Bookkeeping Services in Chennai

What is bookkeeping and how is it different from accounting?

Bookkeeping is the recording layer. It captures transactions in the right account, in the right period, with a voucher behind each entry — an invoice, a receipt, a bank advice, a payroll register. Accounting sits on top of it: classification judgements, provisions and accruals, depreciation, financial statements, and the tax computation. If the recording layer is clean, accounting is arithmetic. If it is not, accounting becomes forensic work.

In practice the two are done by the same team, which is why the distinction matters commercially. A business that only buys "accounting at year end" is really paying someone to reconstruct twelve months of history from bank statements in March, and reconstruction is where input credit is lost, TDS defaults surface late, and the auditor starts asking about unexplained cash.

Books also feed decisions that have nothing to do with compliance: which customers actually pay on time, which product line carries the margin, whether you can fund next quarter's hiring. A ledger closed monthly answers those questions; a ledger closed annually cannot.

Is bookkeeping legally required in India?

Yes, under more than one statute at the same time. Every company must prepare and keep books of account, other relevant books and papers, and financial statements at its registered office for every financial year, on an accrual basis and on the double-entry system, giving a true and fair view of its affairs. That duty starts from the date of incorporation, not from the first sale, and named officers — including the managing director, the whole-time director in charge of finance, and the CFO — are personally responsible for it.

Under the income tax law, prescribed books become compulsory for specified professions and for any business or profession that crosses the prescribed income or turnover thresholds in the relevant look-back period. Separately, every GST-registered person maintains records of inward and outward supplies, stock, input tax credit, and output tax at the principal place of business.

So the honest answer for most businesses is that the question is not whether books are required but which set of rules bites hardest. Companies carry the heaviest load and should assume full double-entry from day one, alongside their annual filing obligations.

Who has to maintain books of account?

The table below maps the common entity types to the regime that drives their book-keeping. Thresholds under the tax law are revised from time to time and the look-back tests are easy to misread, so confirm your position for the year in question rather than assuming last year's answer still holds.

The retention column is indicative and the periods are not identical across statutes. Because an income tax reassessment or a GST audit can reach back further than you expect, most firms simply retain everything for the longest applicable period and stop tracking three separate clocks.

What records make up a complete set of books?

A "complete set" is not just a trial balance. It is the ledger plus the evidence that supports every line in it, organised so a third party can trace a number back to a document without asking you questions.

• Cash book and petty cash register, with a physical cash count at year end
• Bank book for every account, plus monthly statements and reconciliation statements
• Sales register and copies of every tax invoice, credit note, and debit note issued
• Purchase register with original vendor invoices, matched to goods received or service acceptance
• General ledger and journal for accruals, provisions, and adjusting entries
• Fixed asset register with invoices, capitalisation dates, and the depreciation schedule
• Inventory records and stock valuation working, including the method used
• Payroll register, payslips, and statutory deduction workings — see payroll management
• Statutory payment challans for GST, TDS, PF, ESI, and professional tax
• Debtor and creditor ageing with balance confirmations for material parties
• Loan agreements, sanction letters, interest workings, and repayment schedules
• Contracts, purchase orders, and expense approvals that explain unusual transactions

How should you set up a chart of accounts?

The chart of accounts is the skeleton of the ledger, and it is far cheaper to get right at the start than to restructure after two years of history. Build it around the reports you have to produce — the financial statements, the GST returns, and the tax computation — rather than around how your team happens to talk about expenses.

1. 1.Start with the five top-level groups: assets, liabilities, equity, income, expenses
2. 2.Mirror the financial statement line items your entity type must present, so the schedules build themselves
3. 3.Keep separate ledgers for each GST tax head — CGST, SGST, IGST, and cess — split between input and output
4. 4.Create distinct ledgers for each TDS section you deduct under, not one pooled "TDS payable"
5. 5.Split revenue by line of business or geography only where you will actually use the cut
6. 6.Separate statutory dues — PF, ESI, professional tax, GST, TDS — so unpaid liabilities are visible on the balance sheet
7. 7.Keep director or partner accounts, related-party balances, and loans distinctly identifiable for disclosure
8. 8.Isolate non-deductible and personal-in-nature expenses so the tax computation does not need a hunt
9. 9.Fix a naming convention and freeze it — no parallel ledgers for the same thing
10. 10.Document the chart with a one-line description per account so a new joiner posts consistently

Resist the urge to open a new ledger for every recurring vendor. Depth in the chart of accounts should track reporting need, not transaction volume.

What does a monthly close look like?

A monthly close is a fixed sequence that ends with a locked period and a set of reports. The point of fixing the sequence is that nothing depends on memory, and a stand-in can run it.

1. 1.Capture all sales invoices and credit notes for the month and confirm none are in draft
2. 2.Post every purchase invoice with the correct GST treatment and place of supply
3. 3.Record bank and card transactions and clear the unallocated suspense account to nil
4. 4.Reconcile every bank and wallet account to the statement balance
5. 5.Reconcile the purchase register to the auto-drafted input credit statement and flag missing vendor invoices
6. 6.Reconcile the sales register to the outward supply return filed for the month
7. 7.Post the payroll journal, including employer contributions and statutory deductions payable
8. 8.Record accruals for known unbilled costs and prepaid expenses for the period
9. 9.Run depreciation for the month and update the fixed asset register for additions and disposals
10. 10.Check statutory liability ledgers against challans actually paid and explain any difference
11. 11.Review the trial balance for negative balances, odd signs, and stale open items
12. 12.Lock the period, file the working papers, and circulate the management reports

A close that lands within roughly ten days of month end gives you time to correct a return before it is filed. A close that lands in the following quarter does not.

Which reconciliations must be done every month?

Reconciliation is what converts a plausible ledger into a reliable one. Four of them carry almost all the risk.

• Bank reconciliation — every account, every month, with cheques in transit and unpresented instruments listed
• Input tax credit reconciliation — purchase register against the auto-drafted statement, because unclaimed credit expires and excess credit invites interest
• Outward supply reconciliation — books turnover against the returns filed, so the annual reconciliation is not a surprise
• TDS reconciliation — deductions in the books against challans paid and the quarterly statements filed, checked against the tax credit statement
• Payroll reconciliation — payroll register against the salary debit in the bank and the statutory challans deposited
• Debtor and creditor reconciliation — ledger balances against vendor and customer statements for material parties
• Inventory reconciliation — book stock against physical count, with variance explained
• Inter-company and related-party reconciliation where group entities transact

Input credit is where money is lost quietly. A vendor who has not filed leaves credit sitting outside your reach, and the only way to find it in time is to reconcile monthly and chase while the vendor still cares. The same discipline protects your GST return filing and your TDS return filing.

What is the bookkeeping and compliance calendar through the year?

Bookkeeping is only useful if it runs ahead of the filings it feeds. The calendar below is indicative, applies only where the relevant registration exists, and the specific dates shift with notifications and extensions — confirm each one for the year in question.

Can books of account be kept on software or in the cloud?

Yes, and almost everyone does. For companies, electronic records are permitted subject to conditions: they must remain accessible in India and usable for later reference, be retained in the format in which they were originally generated or one that presents the same information accurately, remain complete and unaltered, and be backed up on servers physically located in India. The company also intimates the address at which electronic records are kept, including the service provider's address where cloud storage is used.

Accounting software used by companies must also carry an audit trail — an edit log recording each change to a transaction along with the date it was made — and that log cannot be disabled. The audit trail is expected to be retained for the same period as the books themselves, and auditors now report on whether the feature was enabled and operating through the year.

Practically this rules out running a company's primary ledger on an offline spreadsheet that anyone can overwrite. Pick software with a real audit trail, restrict who can post and who can approve, and keep the backup arrangement documented rather than assumed.

How long must books and vouchers be retained?

• Companies Act — books of account and the vouchers supporting them for at least eight financial years immediately preceding the current year, and for all preceding years where the company is younger
• Income tax law — books and documents for the prescribed number of years from the end of the relevant assessment or tax year, extended where an assessment has been reopened
• GST law — prescribed records and accounts for the period linked to the due date of the annual return for that year
• Labour and payroll records — registers and wage records for the period prescribed under the applicable code and rules
• Audit trail and edit logs — for the same period as the books they relate to

Because the statutes count differently and a reopened assessment can extend the clock, the workable rule is to retain the whole archive for the longest applicable period. Keep the archive indexed by financial year and by document type, so a notice three years later is answered from a folder rather than from a search of everyone's email.

When does bookkeeping turn into an audit requirement?

Two different audits get confused with each other. A company's statutory audit under the Companies Act applies every year regardless of turnover — even a dormant first year — and the first auditor is appointed shortly after incorporation, intimated to the Registrar through ADT-1.

A tax audit is a separate test. It applies once business turnover crosses the prescribed threshold, with a substantially higher threshold available where cash receipts and cash payments each stay within a small prescribed percentage of the total, and a separate flat threshold for professions. There are also situational triggers — notably where a taxpayer who had opted into a presumptive scheme declares profit below the deemed rate while total income exceeds the basic exemption limit.

Those thresholds and the conditions attached to the higher limit have changed more than once, so treat any figure you read as a starting point and confirm applicability for the year. Either way, the audit is only as painless as the books allow: a reconciled ledger with vouchers filed turns the audit into verification instead of reconstruction. See business ITR filing for how this flows into the return.

What are the penalties for not maintaining proper books?

Failure to keep prescribed books attracts a penalty under the income tax law, and failure to get accounts audited where required attracts a separate penalty computed as a percentage of turnover up to a prescribed cap. Under the Companies Act, contravention of the book-keeping provisions carries monetary penalties on the officers held responsible.

The indirect cost is usually larger than the penalty. Input tax credit that is not reconciled in time is simply lost. TDS defaults found at audit carry interest and late fees, and expenses can be disallowed where deduction obligations were not met. Unexplained cash and unsupported balances invite additions during assessment, which is an argument you fight with documents you no longer have.

Penalty amounts and thresholds change with each Finance Act, so we quantify exposure against the provisions in force for the year concerned rather than from a general figure.

What are the signs your bookkeeping is falling behind?

• The bank reconciliation has unexplained differences carried forward month after month
• Input tax credit claimed in returns does not tie to the purchase register
• A suspense or "to be classified" ledger has a growing balance
• Statutory liability ledgers show amounts that were supposedly paid months ago
• Debtor ageing includes balances nobody can explain or confirm
• Cash in hand per the books exceeds anything the business physically holds
• Returns are being filed from estimates, then revised later
• The trial balance is only produced when the auditor asks for it

Any two of these together usually mean the ledger needs a clean-up before the next filing, not after it.

How does outsourced bookkeeping actually work?

A workable outsourced arrangement has three fixed parts: a document handover routine, a monthly close calendar, and a defined reporting pack. You send invoices, bank statements, and payroll inputs on an agreed cadence; the close runs to a fixed sequence; and you receive the same reports each month so trends are comparable.

What matters most is that the same team sees the books and the returns. When bookkeeping, GST returns, TDS, and payroll sit with one desk, reconciliation differences are caught before a return is filed rather than a year later during audit. For proprietors and firms the picture is set out in proprietorship compliance and partnership tax return filing.

Scope should be written down: which entities, which accounts, who approves payments, who holds the software licence, where the data lives, and what happens on exit. Professional fees are scoped after a short discovery call once transaction volume, number of registrations, and the state of the opening balances are known — a clean-up of prior years is separate work from running the monthly close.

Why choose Arjun Filings for bookkeeping services?

Arjun Filings runs bookkeeping services as a checklist-first engagement: a qualified CA or CS scopes the work, tells you exactly which documents are needed, and reviews every form before it is signed and submitted. You get a named specialist, a status update at each stage, and a compliance calendar for whatever comes next.

• Reliable desk for bookkeeping services
• Input checklist each cycle
• Deadline tracking
• Human + AI support when questions arise