Company Accounting Records: Complete Legal Obligations

Bookkeeping is not an annual reporting obligation: it is a continuous obligation, the regularity of which is assessed throughout the financial year. This nuance determines the outcome of a tax audit. Accounts reconstituted after the fact, even if accurate, show the tell-tale signs — batched entries, discontinuous numbering, missing documents — and undermine every position taken by the company.

Who is affected, and to what extent

Every individual or legal entity with trader status must record movements affecting their assets chronologically, carry out a stocktake at least once a year, and draw up annual accounts.

The scope of the obligation then varies according to the regime:

• Micro-enterprise: a revenue book, supplemented by a purchase register for sales activities. No balance sheet, no income statement.
• Simplified real regime: full bookkeeping, with a simplified presentation of annual accounts and the option to record receivables and debts only at year-end closing.
• Standard real regime: full bookkeeping and detailed annual accounts.

An allowance exists for the smallest structures, which may keep cash-basis accounts during the financial year, provided the necessary adjustments are made at closing. This allowance concerns the timing of recording, never the completeness of it.

The mandatory books

Three documents structure the bookkeeping and are the first to be requested during a tax audit.

The journal book records movements chronologically, transaction by transaction. Chronology is not a matter of presentation convention: a backdated entry or one inserted out of sequence is a sign of irregular bookkeeping.

The general ledger reproduces the same entries broken down by account, in accordance with the chart of accounts.

The inventory book, the obligation for which has been eased, lists the assets and liabilities recorded during the annual stocktake.

In addition to these books, businesses keeping computerised accounts must be able to produce the accounting entries file in a standardised format. Its absence or non-compliance is punishable by a fine, regardless of the quality of the accounts themselves.

Supporting documents

Each entry must be backed by a dated and evidential document. This is the requirement that causes the most deductions to be lost, and it is purely documentary: genuine expenditure, incurred in the company's interest, becomes non-deductible for lack of a compliant supporting document.

An invoice must include the mandatory details — identification of the parties, number, date, description, price, VAT rate and amount, and mentions relating to payment terms and penalties. A card payment receipt is not an invoice: it proves a payment, not the nature or recipient of the expense.

The roll-out of e-invoicing shifts the focus. Compliance is no longer assessed on the document alone, but on the reliable audit trail: the ability to link each invoice to the corresponding economic flow and payment, in a documented and permanent manner — a requirement detailed in our article on the reliable audit trail.

Retention periods

Books, registers and supporting documents must be kept for ten years from the closing of the financial year. This period is longer than the tax authorities' assessment period, which covers the three preceding financial years — a point that leads some companies to destroy documents too soon.

Two further rules apply. Documents relating to fixed assets must be kept beyond that, for as long as the asset remains on the balance sheet and for the applicable periods after its disposal, since they justify the depreciable base and the capital gain on disposal. And corporate documents follow their own retention periods, generally longer.

Electronic retention is permitted, provided the integrity, legibility and retrievability of the documents are guaranteed throughout the period. A simple folder of files does not meet these conditions: archiving with evidential value is required.

What a tax audit looks at first

The points examined are consistent from one audit to another, which makes it possible to prepare for them:

• The continuity of numbering of entries and issued invoices.
• The chronology of records, compared against the dates of the supporting documents.
• The consistency between the bank account, the cash register and the records.
• The completeness of supporting documents, checked by sampling on high-stake items.
• The consistency between VAT returns and the accounts.

Irregular accounts may be set aside, opening the way for the tax authorities to reconstitute turnover using their own methods. This is the most severe sanction, as it shifts the burden of the discussion: the company must then prove that the reconstitution is incorrect. The safeguards applicable during the procedure are set out in our article on tax audits.

Use cases

Setting up a business. Choose the regime based on projected volume, not administrative convenience alone. Switching from one regime to another partway through means restatements that forward planning avoids.

Late data entry. Catch up while respecting the actual chronological order of the documents rather than entering them on the date of catch-up. Batched entries at the end of the financial year are noticeable and weaken the whole set of accounts.

Closing. Check the accruals — accrued expenses, accrued income — as well as depreciation and provisions, the omission of which cannot be made up for in the following financial year.

Frequently asked questions

Must a micro-enterprise keep accounts? A revenue book, supplemented by a purchase register for sales activities. Neither a balance sheet nor an income statement is required, but supporting documents must be kept.

How long should documents be kept? Ten years from the closing of the financial year, longer for documents relating to fixed assets and for corporate documents.

Is a card payment receipt enough? No. It proves a payment, not the nature of the expense or its beneficiary. An invoice containing the mandatory details is required.

Can everything be kept in digital form? Yes, provided the integrity, legibility and retrievability of the documents are guaranteed for the entire legal retention period. A simple file directory is not enough.

What is the accounting entries file? A standardised export of computerised accounts, provided to the tax authorities during an audit. Its absence or non-compliance is punishable by its own separate fine.

What is the risk with irregular accounts? They may be set aside, with the tax authorities then reconstituting turnover using their own methods. It is up to the company to prove that this reconstitution is incorrect.

Key takeaways

The regularity of a set of accounts rests on three observable features, and a tax audit checks them in this order: the chronology of records, the continuity of numbering, and the existence of evidential documentation behind each entry.

These three points are built up as you go and cannot be made up for later. Accounts reconstituted at the end of the financial year bear identifiable traces, and the risk is not the rejection of a single isolated entry but of the whole set — along with the accompanying reversal of the burden of the discussion. The upside is favourable: regular, well-documented bookkeeping is what, during a tax audit, makes it possible to uphold the positions taken regarding corporate taxation.