In business management, accounting documentation is one of the key elements to ensure legal compliance.
The proper preservation of these documents allows companies to meet their tax obligations, respond appropriately in case of inspections, and maintain a clear and organised view of their financial situation.
Without adequate accounting documentation, a company may face penalties, difficulties in justifying operations, and problems deducting expenses in their declarations.
This article is for you if…
- You need to know which accounting documents to keep and for how long to comply with the law.
- You want to avoid penalties and tax issues by maintaining proper accounting records.
- You are interested in learning about the permitted formats (physical and digital) for accounting documentation.
- You want recommendations to better organise and manage your accounting files.
- You would like to have adequate support in case of inspections or legal disputes.
Mandatory accounting documentation
Accounting books
In business accounting, accounting books are essential documents for recording and reflecting all company operations and transactions in an orderly and continuous manner. Below are the main books that must be preserved:
Journal Book
This accounting book is one of the pillars of any company’s accounting, as it records all operations carried out in the course of business activity on a daily basis. From purchases and sales to collections and payments, the Journal Book chronologically captures every economic movement, allowing the company to maintain strict control over its operations. The obligation to maintain this book is established in the Commercial Code.
Inventory and Annual Accounts Book
This book contains the company’s detailed opening balance, quarterly trial balances, year-end inventory, and annual accounts, including the balance sheet, profit and loss account, and the annual report. This document is fundamental as it provides a comprehensive view of the company’s financial status throughout the accounting year, facilitating the preparation of financial and management reports.
Ledger
Although not mandatory under the Commercial Code, the Ledger is an accounting tool that many companies maintain voluntarily. This book allows transactions to be grouped into specific accounts, showing entries and exits in an organised manner for each account. It facilitates detailed analysis of the accounting situation and is very useful for internal company management.
Other accounting documents
In addition to accounting books, there are other documents that companies must keep as they are essential for justifying income, expenses, and tax obligations. These documents support operations and allow the company to prove the accuracy of its accounts in case of inspections or audits:
Issued and received invoices
Invoices, both for sales and purchases, are key documents in accounting as they record each transaction with clients and suppliers. These invoices are necessary for tax declarations and to justify the company’s income and expenses.
Receipts
Receipts certify payments made, whether to suppliers, clients, or employees. They are basic documents for supporting transactions and provide transparency in the management of company funds.
Payslips
Payslips represent payments made to employees and serve as records of salary payments and the corresponding tax and social security withholdings. These payslips must be kept to demonstrate compliance with the company’s labour and tax obligations.
Bank statements
Bank statements show the movement of the company’s accounts, allowing verification of each income and expense. These documents facilitate bank reconciliation and are essential for financial management transparency.
Contracts
Contracts, whether with clients, suppliers, employees, or business partners, establish the terms of commercial and labour relationships. Their preservation is crucial to justify agreements and operations and to avoid legal disputes.
Delivery notes
Delivery notes are proof of delivery of goods and services, signed by the person receiving the product. They are useful to demonstrate that a commercial transaction has been completed and to verify the receipt of goods.
Supporting documents for income and expenses
Any other document justifying the company’s income or expenses must be preserved to support accounting records. This includes petty cash receipts, minor purchase vouchers, and documents for specific transactions not reflected in invoices or receipts.
Retention period
Regulations establish specific retention periods for accounting documentation, which vary depending on the applicable law and the type of document. Below are the main legal periods companies must consider to comply with archiving obligations:
Commercial Code and Law 962 of 2005
According to these regulations, accounting books and documents must be kept for at least 10 years. This period applies to accounting books, supporting documents of operations, and other papers related to the company’s accounting, enabling authorities to review and verify economic activity if necessary.
General Tax Law
In the tax field, the General Tax Law establishes a retention period of 4 years for documentation related to tax obligations. This period (also known as the statute of limitations) is crucial for the administration, which may request a review of the company’s tax declarations and justifications during this time.
Organic Law 7/2012
Although it does not impose an obligation, Organic Law 7/2012 recommends a retention period of 10 years to cover potential inspection or review situations, suggesting it is advisable to extend the archiving of accounting and tax documents up to that period for greater security.
Interruptions to the periods
It is important to consider that these periods may be affected if inspections or verification actions are carried out by the Tax Administration. In the case of a tax inspection, the retention period is interrupted and begins to count again from the moment the inspection is resolved. This means that in administrative review situations, the company may be required to keep documentation beyond the usual periods.
Retention format
Companies can choose to keep their accounting documentation in physical (paper) or digital format, depending on what best suits their archiving and management needs. However, it is important to comply with the requirements for each format to ensure the documents’ legal validity.
Physical retention
Traditionally, documentation is kept on paper, especially in the case of original documents requiring physical signatures. This format remains widely accepted and used, although it takes up space and may be less practical for large volumes of documents.
Digital retention
Article 60 of the Commercial Code allows for the retention of documents in digital format, using technical, magnetic, or electronic means, provided that an exact reproduction of the original documents is guaranteed. This option facilitates the management of large volumes of information, saves physical space, and allows for quick retrieval of stored documents.
Requirements for digitised documents
For digitised documents to be valid, they must meet certain authenticity and reproducibility requirements. This means the digitisation system must allow for a faithful copy of the original document, and, if necessary, the company must be able to present the documentation in a format that exactly reproduces the physical version. In this regard, it is advisable to use certified or authorised archiving systems that guarantee the authenticity of digitised documents.
Recommendations for document retention
To optimise the archiving of accounting documentation, it is recommended to implement a series of best practices to ensure the validity, organisation, and accessibility of documents at all times:
Establish an efficient filing system
Organising documents in physical or digital format in an orderly manner facilitates their location and prevents information loss. An efficient filing system allows for quick retrieval of necessary documents, improving the management of accounting information.
Comply with authenticity requirements for digitised documents
Ensuring that digitised documents comply with authenticity and reproducibility standards is essential for their legal validity. This includes using reliable digitisation tools and archiving systems that certify the accuracy of digital copies.
Internal document retention policies
Creating internal document retention policies helps establish archiving periods and methods. These policies should adapt to current regulations, specifying the types of documents and the duration they must be kept, as well as the format in which they should be kept.
Backups
Performing regular backups of digital documents is essential to prevent information loss due to technical failures or accidents. Backups should be stored in a secure location, ideally on an external server or a cloud storage service, allowing for recovery if necessary.
Document expiration tracking
Maintaining a record of document expiration dates facilitates the controlled and secure disposal of documents that no longer need to be kept. This practice helps avoid the accumulation of obsolete documents and keeps the archive orderly and up to date.
Consequences of not keeping documentation
Failure to keep mandatory accounting documentation can have serious consequences for a company, both economically and legally. Below are the main problems that can arise from a lack of proper archiving:
Possible penalties
Financial penalties imposed by the Tax Administration or other regulatory bodies. These penalties can vary depending on the severity of the infraction and the type of missing documentation, representing a significant financial risk for the company.
Issues during tax inspections
During a tax inspection, the company must present all necessary documentation to justify its tax declarations and accounting. Failure to provide this information can lead to tax adjustments, additional penalties, and, in the worst-case scenario, a negative assessment that could affect the company’s reputation.
Legal complications
In litigation or conflict situations, accounting documentation is essential to support the validity of the company’s operations and contracts. Not having this documentation can weaken the company’s position in legal proceedings, making it difficult to justify transactions and defend its interests.
Loss of expense deductibility
The deduction of certain expenses in the tax declaration depends on the company’s ability to demonstrate that these expenses were real and properly documented. Without the necessary proofs, the company could lose the ability to deduct these expenses, increasing its tax burden.
Proper retention of accounting documentation is fundamental to meeting legal and tax obligations and maintaining orderly and efficient management. Throughout this article, we have detailed the types of documents that must be kept, the legal retention periods, and the best practices for managing accounting documentation.
Since failure to comply with these regulations can result in penalties, tax issues, and legal complications, it is recommended to seek the advice of a professional accountant or tax advisor. A specialist can help the company implement an appropriate filing system, ensuring all legal obligations are met and optimising the management of accounting documentation to minimise risks and safeguard the company’s interests.
