General Applicability

• LLPs in India are required to maintain books of account on either cash or accrual basis
  
• The accounts must present a true and fair view of the state of affairs of the LLP
  
• Though LLPs are not companies, they must follow basic accounting principles
  
• They are not mandatorily required to follow Indian Accounting Standards (Ind AS)
  
• However, accounting should be consistent and comply with the LLP Act, 2008 and Income Tax Act
  

MCA and ICAI Guidelines

• The Ministry of Corporate Affairs (MCA) has not prescribed specific accounting standards for LLPs
  
• LLPs may voluntarily adopt accounting standards issued by the Institute of Chartered Accountants of India (ICAI)
  
• ICAI standards help in uniformity, transparency, and audit readiness
  
• Common standards include those on revenue recognition, depreciation, and inventory valuation
  
• Use of ICAI standards is encouraged for LLPs with larger turnover or audit obligations
  

Applicability of Income Tax Act Provisions

• LLPs must prepare accounts that comply with the Income Tax Act, 1961 for tax computation
  
• Provisions related to maintenance of books (Section 44AA) and audit (Section 44AB) apply
  
• Depreciation and other deductions must be calculated as per Income Tax Rules
  
• The accounting method must be consistently followed year to year
  
• Proper records must be kept for income, expenses, and partner contributions
  

Audit Threshold and Accounting Discipline

• If turnover exceeds ₹40 lakhs or capital contribution exceeds ₹25 lakhs, audit becomes mandatory
  
• In such cases, LLPs must follow standard accounting formats and disclosures
  
• The books of account must be prepared in accordance with generally accepted accounting principles (GAAP)
  
• All financial records must be updated at the registered office and maintained for 8 years
  
• Audited accounts must be filed using Form 8 with the Registrar of Companies
  

Recommended Best Practices

• LLPs should maintain cash book, journal, ledger, sales and purchase registers, and bank statements
  
• They should prepare and review trial balances, profit and loss account, and balance sheet periodically
  
• Use of accounting software and professional accounting support is advisable
  
• Documentation of partner contributions, drawings, and settlements must be accurate
  
• Adopting standard accounting improves compliance, financial planning, and investor confidence