A working checklist for keeping audit-ready books in India — what to record and reconcile every month, what to review each quarter, and the full year-end close, with the record retention periods the law actually requires.
Books that are audit-ready are simply books that were closed properly every month. Nothing in this checklist is difficult; the value is in doing it on a schedule rather than in a rush before a deadline.
Monthly
Recording
- Record every sales invoice, in sequence, with no gaps in numbering.
- Record every purchase invoice and expense bill, matched to a goods receipt or approval.
- Record all receipts and payments, including those made personally on the company's behalf.
- Post the payroll journal — gross salary, deductions, employer contributions and net payable.
- Record tax deducted at source on every payment that attracts it.
- Record any journal entries for accruals, prepayments and internal transfers.
Reconciling
- Bank. Every account, to the closing balance on the statement. Unreconciled items older than a month need explaining, not carrying forward.
- Input tax credit. Match the purchase register against the auto-populated inward supply statement. Credit that does not appear there is credit you cannot take.
- Cash. Physical count against the cash book.
- Inter-company and director accounts, where they exist.
- Tax deducted at source — what you deducted, against what you deposited.
Reviewing
- Trial balance, checked for anything sitting in a suspense or unallocated account.
- Debtors ageing, with follow-up on anything past terms.
- Creditors ageing — and note that dues to micro and small suppliers outstanding beyond 45 days have a reporting consequence.
- Profit and loss for the month against budget and against the same month last year.
Do not carry a suspense balance across a month end. Every unidentified receipt or payment is an entry someone will have to reconstruct later from memory. Clear it while the counterparty and the context are still fresh.
Quarterly
- Sample physical verification of stock, reconciled to the stock ledger.
- Fixed asset verification against the register — assets scrapped or disposed of but never written off are a common audit finding.
- Depreciation computed and posted for the quarter.
- Advance tax recomputed against actual results to date, and the instalment paid by the 15th of June, September, December and March.
- TDS return filed, and the reconciliation between deductions, challans and the statement completed before filing.
- Balance confirmations sought from major debtors and creditors.
- Review of related party transactions for the quarter.
Annually
- Full physical stock count at the year end, valued at the lower of cost and net realisable value.
- Provision for doubtful debts, reviewed line by line against the ageing rather than applied as a blanket percentage.
- Full-year depreciation, on the correct basis for the books and separately for tax.
- All accruals and prepayments recorded.
- Turnover per the books reconciled to turnover per the GST returns for the whole year.
- Tax credit statement reconciled to tax deducted as recorded.
- Trial balance, profit and loss account and balance sheet prepared.
- Statutory audit completed, where required.
- Tax audit under section 63 completed, where turnover exceeds the threshold.
- Books closed and the period locked.
Records to Keep, and For How Long
| Record | Retention | Under |
|---|---|---|
| Books of account and vouchers | At least 8 financial years preceding the current year | Companies Act, 2013 |
| Books and documents for income tax | 6 years from the end of the relevant year | Income-tax Act, 2025 |
| GST records and invoices | 72 months from the due date of the annual return | GST law |
| Transfer pricing documentation | Longer periods apply where international transactions exist | Income-tax Act, 2025 |
Retain to the longest applicable period, not the shortest. The same invoice can be a GST record, an income tax record and a Companies Act record at once. Six years of income tax retention does not permit destroying a document the Companies Act requires for eight, or that GST requires for seventy-two months from a later starting point.
Who Must Keep Books at All
Section 62 of the Income-tax Act, 2025 requires books to be maintained by anyone carrying on a specified profession, and by others where income from business or profession exceeds ₹1,20,000, or turnover exceeds ₹10,00,000, in any one of the three years immediately preceding the tax year. For an individual or a Hindu undivided family the income threshold is ₹2,50,000. Companies and LLPs must maintain books regardless of turnover.