App-Based Accounting Solutions: Why Business Structure Determines Software Choice - Suitability for companies
Overview : The choice of accounting software isn't merely about features and pricing—it's fundamentally determined by your business's legal structure. Primary mobile app-based solutions like Khatabook, Vyapar, and myBillBook, ledgers of Indiafilings, excel for proprietorships and partnerships but fall short of compliance requirements for companies incorporated under the Companies Act 2013. Understanding these distinctions is crucial for avoiding regulatory violations and ensuring long-term business sustainability.
Understanding Business Entity Classifications in India
Choosing the right business structure in India isn't just a formality—it determines everything from your tax obligations to the accounting software you can legally use. Many entrepreneurs underestimate how drastically different compliance requirements can be between a simple partnership and a private limited company. What works perfectly for a small trader operating as a proprietorship can land a company director in serious legal trouble. Indian law recognises distinct business structures, each governed by different statutes with varying compliance obligations:
Company | Non Corporate entities |
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Companies under the Companies Act 2013 include private limited companies, public limited companies, and Section 8 companies (NGOs). These entities have separate legal existence and perpetual succession and are subject to stringent regulatory oversight. | Non-corporate entities encompass sole proprietorships governed by individual tax laws, partnerships regulated by the Partnership Act 1932, and Limited Liability Partnerships (LLPs) under the LLP Act 2008. |
Example: | Example:
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Regulatory Framework: Companies Act, 2013 Requirements
Section 128 mandates that companies maintain proper books of account giving a true and fair view of their affairs. with Rule 3(1) of the Companies (Accounts) Rules, 2014, specifically requires companies using accounting software to employ systems with non-disableable audit trail features that record every transaction, modification, and deletion with timestamps and user identification.
Section 129 requires companies to prepare financial statements complying with prescribed accounting standards and Schedule III formats. Section 143 mandates statutory audit by qualified chartered accountants and Rule 11(g) requires auditors to verify audit trail compliance in their reports. Additionally, data preservation under Section 128(5) requires maintaining books of account for eight financial years, including complete audit trail records with user logs and modification histories.
Regulatory Framework: Partnership Act, 1932 Framework
The Partnership Act imposes minimal record-keeping obligations.Section 4 defines partnership as a profit-sharing relationship without mandating specific accounting standards or audit trail requirements. Partnerships have no statutory audit obligation, no prescribed financial statement for the board, and no mandatory data preservation periods. Section 69 addresses registration consequences but doesn't impose accounting software specifications. The maximum number of partners is capped at 50 under Rule 10 of Companies (Miscellaneous) Rules, 2014,referencing Section 464 of the Companies Act, 2013.
App-Based Solutions: Feature Analysis and Limitations

Khatabook
Khatabook primarily focuses on digital ledger maintenance and payment tracking for small traders. The platform offers basic transaction recording, customer credit management, and simple reporting but lacks the sophisticated audit trail capabilities required for corporate compliance.

Vyapar
Vyapar provides invoicing, inventory management, and GST compliance features that are suitable for small and medium enterprises. However, its audit trail functionality is basic and may not meet the non-disableable requirement mandated by companies.

myBillBook
myBillBook offers comprehensive billing solutions with inventory management and GST compliance but similarly lacks the enterprise-grade audit trail features necessary for Companies Act compliance.

IndiaFilings Ledger
IndiaFilings Ledger and similar mobile-first applications are designed for ease of use rather than regulatory compliance, making them unsuitable for companies requiring detailed transaction logging and user access controls.
Why Companies Need Enterprise-Grade Software
Companies incorporated under the Companies Act 2013 face stringent regulatory requirements that simple app-based solutions simply cannot meet. The gap between basic accounting apps and enterprise software isn't just about features—it's about fundamental compliance with mandatory legal obligations that carry serious penalties for non-adherence.
- Audit Trail Compliance Requirements: Companies must use software with non-disableable audit trails that automatically log every transaction with immutable timestamps and user identification, as mandated by Rule 3(1) of the Companies (Accounts) Rules, 2014. App-based solutions typically offer basic logging that can be disabled or lack the comprehensive detail required for statutory compliance.
- Data Preservation and Accessibility: The eight-year preservation requirement under Section 128(5) demands continuous data accessibility, including complete audit trails. App-based solutions often operate on mobile-first architectures that may not guarantee long-term preservation or require continuous subscriptions, creating compliance risks if services are discontinued.
- Statutory Auditor Requirements: Rule 11(g) requires auditors to verify that companies used compliant software with operational audit trails throughout the financial year. App-based solutions may not provide the detailed audit reports that statutory auditors require for compliance certification, potentially resulting in qualified audit opinions.
Entity-Specific Software Recommendations
- For Companies Under Companies Act, 2013: Enterprise Solutions: TallyPrime Edit Log version, Zoho Books, Microsoft Dynamics 365, and similar platforms offer compliant audit trail features that cannot be disabled, comprehensive user access controls, and enterprise-grade data preservation capabilities. Cloud Considerations: Ensure chosen solutions maintain daily backups on servers physically located in India as required under Rule 3(5) and provide detailed audit trail reports for statutory auditor verification.
- For Partnerships and Proprietorships: App-Based Solutions: Khatabook, Vyapar, myBillBook, and similar platforms are well-suited for these entities as they offer user-friendly interfaces, cost-effective pricing, and adequate functionality for simpler compliance requirements.
Conclusion
The fundamental distinction between companies and non-corporate entities in Indian law creates vastly different accounting software requirements. Whilst app-based solutions like Khatabook, Vyapar, and myBillBook excel for partnerships and proprietorships seeking cost-effective, user-friendly platforms, they categorically fail to meet the stringent audit trail and data preservation requirements mandated for companies under the Companies Act 2013. Companies must invest in enterprise-grade solutions that guarantee non-disableable audit trails, eight-year data preservation, and statutory auditor compliance verification.
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Author Bio

Sanjeev Kumar | in
Meet Sanjeev Kumar, a distinguished advocate before the Supreme Court of India, High Courts, and National Tribunals. Founding Partner of Juriskps Law Offices, a premier law firm, he specializes in commercial, corporate, tax, arbitration, and IPR matters. His incisive legal insights enrich Setindiabiz’s blog with expert commentary.