An accounting period is a fixed period of time during which a company records all its income, expenditure, investments and management decisions in its accounts.
Let's find out what it's all about for a company.
An accounting period is a twelve-month period during which a company records all its economic transactions in its accounts.
In most cases, the financial year begins on January1 and ends on December 31. It can start at the beginning of any other month of the year (for example, March1, July1 or September1 ).
At the end of each financial year, the company produces its annual financial statements, comprising the balance sheet, income statement and notes. These statements must be certified by a statutory auditor, and filed with the clerk of the commercial court.
A financial year lasts 12 months. Companies are free to choose the closing date for their accounts.
For companies with irregular sales throughout the year, it's more comfortable to close the accounts after the peak season. For example, toy sellers with a peak in sales during the festive season often prefer to close their accounts at the end of January or February.
The first financial year is subject to different rules. It has no minimum duration, and can extend up to 24 months from the company's creation.
The date on which the accounts are closed is not definitive, and may change during the life of a company. The dates of the financial year are set out in the company's articles of association, which means that any changes to these dates require a modification of the articles.
The decision must be taken at an Extraordinary General Meeting, and must be filed with the Clerk of the Commercial Court and with the RCS (Registre du Commerce et des Sociétés). Of course, you cannot choose to close your accounts at a date in the past.
The annual closing of accounts gives rise to the production of several mandatory accounting documents:
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The balance sheet: this lists all the company's assets (fixed assets and current assets) and the resources used to finance them (equity and debt).
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Income statement: measures the wealth created by a company over the course of an accounting period, and shows a net profit or loss.
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The accounting appendix: this explains the accounting variations in each item of expenditure or revenue between two financial years.
These documents are filed with the commercial court clerk's office, then compiled by the public administration to measure changes in major wealth indicators such as GDP (Gross Domestic Product) or GNP (Gross National Product).
The mere mention of the term "accounting year" is sometimes enough to cause palpable astonishment among some company directors. Reputedly laborious and complex, accounting is a task requiring genuine expertise. In fact, all companies are subject to the principle of financial reporting, from the moment they are set up to the moment they cease trading, which is why you need to be well supported.
At SeDomicilier, our domiciliation services include accounting and legal assistance to support you in all your dealings.
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Written by our expert Paul LASBARRERES-CANDAU
April 6, 2021
