Accrual or Cash Accounting: Which One Fits Your Business

Quick answer. Cash accounting records receipts when collected and expenses when paid; accrual accounting records receivables and payables as soon as they arise. Companies and traders are bound to accrual (Article L123-12 of the French Commercial Code). Independent professionals (BNC) keep cash accounting unless they elect for accrual before 1 February (Article 93 A of the General Tax Code).

The same turnover can produce two different results depending on the accounting method. An invoice issued in December but collected in January does not fall into the same fiscal year under cash basis and under accrual basis. For a business owner, this gap is not a technicality: it decides the tax year of your profit, the readability of your result, and your exposure during a tax audit. Here is how to decide, without confusing an authorised simplification with a missed obligation.

Cash accounting follows the money. Revenue is recorded on the day it is collected, an expense on the day it is paid. It is intuitive and close to the bank statement. The profit equals the excess of receipts collected over expenses actually paid during the year, in line with Article 93 of the French General Tax Code for non-commercial profits.

Accrual accounting follows legal rights. A sale is recorded on the invoice date, regardless of payment; an expense is matched to the period in which it is incurred, that is, as soon as the debt is certain in principle and in amount. The income statement then summarises the revenue and expenses of the period without regard to their date of collection or payment (Article L123-13 of the Commercial Code).

This is exactly what is meant by the matching of expenses: a December electricity cost paid in January belongs to the December period. This rule, central to the core accounting principles, pairs revenue and expenses of the same period and measures genuine economic performance rather than a mere bank balance.

Cash accounting is not open to everyone. It is reserved for specific profiles:

• holders of non-commercial profits (BNC) under the controlled-declaration regime, who keep a receipts-and-payments record by default;
• micro-entrepreneurs, whose obligations are limited to a receipts book and, where relevant, a purchase register;
• certain non-profit and non-commercial structures with no business tax personality.

Conversely, every commercial company (SAS, SARL, SASU, EURL) and every individual trader is bound to accrual accounting. Article L123-12 of the Commercial Code requires chronological recording of the movements affecting the assets and, at year-end, annual accounts made up of a balance sheet, an income statement and notes forming an indivisible whole. To place these thresholds and formats in context, our guide to a French SME's accounting obligations details the applicable regimes.

Yes. An independent professional under the controlled-declaration regime may give up cash accounting in favour of acquired receivables and incurred expenses. This is the purpose of Article 93 A of the General Tax Code. The election is genuinely useful for activities with a large billing lag: fees invoiced at year-end but settled the following year, expenses incurred before being paid.

The election follows a strict formalism:

1. Send a written request to the tax office before 1 February of the first year concerned (for a new activity, until the filing deadline of the first return).
2. Attach a statement of receivables and payables as at 31 December of the year preceding the election.
3. Keep the election by tacit renewal: it stays in force until expressly cancelled.
4. Cancel it if needed in writing, before 1 February of the year in which you wish to return to collected receipts.

To understand how this interacts with the tax regime of independent professionals, see our analyses of the special BNC regime and of how non-commercial profits work.

The simplified real regime offers a middle path. Individuals under this regime may record receivables and payables only at year-end (Article L123-25 of the Commercial Code) and post certain recurring expenses by their payment date (Article L123-26). In practice they keep cash accounting during the year, then switch to accrual at closing through adjustment entries. This is neither true cash accounting nor an exemption from matching.

The micro-entrepreneur, in turn, has no balance sheet or income statement to produce: a receipts book is enough, supplemented by a purchase register when under the VAT exemption. The logic is purely cash-based. This connects with the threshold question we cover in our article on moving from micro to a company and in our note on micro-enterprise accounting in 2026.

Three mistakes come up regularly in the files we take over.

The first is to believe that a company may keep cash accounting because its activity is simple. That is wrong: the accrual obligation flows from the legal status, not the size. A single-person SASU remains subject to Article L123-12 of the Commercial Code.

The second concerns the BNC election: many professionals want it but miss the 1 February deadline, or fail to attach the statement of receivables and payables. The election is then unenforceable for the targeted year.

The third relates to e-invoicing. From 1 September 2026, every business must be able to receive electronic invoices. Accounting kept on a pure cash logic copes poorly with this structured flow, which materialises receivables and payables at precise dates.

Our reading is straightforward: the question "accrual or cash" rarely arises as a free choice. For a company there is no debate, it is accrual. For an independent professional, the real issue is not data-entry convenience but the coherence between your tax position, your management and your billing rhythm.

The underestimated risk concerns the transition year. Recently, an independent consultant taxed under the BNC regime called on us after electing for accrual without a rigorous opening statement: part of his prior-year fees, collected in the year of the election, was at risk of being taxed twice because the opening receivables had not been properly neutralised. We rebuilt the statement of receivables and payables as at 31 December and secured the first tax return. The method was sound; the execution put several thousand euros of tax at risk.

Our usual trade-off: we recommend cash basis to a professional whose collections are regular and who has neither inventory nor long contracts; we steer towards the accrual election those whose billing concentrates at year-end or who want a result that reads clearly for a banker. As chartered accountants registered with the Ordre, we set this choice out in the engagement letter and document it, because this is exactly what the tax authority looks at during an audit: the consistency of the method over time.

Hayot Expertise tip. Before requesting an election, have a precise statement of your opening receivables and payables drawn up. It is this document, not the intention, that secures the switching year. Our bookkeeping and accounts review team calibrates the method to your activity and your business tax support.