ACCA Advanced Taxation (ATX) Practice Exam

How long must a company generally retain its records?

1. Three years after the end of the accounting period

2. Five years after the end of the accounting period

3. Six years after the end of the accounting period

4. Ten years after the end of the accounting period

The correct answer is: Six years after the end of the accounting period

A company is generally required to retain its records for six years after the end of the accounting period. This retention period is aligned with various legal and regulatory obligations that aim to ensure that sufficient information is available for tax assessments and financial audits. The six-year timeframe allows tax authorities to review transactions and accounting practices that may be necessary for compliance and verification purposes. Within this period, records must be kept intact to support the company's reported income, deductions, and any other claims made on its tax returns. Beyond this timeframe, while some organizations might choose to retain records longer for internal purposes or in anticipation of potential legal issues, the six-year requirement serves as a standard bureaucratic guideline for tax documentation in many jurisdictions. It reflects a balance between regulatory requirements and the practical needs of managing business records effectively. In jurisdictions with different legal frameworks, the required duration for retaining records may vary, but six years is widely accepted in various accounting and tax practices.