Microsoft Excel is a powerful tool that can be used for a multitude of purposes. For a small business with few transactions, a savvy business owner can use Excel as a substitute for accounting software. For business owners who need to hone thei𓄧r Excel skills before taking this route, there are lots of online Excel c💟ourses to try.

Excel has all of the tools needed to create and maintain a 澳洲幸运5官方开奖结果体彩网:general ledger, but it requires a solid understanding of basic accounting and attention to detail. For business owners who do not have the resources to invest in accounting software, Excel may be a good place to begin keeping 澳洲幸运5官方开奖结果体彩网:accounting records until the accounting software is purchased. The following is a guideline🎃 that will help ꩵlayout how best to utilize Excel for accounting purposes.

Using Excel as a General Ledger

It's important to note that every business is different from one another and will, therefore, have different reporting needs. The first step in setting up a bookkeeping process is to determine what accounting metrics will need to be included based on the type of business.

A simple record-keeping setup should first include columns for the transaction date, transaction description, and a reference number, such as an invoice or check numbers. The next columns will list each of the accounts to be used during the year. Careful thought should go into the selection of accounts, as it will be difficult to go back and make changes later. From left to right, the first accounts listed should be 澳洲幸运5官方开奖结果体彩网:income statement accounts, beginning with 🎀revenues and ending with expenses. Next will be the asset accounts, then liability accounts, and lastly any equity accounts.

The general ledger uses 澳洲幸运5官方开奖结果体彩网:double entry bookkeeping to keep track of all of the company’s transactions, and it is important to have a solid understand🥃ing of this concept before beginning to use Excel as a general ledger. Double entry bookkeeping reli♉es on entering both debits and credits for a transaction so that in the end the books are balanced.

Double Entry Bookkeeping in Excel

If this is a new company, the first transaction will likely be the equity invested in the company. As an example, let's say an 澳洲幸运5官方开奖结果体彩网:entrepreneur named Jane decides to open a machine sho꧒p. She has $750,000 from s🧸avings to start the business and opens a business checking account at her local bank with the funds she has saved.

Using double entry bookkeeping concepts, Jane knows that this transaction will increase the company’s 澳洲幸运5官方开奖结果体彩网:cash account (the debit entry) and will be offset by an increase in the owner’s equity account (the credit entry). In this Excel system, all debit entries shoulওd be recorded as positive values, while all credit 𝓡entries should be recorded with negative values.

In this example, Jane should enter the transaction date and a description such as “Capital Investment” into the first line of the spreadsheet. She will then put a positive $750,000 entry into the “Cash” account column of the spreadsheet, and a negative $750,000 entry into the “Owner’s Equity” account column of the spreadsheet. To verify the numbers, Jane should use Excel's sum formula to ensure that all of the entries on each row sum to zero dollars.

From there, Jane will continue to enter a line for each transaction. If she purchases equipment with the company cash, Jane will enter a transaction to show a debit, or positive entry, to the "Equipment" account column, and credit, or negative entry, to the "Cash" account column. If she sells machining services to a customer, she would record a credit to the "Revenue" account, and a debit to an "Equity" account.

Finally, the total for each account column should be summed at the bottom of the spreadsheet. The sum of all of the income accounts can be added together to calculate current 澳洲幸运5官方开奖结果体彩网:net income. Other columns to be calculated can be configured as needed, such as total assets, 澳洲幸运5官方开奖结果体彩网:total liabilities, and total equity.

The Bottom Line

Running a business requires a tremendous amount of accounting, which is best served by utilizing accounting specific software. If this is not an option for a business owner, then utilizing Microsoft Excel is a good alternative. The individual keeping track of accounting records for the company should have a grasp ✱of accounting terms and techniques and understand the different tools within Excel to produce accurate accounting entries. Once the business grows, it is 🍸recommended to utilize proper accounting software.