
An individual appointed to perform functions and duties typically associated with a CFO.
Sending Copies of Financial Statements
To Members: Financial statements, auditor’s and directors’ reports, and chairman’s review report (for listed companies) must be sent at least 21 days before the meeting.
To SECP and Others:
Listed companies must dispatch at least 3 copies to SECP, registrar, and stock exchanges.
A copy must also be filed electronically with SECP.
A copy should be retained at the registered office and be available for inspection by members.
Reports should be available on the company’s website for a specified period.
Audit of Financial Statements:
Accounts must be audited, and the auditor’s report should accompany the accounts.
Audit requirement does not apply to private companies with paid-up capital not exceeding Rs. 1 million or a higher amount as notified by SECP.
Authentication of F/S
Approval: Directors authenticate financial statements by passing a resolution in the meeting.
Signature Requirements:
Chief Executive and at least one director must sign.
For listed companies, CFO must also sign.
If the Chief Executive is abroad, at least two directors must sign.
For private companies with paid-up capital up to Rs. 1 million, an affidavit by Chief Executive (if he signs) or a director (if two directors sign) must be included to confirm board approval.
For Single Member Companies (SMCs), one director must sign.
Directors’ Report
Requirement:
Preparation: Boards must prepare a directors’ report each financial year.
Exemptions: Not applicable to private companies with paid-up capital up to Rs. 3 million.
Filing of Accounts:
After AGM:
Companies must send one copy of the adopted financial statements to the registrar within 30 days of the AGM for listed companies and 15 days for other companies.
If accounts are not adopted in the meeting, this fact must be reported to the registrar along with the copies.
Filing requirement does not apply to private companies with paid-up capital not exceeding Rs. 10 million or a higher amount as notified by SECP.
Additional Requirement for listed companies (Director’s report)
For Listed Companies:
Business Review:
Main trends and factors affecting future development.
Environmental impact of the company’s business.
Corporate social responsibility activities.
Directors’ responsibility for internal financial controls.
Reasons for not declaring dividends if profits are earned and future dividend prospects.
Approval:
Director’s Report and compliance statements must be approved by the board and signed by the CEO and one director
