Annual accounts: which documents should be filed to ensure proper (accounting) year-end closing?
What are the mandatory annual financial statements for a company? In a nutshell, the accounting documents concerned are the balance sheet, income statement and notes to the financial statements. But what are they actually used for?
Our article sheds light on the composition of the annual financial statements, and guides you through the process of preparing and approving them. Did you know that, under certain conditions, you can file a simplified presentation?
Accounting definition of annual financial statements
Annual financial statements are among the mandatory accounting documents that a company must produce once a year.
These annual financial statements, or company accounts, comprise :
- balance sheet
- the income statement
- and the notes to the financial statements.
Let's take a closer look.
Composition and content of a company's annual financial statements
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;
- liabilities (or resources made available).
💡 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 active balance sheet and the passive balance sheet.
The income statement
The income statement is the second financial statement in the annual financial statements.
It is based on the company's income and expenses, and shows the net income at the end of an accounting period:
- positive: the company is profitable;
- negative: the company is in deficit.
The income statement is also part of the tax return.
Accounting notes
The notes to the financial statements are an informative document that provides details of the company's accounting situation as presented in the balance sheet and income statement.
Certain information must be included, such as explanations of :
- business expenses, fixed assets and goodwill, all of which are necessary for the operation of the company,
- accrued expenses and accrued income,
- changes in accounting calculations, etc.
ℹ️ Exception: companies meeting at least two of the following conditions are exempt from drawing up a schedule:
- 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 financial statements for associations
Associations are required to prepare annual financial statements if they :
- are recognized as being of public utility or approved,
- are subject to commercial tax,
- receive public funding exceeding 50% of their budget.
Otherwise, they can keep a simpler form of associative accounting known as cash flow accounting.
Simplified presentation of annual financial statements
In certain cases, companies may present a simplified balance sheet and income statement. Article D123-200 of the French Commercial Code sets total thresholds that must not be exceeded for each company size:
- Microenterprises
- 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 euros,
- sales less than or equal to 12 million euros,
- fewer than or equal to 50 employees.
ℹ️ New in 2019: the PACTE law simplifies the publication of annual financial statements for medium-sized companies.
- Medium-sized companies
- balance sheet less than or equal to 20 million euros,
- sales less than or equal to 40 million euros,
- 250 or fewer employees.
Drawing up and filing annual financial statements
Who is required to draw up annual financial statements?
The preparation of annual financial statements is one of the accounting obligations of commercial companies subject to corporate income 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 profession companies,
- certain agricultural companies.
Approval of financial statements
Before filing the annual financial statements, they must be approved as follows:
- convening of the Annual General Meeting,
- communication of the annual financial statements to participants prior to the meeting,
- presentation of the accounts by the auditor or chairman at the meeting,
- vote to approve the accounts,
- drafting of minutes approving the financial statements (not mandatory for SASU or EURL companies).
When should the accounts be filed?
Annual financial statements must be filed with the Clerk of the Commercial Court, together with the minutes of approval:
- within 6 months of the end of the financial year,
- within one month of approval of the financial statements.
ℹ️ If the accounts are filed electronically, the deadline is extended to 2 months.
Article translated from French