Catch Up & Clean Up

Transaction list and required data on recording each transactions

The Cycles

Before we jump into catch up and clean up processes, we need to understand the basic accounting processes and cycles. To illustrate, below is simple diagram.

Here is basic accounting processes:

Analyzing and recording transactions using single or double accounting entries
Posting journal entries to ledger accounts
Preparing unadjusted trial balance
Preparing adjusting entries at the end of the period
Preparing adjusted trial balance
Preparing financial statements
Closing temporary accounts via closing entries
Preparing post-closing trial balance

Our focus is on analyzing and recording transactions.

Transaction lists are subdivided in five (5) major accounting cycle:

Revenue and Collection Cycle
Purchases and Disbursement Cycle
Inventory and/or Conversion Cycle
Depreciation and Capital Expenditure Cycle
Financing Cycle

What Is an Arm’s Length Transaction?

An arm’s length transaction is a deal wherein both buyer and seller are independent, unrelated, well-informed, have equal bargaining power, and are acting purely in their own self-interest to get the best price out of the deal.

Let's dive into details!!!

Revenue and collection cycle is a repeating set of business activities and processing operations associated with providing goods and services to customers and the collection of payments for those sales. This consists of the following transaction categories or documents:

Estimates (non-posting transactions)
Sales orders (non-posting transactions)
Invoices
Sales Receipts
Received Payments (commonly known as collections)
Credit Memos (this usually includes sales returns and refunds)
Deposits (either cash or check deposits)

Purchasing and disbursement cycle follows a purchase from the decision to buy through the final payment. They decide they need to purchase product and compare pricing and suppliers; next, they make a purchase and choose a method of payment. A company’s expenditure cycle usually has more steps and involves a number of people and departments. This consists of the following transaction categories or documents:

Purchase Orders (non-posting transactions)
Bills
Vendor Credit Memo (debit memo)
Bill Payments (this is usually in check payments for internal control)

Inventory and/or conversion cycle means different things to different companies in different verticals. For companies that source, assemble, and create inventory, it refers to a time-based process which is basic to understanding how to maximize resources and cash flow. To businesses that buy, store, and sell inventory, it focuses on the process of understanding, planning, and managing inventory levels from the point of purchase through more-efficient auditing. This usually includes the following transaction categories or documents:

Purchase order
Item receipts
Inventory transfers

Manufacturing - raw materials warehouse > manufacturing plant > finish goods warehouse > storehouse

Retail - warehouse > storehouse

Inventory adjustments

Depreciation and Capital Expenditure Cycle includes purchase and disbursement cycle. It also involves capitalizing purchase goods/services and reflecting it to balance sheet and as investments to cash flow.

Purchase order
Item receipt
Lapsing/Fixed asset schedule
Sales of property

Financing Cycle includes the accounting transactions that record the acquisition of capital from owner and creditors, the use of that capital to acquire productive assets and report the owners and creditors on how it is used.

Loan agreement with amortization schedule
Subsequent principal and interest payments

Next step!

Identify and classify transactions, follow the process flow and make this repetitively, just make it...

Fast

&

Precise

In this process...

. . . T I M E . . .

...is not your friend.

If looking at this cycle makes you dizzy, don't worry as we got you covered.

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