Commercial books
The legislature addressed merchants’ books in the Law of Evidence, and the Evidence Law organized the provisions governing commercial books in Articles 15, 16, and 17. These provisions are discussed below.
Definition of Commercial Books:
The legal obligations borne by a merchant make the merchant liable for the consequences arising from those obligations. Therefore, the merchant must record both rights and liabilities in books that the legislature has required the merchant to keep.
Types of Commercial Books and Their Rules in Terms of Organization, Validity, and Inspection:
First: Mandatory Books
This type of book represents the minimum set of documents that a merchant must keep regarding the conditions and affairs of the merchant’s trade. Every merchant is required to keep at least three books:
1. Journal Book: This is the book in which all transactions and acts related in any way to the merchant’s commercial activity must be entered daily. The expenses spent by the merchant on himself and his family are also entered in aggregate each month.
Auxiliary books that are considered mandatory include the rough book and the draft book.
2. Letter-Copy Book: Undoubtedly, there are relationships between a merchant and other merchants, as well as non-merchants. In addition, the merchant may have relationships with official departments, such as the Income Tax Department, Customs, and the Ministry of Industry and Trade.
Such relationships necessarily involve correspondence exchanged between the merchant and others, containing the substance of those relationships.
3. Inventory and Balance Sheet Book: This book contains recorded data concerning the details of the merchant’s transactions at the end of the financial year, showing the overall result of those transactions. The inventory and balance sheet book is organized in two stages. It may appear as if it consists of two books: the first part includes the goods, their types, the amount of funds owned by the merchant, and the obligations the merchant must fulfill; while the second part includes a balance of the merchant’s business at the end of each year.
Through this book, the summary of the merchant’s business becomes clear, along with the merchant’s financial position and the profit and loss account.
Second: Optional Books
1. Ledger Book: This book contains information recorded by the merchant regarding the summary of business activities, arranged according to the details of those activities. It shows what is owed by the merchant and what is owed to the merchant. In other words, it contains an account statement with two sides: debit and credit, reflecting the commercial position of those dealing with the merchant. The first side records what is claimed from the merchant, which is referred to as the debit side, while the second side records what is claimed for the merchant, which is referred to as the credit side.
2. Commercial Papers Register: In this register, the merchant records all relationships arising from exchange obligations resulting from commercial papers, whether bills of exchange, promissory notes, or cheques. The commercial papers register gives an accurate picture of the merchant’s obligations and rights in commercial papers. It also indicates whether the merchant is the drawer of the paper, an endorser, an intervener in acceptance, or the drawee.
3. Cash and Warehouse Book: In the cash book, the merchant records the cash liquidity and commercial papers available to the merchant. Entries are made for all amounts entering and leaving the cash fund, with dates organized systematically, so that the merchant is aware of the movement of available cash liquidity. This book is of great importance, particularly for banks.
Third: Principles for Organizing Commercial Books
Because these books are of great importance in contractual relationships between merchants, and because of their importance in evidence and their probative value against those dealing with the merchant, the legislature gave them special attention under Article 17 of the Commercial Law. That article requires mandatory commercial books to be organized chronologically, without blanks, spaces, transfers to the margin, erasures, or interlineations.
This method of organizing commercial books preserves confidence in them so that they may be relied upon as evidence. In particular, organizing them in the manner described, without leaving blanks or spaces and without interlineations, prevents the person preparing them from adding anything new, amending them, or replacing them with others.
The books must also have numbered pages, and the Commercial Register Controller must mark and sign them. This means that the Controller has examined them in the manner intended by the legislature. Article 18 of the Commercial Law provides for this requirement.
Fourth: Retention of Commercial Books
The Commercial Law requires commercial books to be retained for ten years. Article 19 provides: “A merchant must retain the books for ten years after they have been closed.”
This provision indicates that the obligation is imposed on the merchant with respect to mandatory books, not optional books. However, failure to comply with this legal obligation exposes the merchant to the penalties prescribed for those who do not keep commercial books. This means that the ten-year period is not a limitation period after which the right to claim rights lapses.
Accordingly, this period is organizational in nature, and the law has prescribed a sanction for violating it. The period for retaining the books begins from the date on which the books are closed, that is, from the date of the last entry made in them.
Upon the expiry of the ten-year period, the merchant may destroy these books, or may keep them if the merchant sees an interest in doing so. They may still be relied upon as long as the rights recorded in them have not become time-barred.