Microsoft Excel is used to maintain track of a business's financial transactions when doing bookkeeping. These exchanges could take the form of payments, purchases, expenses, sales, etc. Many businesses use Microsoft Excel for bookkeeping because it can be modified. Understanding your company's financial statements, producing financial reports, and ensuring there are no errors can all be facilitated by learning how to conduct bookkeeping in Excel and exploring its capabilities.
Start with a template that contains a chart of accounts, transaction sheet, and income statement page if you wish to manage your basic bookkeeping using Excel. You can personalize this template, download it to your computer, and then use it to record and organize your daily transactions to develop your own Excel bookkeeping system.
In terms of business accounting, bookkeeping is the fundamental procedure that maintains you in order, current, and prepared to handle any additional financial responsibilities that may develop. If you choose to use Microsoft Excel to handle your basic bookkeeping, Excel is incredibly user-friendly.
Tips on Bookkeeping Using Excel Functions
You can log many kinds of transactions to and from your business bank accounts using the Excel bookkeeping system. You can monitor your stock, personnel, suppliers, etc. Even while Excel isn't often considered accounting software, it can be useful for small business bookkeeping. You may automate routine operations, save time, and reduce the possibility of errors by creating Excel bookkeeping templates. The use of Excel for bookkeeping has many benefits.
- Basic bookkeeping activities in Excel can be completed without special expertise.
- The software is simple to use.
- In comparison to bookkeeping software, it is less expensive.
- The application offers a ton of useful features that make it simple to record transactions.
- You can make graphs and other graphical presentations using it.
- You can maintain tabs on the money coming in and going out of your bank account.
- It helps you to make financial accounts and carry out simple computations.
- You may track invoices with it.
Single-Entry Excel Bookkeeping
An accounting system for monitoring an organization's finances is known as single-entry bookkeeping. Each transaction is represented by a single entry, the majority of which records the inflow or outflow of money. Transactions are entered into the single-entry bookkeeping method in a "cash book," or journal, that has columns with headings like the date and description.
Contrary to double-entry accounting, which records debit and credit, single-entry bookkeeping focuses solely on recording one side of transactions. Small businesses benefit greatly from single-entry bookkeeping, which Excel handles flawlessly. It is not, however, appropriate for larger businesses. A double-entry bookkeeping system is required in these circumstances to track cash flow and lower the risk of fraud and mistakes.
How to Create a Bookkeeping System in Excel
Step 1: Prepare a Bookkeeping Excel Sheet Template
You can create your own Excel bookkeeping template from scratch if you've used Excel before and are familiar with its features. You can obtain Excel bookkeeping templates online if you've never used them or are unfamiliar with their functions. You can use templates you make or download as a starting point for more complex accounting chores including fundamental financial statements, forms, receipts, reports, etc.
A chart of accounts sheet, an income statement sheet, and a transactions sheet should all be included in the template, no matter where you got it from. A sheet called a chart of accounts contains a list of the accounts that go into your books. Every transaction must be categorized into one of the accounts that each account represents on the spreadsheet.
An income statement sheet shows your net income in addition to details about your profits and expenses. Every transaction pertaining to your firm is listed in detail on a transactions sheet. You should enter information like the date, sum, description, account, etc. here. You have the option of having transactions on separate income and expense pages or everything on one sheet.
Step 2: Customize Your Chart of Accounts
The next step is to modify your chart of accounts so that it is appropriate for your business. You should establish points of reference to serve as a reminder of the transactions that belong in which categories. You must first compile a list of every expense and source of revenue your business has. Create an account for each, include it in the chart of accounts, and use it as a guide when classifying transactions after that. Remember that your chart of accounts must work for your company. However, you must classify transactions into one of three categories: revenue, cost of goods sold (COGS), or both.
Step 3: Customize Your Income Statement Sheet
Your chart of accounts data is included in your income statement sheet. You must alter your income statement sheet to reflect the chart of accounts if you want to guarantee high accuracy. You must make twelve papers, one for each month if you wish to produce monthly income statements. The fact that prefabricated templates include formulas for automatic data entry and calculations is one of its benefits. These calculations are built using data from additional sheets.
Step 4: Create a Sheet for Invoices
Include the invoice number when adding revenue from invoices. You may then cross-reference the information, check for mistakes, and make sure you don't input an invoice payment more than once or forget to enter it. It's considerably simpler to keep track of your finances when you have a separate sheet for invoices. You can either make one from scratch or download a template.
Step 5: Create a Sheet for Projecting Cash Flow
A lot of small business owners choose to make a cash flow projection chart for the purpose of managing their monthly budgets. You can design the sheet from scratch or download a template, just like with the sheet for invoices.
Step 6: Save the Excel File
It's time to save the Excel file after you've designed the ideal template for your company and added all of the required sheets. You can save it to your computer or drive. It is crucial to preserve the security of this file because it contains important information about the bank accounts and accounting records of your firm.
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Benefits of Accounting in Excel for Small Businesses
Around the world, many firms, particularly newly established ones, substantially rely on the subsequent accounting procedure. For them, Excel is a tried-and-true program that accountants rely on and that is frequently used every day. The use of Excel for small business accounting has the following major advantages.
Convenience in Data Organization
Excel enables users to easily save data in a structured fashion in spreadsheets. The software has advanced so much over the years that it can now illustrate accounting results and stored data using pie charts and other graphical displays.
Forecasts
'Forecast sheets' are an improvement over the 'what-if' function since they let users predict future trends by using historical data from previous years. It is simple to predict the volume of existing or upcoming cash flows
Customized Bookkeeping Templates
Excel gives you the option to create custom bookkeeping templates for the receipts, invoices, and other reports you frequently need. The fact that you can reuse these templates based on your needs saves you a lot of time and work.
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Variety of Templates
There is a vast library of invoices, ledgers, reconciliation, budgeting, and other accounting tracks included with Microsoft Excel. With a click, you can incorporate them according to your demands.
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Affordable
It will be challenging for a small or newly started business to budget for specialized accounting software. They are saved by MS Excel because it is included in the MS Office suite. It works on many different platforms without even requiring an internet connection and does not require yearly renewal.
Comparing Datasets
The process of comparing several data sets is rapid and simple. When comparing financial statistics across two time periods to compute revenue, such as comparing year-over-year and month-over-month data, Excel makes the process simple. Additionally, if your small business is a retailer or reseller, you may compare your consumer base geographically and examine a number of variables like age, shopping preferences, spending power, etc. This will undoubtedly provide you with a more detailed understanding of how your business or organization is doing.
Formulas and Macros
Among the many accounting functions in Excel, the 'macros' feature makes spreadsheet updates simpler. Using this function, you can simply click to apply your calculations elsewhere after you've recorded them. When dealing with repetitive calculations, such as updating your report each month to reflect changes in the financial data, this is a lifesaver. With the help of this fantastic feature, you don't have to alter the entire report each time. Excel formulas and macros minimize the need for manual intervention.
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Nice article. Very useful.