Failing to maintain mandatory commercial books or keeping them in an unorganized manner subjects the merchant to both civil and criminal penalties.
Given the importance of maintaining and organizing commercial books, this article will explore the benefits of keeping such books and how to properly organize them.
Penalty for Not Keeping Commercial Books
Article 17 – Accounting Records and Financial Statements:
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The company must retain accounting records and supporting documents that clarify its business operations, contracts, and financial statements at the company’s main office or any other location determined by the manager or board of directors.
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Financial statements must be prepared at the end of each fiscal year in accordance with accounting standards approved in the Kingdom. These statements must be filed within six months of the fiscal year’s end, according to the applicable regulations.
Article 262:
Without prejudice to any other penalties stipulated by other laws, a fine of up to SAR 500,000 may be imposed on:
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Any person who fails to perform their duty to maintain the company’s accounting records and supporting documents to clarify its business activities and contracts, or who fails to prepare financial statements according to approved standards or to file them in accordance with the law.
Why Is Keeping Commercial Books Important?
The importance of keeping commercial books is evident in the many benefits it offers to merchants, their business partners, and regulatory authorities.
Some of the main advantages include:
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Understanding the company’s financial status by recording all inputs and outputs, which helps improve financial performance.
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Documenting daily transactions in the books serves as legal proof of such transactions.
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Estimating income tax based on recorded transactions.
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Identifying business partners and understanding mutual obligations.
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Tracking imported and exported goods, which helps determine pricing.
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Not Keeping Commercial Books may expose the merchant to penalties and legal consequences.
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In cases of bankruptcy, the books serve as evidence of genuine financial distress, not fraud.
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They assist bankruptcy trustees in assessing rights and obligations.
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For the Zakat, Tax and Customs Authority, commercial books help determine tax liabilities.
How to Organize Commercial Books
To properly organize commercial books, merchants must follow these key guidelines:
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The books must clearly reflect the merchant’s financial position.
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No erasures or marginal notes are allowed.
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If an error occurs, it must be corrected by a new entry, stating the date of the correction, without deleting the original entry.
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The books must be sequentially numbered.
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After settling accounts, merchants are required to keep the books for at least 10 years.
Who Is Required to Keep Commercial Books?
After understanding the importance and penalties related to Not Keeping Commercial Books, it’s essential to know who is legally required to keep them.
According to Saudi regulations, merchants with capital of SAR 100,000 or more—whether individuals or legal entities—are obligated to keep and organize commercial books.
Merchants with capital below this threshold are not required to do so.
If you need assistance from professionals in maintaining your commercial books, you can reach out to us at Rakaez Business – Certified Accountants and Auditors.
We provide expert services in commercial bookkeeping, recording transactions, and analyzing financial data to help you understand your financial and tax status.
Our extensive experience in accounting and auditing ensures compliance and clarity in your business operations.
Conclusion
In summary, Not Keeping Commercial Books can lead to significant legal consequences. This article has outlined the benefits of keeping commercial books, how to properly organize them, and who is legally obligated to maintain them under Saudi law.
For more detailed legal information, you can visit the Saudi Ministry of Commerce official website.
Read also:
Business Pillars CPAs Company – Accountants and Legal Auditors
Accounting and Auditing Firms in Saudi Arabia
Corporate Zakat in Saudi Arabia and How to Calculate It
Guidelines for Selective Taxation