What company records must you keep?

As a director, the law makes you personally responsible for keeping proper company records. 

You must see that the company keeps up-to-date financial records that:

• correctly record and explain its transactions (including any transactions as a trustee), and
• explain the company’s financial position and performance.

All companies must have financial records so that:

• true and fair financial statements of the company can be prepared if needed
• financial statements can be conveniently and properly audited if necessary, and
• the company can obey the tax laws.

If your company is a ‘small proprietary company’ or a small company limited by guarantee (as defined in the Corporations Act), it will generally not have to prepare formal financial reports under that Act each year and lodge them with ASIC. However, you must still keep financial records, and may need financial reports for managing and monitoring your company’s financial position and performance for tax purposes or for raising finance.

What are financial records?

Some of the basic financial records that the law may require a company to keep are:

• general ledger, recording all the company’s transactions and balances (e.g. revenue, expenses, assets, liabilities) or summarising transactions and balances detailed in other records
• cash records (e.g. bank statements, deposit books, cheque butts, petty cash records)
• debtor and sales records (e.g. a list of debtors and their balances, delivery dockets, invoices and statements issued, a list of all sales transactions)
• creditor and purchases records (e.g. purchase orders, invoices and statements received and paid, unpaid invoices, a list of all purchases, a list of all creditors and their balances)
• wage and superannuation records
• a register of property, plant and equipment showing transactions and balances in relation to individual items
• inventory records
• investment records (e.g. contract notes, dividend or interest notices, certificates)
• tax returns and calculations (e.g. income tax, group tax, fringe benefits tax and GST returns and statements), and
• deeds, contracts and agreements.

A company would also normally prepare the following statements regularly (e.g. monthly) to manage its business performance and provide to lenders:

Statement of Comprehensive Income: a statement showing the company’s revenue and expenses and the profit or loss that results from these items

Statement of Financial Position: a statement showing the things of value the company owns and the debts the company owes, and

Statement of Cash Flows: a statement summarising cash inflows and outflows.