chapter 04
Recurring Tasks to Complete for GAAP Compliance
Get Accounting HelpDue to the increased complexity of accrual accounting, it’s essential to consistently work on your financial reporting to achieve GAAP compliance. If you put off too many tasks—or the wrong ones—to quarter or year-end, you won’t be able to fulfill your obligations.
Some of the most important GAAP-related tasks to complete on a monthly, quarterly and annual basis include:
MONTHLY
- Reconcile bank and credit card statements
- Adjust journal entries
- Record depreciation and amortization
- Update fast-moving inventory counts
QUARTERLY
- Update current and deferred tax liabilities
- Internally audit key controls
- Prepare interim financial statements (if required)
- Update slower-moving inventory counts
YEARLY
- Conduct a full inventory assessment
- Prep and finalize year-end financial statements
- Prepare and file year-end tax returns
- Complete independent external audit
Monthly Recurring GAAP Compliance Tasks
You must focus on several tasks on a monthly basis to ensure the accuracy and consistency of your financial reporting. They form the backbone of your financial operations, in turn helping you stay on top of GAAP compliance.
EFFICIENCY TIP
Automate bank reconciliations, journal entries and inventory tracking to save time and reduce errors.
Bank and Credit Card Reconciliations
Ensure you’ve accounted for all transactions by reconciling your books to your bank account and credit card statements.
Accounting software generally includes reconciliation features that can automate this process, saving time and reducing errors.
Journal Entries Adjustment
Record AP and AR, prepaid expenses and deferred revenue, and accrued expenses and accrued revenue.
This ensures revenue and expenses are recognized in the correct period, adhering to the accrual basis of accounting.
Some accounting software offers automated adjusting entry features that reduce the need for manual adjustments, but they typically won’t eliminate it.
Depreciation and Amortization Entries
Allocate non-cash expenses over the useful lives of assets, matching these costs to the period in which they occur.
Some accounting software offers features that automate GAAP-compliant depreciation and amortization schedules, including straight-line and accelerated methods.
Fast-Moving Inventory Counts
For businesses that deal with physical goods, inventory items with high turnover rates should be counted more often so their values are reflected accurately in financial statements.
Inventory management systems can provide real-time tracking and reduce the need for inventory counts.
Quarterly Recurring GAAP Compliance Tasks
Every quarter, additional tasks come into play to align your reporting with GAAP standards. These tasks help refine your financial statements and keep them compliant as your business moves through the year.
AUDIT EFFICIENCY TIP
Focus internal audits on high-risk areas to save
time and resources.
1. Tax Liability Updates
Adjust your current and deferred taxes payable (liabilities) or refundable (assets) to reflect estimated tax payments made during the quarter. This ensures your tax position is reflected accurately in your financial statements.
Integrated tax and accounting software can help you streamline this process significantly, but it may not automate it entirely.
2. Internal Audit for Key Controls
Public companies are required to conduct internal audits by the Sarbanes-Oxley Act (SOX), but private companies can also benefit from evaluating the effectiveness of their internal controls.
These audits help identify risks and ensure that processes are functioning as expected. Audit management software can help organize your processes.
3. Interim Financial Statements
If your company is required to issue interim financial statements, you will need to prepare balance sheets, income statements, and cash flow statements for the most recent quarter.
While these statements are often less detailed than year-end reports, they are still crucial for stakeholders. Presentation requirements for interim financial statements are relaxed, so you can opt not to have them audited to save resources.
4. Slower-Moving Inventory Counts
You can afford to count items with lower turnover rates less often, but you should still count them at least quarterly. Accurate inventory counts prevent errors in asset valuation and ensure your financial statements accurately reflect your business’s inventory levels.
Slower-moving inventory may make manual counting less challenging, but an inventory management system may still be beneficial.
Annual Recurring GAAP Compliance Tasks
You’ll need to tackle some of the most critical tasks annually to ensure your financial statements are fully GAAP-compliant. These tasks help close the books on the fiscal year and prepare for any external audits.
Annual Inventory Assessment
Perform a comprehensive count and valuation of all inventory items to
ensure
your financial statements accurately reflect its value at year-end. Use
inventory management software to streamline counting and valuation.
Additionally, be sure to consider your valuation method carefully and
use it
consistently.
Year-End Financial Statements
Prepare and finalize your balance sheet, income statement and cash
flow statement. These provide users with useful insights into
your financial performance and position at year-end. Your accounting
software’s financial reporting features should help you prepare and
finalize your year-end statements.
ANNUAL EFFICENCY TIP
Automate as much of your year-end financial reporting preparation as possible using integrated tax and accounting software with built-in GAAP reporting features.
Tax Returns and Deferred Liabilities
Record current and deferred tax liabilities (or assets) based on actual
tax return numbers to reflect your true year-end tax position in your
financial statements. Once again, having integrated tax and accounting
software can help you streamline this process significantly.
External Audit Preparation
Public and some private companies must hire an independent auditor to issue an unbiased opinion on your financial statements and disclosures. That assures users they’re free of material misstatements. By keeping up with GAAP requirements throughout the year and creating an organized audit trail—which your accounting software may support—you’ll significantly reduce the effort required for this process, allowing your audit to go more smoothly.
