पाठशाला Pathshala · संचालन Sanchālan, Operations · Lesson 04 · Start

Bookkeeping from day one: the accounts you cannot skip

The Companies Act requires books from the day the company exists. Investors require them to be believable. Set up the books, the chartered accountant and a five-day monthly close before the first term sheet makes you.

Pathshala, The Founder Library · 11 October 2026 · 9 min read

The first investor to take a company seriously will ask for its books. Not a revenue figure; the books: a ledger that reconciles to the bank, a balance sheet whose every line has a schedule, GST returns that agree with the sales register. A company that started keeping them in month one hands over a folder. A company that started in month eighteen hands over a CA’s reconstruction, and every number in the data room now carries an asterisk.

This lesson sets out what the law requires of a company’s books from the day it exists, how to appoint and brief the chartered accountant, the accounts a startup cannot do without, the five-day monthly close that turns the books into something a founder can run the company on, and what the first investor will ask to see.

What the Companies Act requires

Section 128 of the Companies Act, 2013 is short and leaves no room. Every company shall prepare and keep at its registered office books of account and other relevant books and papers that give a true and fair view of its affairs, and the books shall be kept on accrual basis and according to the double entry system of accounting. Three consequences follow for a company that is four months old. Accrual, so a bill received in March is a March expense whether or not it was paid in March, and cash-basis bookkeeping in a spreadsheet is not compliance. Double entry, so every transaction touches two accounts and the ledger balances by construction. From the start, because the section says every company, not every company above a turnover.

The books may be kept electronically, and almost every startup’s are, but the Companies (Accounts) Rules attach conditions. Since the amendment notified in August 2022 the books must remain accessible in India at all times and a backup must be kept on a daily basis on servers physically located in India, with the service provider’s name, address and IP reported to the Registrar annually; Grant Thornton’s summary of the amendment sets this out. For financial years beginning on or after 1 April 2023 a company using accounting software must use only software that records an audit trail of each and every transaction, creates an edit log of each change with its date, and ensures the audit trail cannot be disabled; the ICAI’s journal note explains that the statutory auditor must now report on whether that feature operated through the year and was not tampered with. Books kept in a general-purpose spreadsheet fail this test.

Two more lines from section 128 matter early. Sub-section (5): the books and vouchers of every company relating to a period of not less than eight financial years must be kept in good order. Sub-section (6): the managing director, finance director, CFO or whoever is charged with the duty is punishable for contravention with a fine of not less than ₹50,000 and up to ₹5 lakh. In a two-founder company that person is one of the two founders.

The chartered accountant, and what to ask on day one

A startup needs two different things from the profession and should not get them from the same firm. The statutory auditor is appointed by the board within thirty days of incorporation under section 139(6); if the board fails, the members must appoint one at a general meeting within ninety days, and the first auditor holds office until the first annual general meeting. The auditor’s job is to form an independent opinion on the accounts. The bookkeeper, whether an in-house accountant or a CA firm on a monthly retainer, keeps the ledger, runs the filings and produces the monthly pack. A firm that does both for the same company is auditing its own work, and a careful investor will ask about it.

When briefing the bookkeeping firm, ask for five things in writing. The deliverable each month: a closed ledger, three statements and a management pack by a fixed working day. The filings they own and the dates: TDS, GST, PF, ESIC, professional tax, advance tax, and later the annual MCA forms. Who holds the logins to the GST portal, the TRACES account and the MCA account; the answer is the company, with the firm as an authorised user. Which software, and confirmation that it meets the audit trail rule. And the escalation: who the founder calls when a notice arrives. A firm that cannot answer the first question with a date is describing a service, not a close.

The accounts you cannot skip

Write the chart of accounts with the CA before the first entry, because a chart written in month eighteen means eighteen months of reclassification. The minimum for a startup: revenue by line so that subscription, services and one-time income are never summed; cost of delivery separately from overheads, so gross margin exists; payroll with PF, ESIC and TDS on salaries as their own accounts; payment gateway charges as a cost and not netted off revenue; GST input and GST output as separate ledgers that reconcile to the returns; TDS receivable for tax customers deduct from your invoices and TDS payable for tax you deduct from vendors; deferred revenue for anything invoiced ahead of delivery; founder loans and reimbursements; and fixed assets with a register.

The rule that does more for diligence than any other is also the simplest: nothing of the company’s is paid from a personal account after the current account opens. A founder who pays the AWS bill on a personal card creates a reimbursement entry that must be documented, and forty of them create a pattern an investor reads as a company that does not know where its money is. Where a founder does fund the company, it is a loan with a board resolution and a repayment term, or it is equity. It is never a running tab.

The monthly close, in five working days

A close is the process of turning a month of entries into a set of statements nobody will have to restate. Treelife’s month-end checklist for Indian startups reports a median close of twelve to eighteen working days and argues that a seed or Series A company should deliver investor-grade financials within five, with the compliance filings running in parallel to the 20th. The five days have a fixed order because each depends on the one before.

Day one locks the previous period and reconciles every bank, card and payment gateway account to zero difference; gateway settlements arrive late and net off their own charges and refunds, so this is where most errors live. Depreciation is posted and payroll is confirmed. Day two accrues the expenses incurred but not yet billed, deducts TDS at the point of accrual rather than payment, self-assesses reverse-charge GST on foreign vendors, and flags any micro or small vendor unpaid beyond forty-five days; under section 43B(h) of the Income-tax Act, inserted by the Finance Act 2023, such amounts are deductible only when actually paid. Day three recognises revenue over the period the service was delivered and rolls the deferred revenue schedule, and checks that every B2B invoice carries a valid e-invoice reference before GSTR-1 goes. Day four builds the purchase register that will be matched to GSTR-2B when it arrives on the 14th, and attaches a schedule to every balance-sheet account. Day five explains every line that moved more than fifteen per cent against last month, updates burn and [runway](/library/runway-how-many-months-you-really-have), locks the period in the software and sends the pack.

The statutory dates fall across the rest of the month and the CA runs them, but the founder knows them. TDS deducted last month is deposited by the 7th. PF and ESIC by the 15th. GSTR-2B is available from the 14th and is reconciled against the purchase register before anything is filed; GSTR-1 goes first and GSTR-3B by the 20th. A company with turnover up to ₹5 crore may opt into the QRMP scheme and file both returns quarterly, paying tax monthly by the 25th through form PMT-06 and filing the quarterly 3B on the 22nd or 24th depending on the state; the invoice furnishing facility lets it upload B2B invoices by the 13th so its customers can claim credit. The dates above are the general rules as checked on 11 October 2026 and the CA confirms which apply.

Books kept from month one are a folder. Books reconstructed in month eighteen are a story, and every number in a story has an asterisk.

What the first investor asks for

The diligence list for a seed round in India is predictable, and every item on it is a by-product of the close described above. Audited financial statements for each completed year and management accounts for the current one. Bank statements that reconcile to the ledger. GST returns that agree with the sales register, and TDS returns that agree with payroll and vendor payments. The fixed asset register. The deferred revenue schedule, because a company selling annual plans has recognised revenue it has not yet earned if the schedule does not exist. Receivables ageing, and a list of any customer over ninety days. Founder loans, reimbursements and related-party transactions with the resolutions behind them. And the monthly MIS pack for the last twelve months, because an investor who sees twelve consecutive packs delivered by the fifth working day has learned more about how the company is run than any pitch deck can tell them.

None of this is produced for the investor. It is produced for the founders, every month, and the investor is shown the copies.

A worked month

A Delhi NCR company with nine people sells annual software subscriptions and some implementation work; ₹22 lakh was invoiced in September, of which ₹15 lakh was annual plans. On the first working day of October the bookkeeper locks September, reconciles the current account and the gateway, and finds ₹38,000 of gateway charges that had been sitting in revenue; they move to cost. Day two accrues the ₹1.2 lakh cloud bill not yet received, deducts TDS on a ₹3 lakh contractor accrual, and flags one small vendor at fifty-one days. Day three recognises one twelfth of the ₹15 lakh of annual plans, ₹1.25 lakh, and adds the rest to deferred revenue, which now stands at ₹61 lakh; the founders had been reading ₹22 lakh as September revenue and it was ₹8.25 lakh. Day five’s pack shows net burn of ₹9 lakh against a bank balance of ₹1.4 crore: fifteen months, not the twenty the founders had assumed. The CA deposits TDS on the 7th, reconciles 2B on the 14th and files 3B on the 20th. Nothing dramatic happened. A company that did not close would have found the same facts in a diligence call.

The monthly ritual

On the fifth working day of every month the pack arrives and a founder reads it the same day, with three questions written at the top. Did the bank reconcile to zero, and if not what is the difference? What moved more than fifteen per cent, and is the explanation one I believe? What is the runway now? The answers go in the [weekly page](/library/weekly-metrics-review-one-page-one-hour) the following Monday. Once a quarter the founder opens the GST portal and TRACES personally and checks that what was filed matches what the pack said was filed. And once a year, a month before the audit, the founder asks the auditor for the list of things they will ask for, and hands it over from the folder.

Nothing here is legal, tax or investment advice. Thresholds and dates change; the rules above are stated as checked on 11 October 2026, and a chartered accountant who has closed the books of early-stage companies is the cheapest part of this process.