In order to provide guidance to directors of small proprietary companies in answering this question, ASIC has reviewed the requirements of the Corporations Act 2001 (Corporations Act) and has sought input from a number of professional bodies and associations to compile a schedule of appropriate books and records. If you are in doubt about the form and content of financial statements or other records which should be prepared or maintained you should seek professional advice.
The Corporations Act in s286(1) states that a company must keep written financial records that:
correctly record and explain its transactions and financial position and performance, and
would enable true and fair financial statements to be prepared and audited.
Financial records are defined in s9 of the Corporations Act as including:
invoices, receipts orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers
documents of prime entry, and
working papers and other documents needed to explain:
the methods by which financial statements are made up, and
adjustments to be made in preparing financial statements.
Financial records may be kept electronically and there are numerous accounting software packages available for this purpose. Section 288 of the Corporations Act states that if financial records are kept in electronic form, they must be convertible into hard copy. Hard copy must be made available within a reasonable time to a person who is entitled to inspect the records. If financial records are kept on a computer which is owned and operated by a third party (e.g. your company's accountant), you still have the responsibility to provide a hard copy.
Schedule of suggested books and records to be kept
Here are some of the basic financial records that accountants might expect a company to keep:
16. Minutes of Meetings of Directors and/or Members
17. Deeds (where applicable)
Contracts & Agreements (e.g. HP and leases).
Inter-company transactions, including guarantees.
Note 1. Although the Corporations Act does not require small proprietary companies to prepare financial statements, unless requested by ASIC or shareholders, they are considered a valuable tool for managing your company and checking its progress and financial position and may be helpful if you are contemplating raising finance.
Note 2.The above schedule is by no means exhaustive and the financial records required will vary from company to company. Further, the schedule does not cover the registers you must keep if your company holds a securities or futures licence.
Note 3. Section 286(2) of the Corporations Act requires financial records to be kept for seven years.
Note 4. With the commencement of the Personal Property Securities Register on 30 January 2012 s271 of the Corporations Act was repealed; however, companies are still required to maintain a register of charge details up to that point in time.
This is Information Sheet 76 (INFO 76). Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.