Business Accounting Management: Complete Legal Obligations

Bookkeeping is not an annual filing obligation: it is a continuous obligation, the regularity of which is assessed throughout the fiscal year. This nuance determines the outcome of an audit. Accounting records reconstituted after the fact, even if accurate, show telltale signs — batched entries, discontinuous numbering, missing documents — and weaken all of the positions taken by the company.

Who is affected, and to what extent

Any individual or legal entity holding the status of merchant must chronologically record all movements affecting its assets, carry out an inventory at least once a year, and prepare annual financial statements.

The scope of the obligation then varies depending on the tax regime:

• Micro-enterprise: a revenue ledger, supplemented by a purchases register for sales activities. No balance sheet, no income statement.
• Simplified actual regime: full bookkeeping, with a simplified presentation of annual financial statements and the option to record receivables and payables only at closing.
• Standard actual regime: full bookkeeping and detailed annual financial statements.

An allowance exists for the smallest structures, which may keep cash-basis accounting during the fiscal year, provided the necessary adjustments are made at closing. This allowance applies to the recording pace, never to completeness.

The mandatory ledgers

Three documents structure bookkeeping and are the first requested during an audit.

The journal ledger records movements chronologically, transaction by transaction. Chronology is not a mere 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 ledger, the requirement for which has been eased, lists the assets and liabilities identified during the annual inventory.

In addition to these ledgers, companies keeping computerized accounting records must be able to produce the accounting entries file in a standardized format. Its absence or non-compliance is subject to a fine, regardless of the quality of the accounts themselves.

Supporting documents

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

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

The rollout of electronic invoicing shifts the focus. Compliance is no longer judged solely on the document itself, 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

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

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

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

What an audit looks at first

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

• The continuity of numbering of entries and issued invoices.
• The chronology of entries, compared against the dates of supporting documents.
• The reconciliation between the bank account, the cash register, and the entries.
• The completeness of supporting documents, through sampling of high-stakes items.
• The consistency between VAT filings and the accounting records.

Irregular accounting records may be disregarded, opening the way for the tax authorities to reconstruct revenue using their own methods. This is the most severe sanction, because it shifts the burden of the discussion: the company must then demonstrate that the reconstruction is incorrect. The safeguards applicable during the procedure are covered in our article on tax audits.

Use cases

Starting a business. Choose the tax regime based on projected volume rather than administrative convenience alone. Switching from one regime to another partway through requires adjustments that can be avoided through anticipation.

Delayed entry. Catch up by following the actual chronology of the documents rather than recording them as of the catch-up date. Batched entries at the end of the fiscal year are noticeable and weaken the whole set of records.

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

Frequently asked questions

Does a micro-enterprise need to keep accounting records? A revenue ledger, supplemented by a purchases register for sales activities. Neither a balance sheet nor an income statement is required, but supporting documents must be kept.

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

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

Can everything be kept in digital form? Yes, provided the integrity, readability 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 standardized export of computerized accounting records, provided to the tax authorities during an audit. Its absence or non-compliance is subject to a separate fine.

What is the risk with irregular accounting records? They may be disregarded, with the tax authorities then reconstructing revenue using their own methods. It is up to the company to demonstrate that this reconstruction is incorrect.

Key takeaways

The regularity of accounting records rests on three observable characteristics, which an audit checks in this order: the chronology of entries, the continuity of numbering, and the existence of a probative document behind each entry.

These three points are built up over time and cannot be made up for after the fact. Accounting records reconstituted at the end of the fiscal year carry identifiable traces, and the risk is not the rejection of a single isolated entry but of the entire set of records — along with the resulting shift in the burden of the discussion. The upside is favorable: regular, well-documented bookkeeping is what, during an audit, allows the positions taken in matters of corporate taxation.