Correct. As it’s only based on the previous 12 months usage, if the account is XS, S or M by the time the subscription expires, then the subscription becomes optional.
That depends on what type of entries they are. For example, if they’re from invoices, you would need to delete the invoices. If they’re from bank transactions, you would need to delete the bank entries.
You can create an account back up which would contain CSV files containing your data. There’s more details on this here: Create a data backup schedule
However, please bear in mind, that as it’s a back up, your most recent entries may not be included instantly.