Annual accounts: which documents should be filed to close the financial year correctly?
What are the mandatory annual accounts for a company? In short, the accounting documents concerned are the balance sheet, the profit and loss account and the notes to the accounts. But what is the actual purpose of these documents?
Our article explains the composition of the annual accounts, and guides you through the process of drawing them up and approving them. Did you know that, under certain conditions, you can file a simplified presentation?
Definition of annual accounts in accounting
The annual accounts are one of the mandatory accounting documents that a company must produce once a year.
These annual accounts, or company accounts, comprise :
- the balance sheet
- the profit and loss account
- and the notes to the accounts.
Let's look at them in more detail.
Composition and content of a company's annual accounts
The annual balance sheet
The balance sheet is based on the general chart of accounts and takes the form of a table. It lists :
- a company's assets (or uses), i.e. what it owns: these are the company's assets ;
- the liabilities (or resources made available to it).
💡 For the balance sheet to be correct and valid, assets must always equal liabilities.
The balance sheet is also part of the tax return, where it is divided into two parts: the asset balance sheet and the liability balance sheet.
The profit and loss account
The profit and loss account is the second financial statement in the annual accounts.
It is based on the company's income and expenses to show the net profit at the end of the financial year:
- positive: the company is profitable;
- negative: the company is in deficit.
The profit and loss account also forms part of the tax return.
The notes to the accounts
The notes to the accounts are an informative document that provides details of the company's accounting position as presented in the balance sheet and profit and loss account.
Certain information must be included, such as explanations of :
- business expenses, fixed assets and goodwill, which are necessary for the operation of the business,
- accrued expenses and accrued income,
- any changes in accounting calculations, etc.
ℹ️ Exception: companies meeting at least two of the following conditions are exempt from drawing up notes to the accounts:
- total balance sheet less than or equal to €350,000,
- net sales less than or equal to €700,000,
- number of employees less than or equal to 10.
Annual accounts for associations
Associations must draw up annual accounts if they :
- are recognised as being in the public interest or are approved,
- are subject to business tax,
- receive more than 50% of their budget in public funding.
Otherwise, they may keep simpler cash accounts.
Simplified presentation of annual accounts
In certain cases, companies may present a simplified balance sheet and profit and loss account. Article D123-200 of the French Commercial Code sets out total thresholds that must not be exceeded for each size of company:
- Microenterprises
- a balance sheet less than or equal to 350,000 euros,
- sales less than or equal to 700,000 euros,
- no more than 10 employees.
- Small businesses
- balance sheet less than or equal to €6 million,
- sales less than or equal to €12 million,
- no more than 50 employees.
ℹ️ New in 2019: the PACTE Act simplifies the publication of annual accounts for medium-sized companies.
- Medium-sized companies
- a balance sheet of less than or equal to €20 million,
- sales of less than or equal to €40 million,
- 250 employees or fewer.
Drawing up and filing annual accounts
Who is required to draw up annual accounts?
Drawing up annual accounts is one of the accounting obligations of commercial companies subject to corporation tax (IS):
- joint stock companies: SA, SAS and sociétés en commandite par actions,
- SARLs and EURLs,
- partnerships, except SNCs where at least one partner is a natural person,
- companies whose registered office is located abroad, but which have opened at least one establishment in France,
- liberal professions companies,
- certain agricultural companies.
Approval of the accounts
Before the annual accounts are filed, they must be approved as follows:
- convening a general meeting of shareholders,
- communication of the annual accounts to the participants before the meeting,
- presentation of the accounts by the auditor or chairman at the meeting,
- voting to approve the accounts,
- drafting of minutes approving the accounts (not compulsory for SASU or EURL companies).
When should the accounts be filed?
The annual accounts must be filed with the commercial court clerk's office, together with the minutes of approval:
- within 6 months of the end of the financial year,
- within one month of approval of the accounts.
ℹ️ If the accounts are filed electronically, the deadline is extended to 2 months.
Article translated from French