Periodically, legislation requires companies to provide an accounting summary of their economic activity. If it is often perceived by companies as a burden, accounting is nevertheless an essential tool for presenting quantified information on the economic activity of a company.
Accountancy: a legal obligation for every company
The documents to provide
Whatever the status of your company, it is subject to a set of rules requiring it to provide various documents for the authorities. On a daily basis, you must list the operations of your business using supporting documents: these may be invoices, checks, insurance receipts or even tax declarations. You must list all this information in these different documents, respecting the accounting entry:
- The journal: it allows a chronological classification of your company's operations by assigning them to different accounts, distinguishing debits and credits thanks to two distinct columns.
- The general ledger: it allows a classification of the operations carried out for each of the accounts of the company over a given period. Thus, it allows to have an overview of all the operations on such or such account.
- The general balance: Once the general ledger is set up, you can balance each of the accounts. The trial balance consists of listing all the balances of your accounts, specifying each time whether they are debit or credit.
These various accounting documents must be kept up to date regularly thanks to the PCG (General Chart of Accounts) which is the reference in France. When filing the company's annual accounts, other summary documents showing the accounting information of your company must be provided: these are the financial statements. The presentation of the company's accounts must imperatively include:
The balance sheets
It presents the accounts to the assets and liabilities of the company, in other words its assets (what it owns) and its debts. It thus presents the financial resources of a company (the origin of its funds) as well as the way in which it uses them (uses). The balance sheet provides a direct view of a company's assets and liabilities.
The income statements
It gives information about the performance of the company. It summarizes all of the company's income (sales, for example) and expenses (financial, salaries, etc.).
Annexes
They supplement and comment on the figures provided in the annual balance sheet and the income statement
Declaration of company accounts
The supporting documents (invoices, checks, etc.) forming the basis of the work of the Chartered Accountant must also be set aside: they may be requested from you in the event of an audit. If you do not declare summaries of your company's accounts, you risk a fine of up to €1,500.
Once your accounts have been closed, you must declare your company's financial statements to the tax department. They will serve as a basis for calculating your company's tax obligations. You can carry out this procedure online with the clerks of the commercial courts, or by mail.
This information must also be kept for 10 years in the company's archives.
Accounting reports the financial situation of a company
It makes it possible to evaluate the assets of a company (assets/liabilities)
Accounting management makes it possible to record the encrypted information of a company on a given date. Keeping the accounts is therefore a way of keeping in memory, that is to say of archiving the quantified information related to your activity.
By taking a quick look at your company's balance sheet, you can directly obtain information on your company's assets. Asset accounts summarize what you own at the time the accounts are closed.
We thus distinguish:
- current assets: these are essentially company receivables, i.e., the money that your customers owe you
- fixed assets: these are tangible assets (office equipment, land) or intangible assets (patents, brands) held by the company
- availability: money in the bank or in cash, directly usable by the company in the form of cash
- Conversely, by looking at liability accounts, you can get an idea of how much money you owe when the accounts are closed. We distinguish:
- financial debts: money that the company must repay after having borrowed it from a bank
- operating debts: money that the company owes to its various suppliers
Cash accounts
Accounting also provides an overview of the company's cash flow, which is crucial information for a good manager. On the PCG (General Chart of Accounts), the accounts affiliated with the treasury are class 5 accounts: these are, for example, bank or cash accounts.
They allow you to have an overview of the state of your accounts and the cash flow of your company: having a bank account with a large credit balance will indicate, for example, that the management of your company is not good.
The information from these accounts can be summarized through a cash flow statement, in which three types of flows are distinguished:
- operating cash flows: these include sales made by your company, but also payroll costs and the payment of your suppliers that have enabled you to produce goods or services.
- investment cash flows: they include, for example, fixed assets made by your company
- financing cash flows: these represent the capital invested in the company and the loans made by the company
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