How to Use Excel for Accounting in 2022

As the technology of accounting evolves, many accountants are looking to Excel as a way to keep up with changes. In 2022, accounting programs will now be able to read and write in excel files directly. This means that any data entered into an excel file can then automatically be categorized into different types of information including cost per unit or profit margin ratios.

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Accountants may use Microsoft Excel to create a variety of schedules and computations that conventional accounting software cannot. It has features for doing sophisticated mathematical computations, as well as a variety of add-ons for financial forecasting and modeling. Because of its powerful capabilities, you may use it with as little or as much sophistication as you choose. This article explains how to utilize Excel to improve your accounting and fill in the gaps left by many free programs, as well as providing templates to help you get started.

When Should You Use Accounting Software?

While Excel has a lot of great accounting applications, I wouldn’t advocate using it as your main bookkeeping program to manage your cash flow and categorize your revenue and spending. While it is possible, it is much more convenient to utilize one of the numerous free accounting programs available in both cloud and desktop editions.

Simple accounting software makes it simple to keep complete and accurate records. Many of these applications employ double-entry accounting, allow you to produce financial reports, interface with business apps, and can expand with your organization, in addition to automating bookkeeping operations like sending invoices (accounts receivable or A/R) and paying bills (accounts payable or A/P).

Excel, unlike accounting software, will be unable to:

• Automatically generate reports based on data from your books.
• Allow numerous people to seamlessly collaborate on your system.
• Allow access with a mobile app.
• You’ll be notified if there are any duplicate entries or data entering errors.
• Connect to your company’s bank accounts or credit cards to automatically import and categorize transactions.

Do you want to buy accounting software but your budget prevents you from doing so? Take a look at our picks for the best free accounting software.

Templates that may be downloaded

All of the templates given in this post are free to download and do not need an email address!

Reconciling Bank Accounts using Excel

In Excel, here’s an example of a bank reconciliation.

Bank reconciliation is one of the most crucial accounting duties for your company since it prevents you from overdrawing your account or being a fraud victim. The act of reconciling your bank or credit card statement with your accounting records for the same time period in order to identify any differences is known as reconciliation. If you find any, make a note of them so that you or your accountant may look into them.

Tip: If you are using the Templates that may be downloaded provided in this article, you only need to complete the highlighted cells. The remaining cells will calculate automatically.

Follow these procedures to reconcile your statement:

1. Fill in the final balance as it appears on your bank statement.
2. Look through your checkbook for any deposits that aren’t shown on your bank statement. In the Add Deposits in Transit area, enter the deposit date and amount.
3. Look through your checkbook for any cheques that aren’t included on your bank statement. In the Minus Outstanding Checks area, write the check number and amount.
4. Look through your bank statement for any transactions that aren’t in your checkbook. A bank service fee or an unrecorded check, for example. In your check register, make a note of any transactions that are missing.
5. The final balance in your check register should now equal the amount for Balance per Check Register on the bank reconciliation. If not, go through the procedures again to find the problem.

Tracking Unpaid Invoices (A/R) with Excel

In Excel, you may see an example of an A/R report.

Many firms that invoice their customers use an A/R aging report to keep track of what payments are owed to them. An A/R report states when payments are due, how much is owing, and who owes it. It’s a useful tool for forecasting cash flow and knowing precisely how much you owe at any particular moment.

Follow the steps below to build your A/R report:

1. Fill in the highlighted area in the top right corner of the spreadsheet with your payment terms. The majority of businesses have payment terms ranging from Net 10 to Net 60 or Net 90 days. The payment conditions in this case are Net 30, which means consumers have 30 days to pay their invoice before it becomes past due.
2. Fill in the client name, invoice number, amount, and invoice date in the highlighted area below to get a list of your outstanding bills.
3. There’s already a formula in place to compute the due date and days late. Use this data to evaluate when it’s important to contact consumers who have fallen behind on their payments.
4. To add more rows to the spreadsheet, right-click on the far left column and choose Insert 1 Above or Insert 1 Below from the drop-down menu.

Excel may be used to create invoices if you want extensive customization choices, such as adding a logo or changing fonts. However, you may want to think about employing a free invoice generator to automate the billing process. Take a look at our list of the best free invoice generators, which includes Invoice Ninja.

Tracking Unpaid Bills (A/P) with Excel

In Excel, here’s a sample A/P report.

A/P refers to the practice of keeping track of how much money is owed to suppliers, when bills are due, and when they are paid. If you don’t pay your suppliers on time, you risk having negative credit and running out of supplies, among other problems. Using Excel to create an A/P aging file will allow you to keep track of your payable accounts and see which invoices need to be paid first, as well as how far behind you are on any past due accounts. To make your A/P report, follow these steps:

1. Enter the name of each vendor, the invoice number, the amount owed, the invoice date, and the invoice terms in the highlighted area. The due date will be determined automatically, as well as the number of days late.
2. To add more rows to the spreadsheet, right-click on the far left column and choose Insert 1 Above or Insert 1 Below from the drop-down menu.

Keeping Track of the Cost of Goods Sold using Excel

The most difficult aspect of inventory accounting is identifying the difference between the cost of inventory on hand at the end of the year and the cost of inventory sold throughout the year, commonly known as cost of goods sold (COGS). The Average Cost Approach or the first in, first out (FIFO) method may be used to make this essential allocation.

Using the Average Cost Method

The Using COGS are calculated using the average per unit cost of inventory on hand at the moment of sale under the Average Cost Method. This spreadsheet may assist you in keeping track of your average cost:

Sample COGS Using the Average Cost Method report in Excel

With the Using the Average Cost Method, the average cost per unit is calculated by dividing the total cost of inventory by the total number of units available for sale. COGS is then calculated by the average cost per unit times the number of units sold.

Here are the steps to creating your Using the Average Cost Method report in Excel:

1. Enter the invoice date, item quantity, and cost per unit under Inventory Purchases.
2. Enter the quantity of each item sold under Inventory Sales.
3. The Cost per Unit, COGS, and Inventory Balance will be calculated automatically, giving you an accurate picture of your inventory costs. For a more in-depth look at how inventory is calculated using the Using the Average Cost Method, read our article about the inventory aging report.

FIFO (First-In, First-Out) Method

With the FIFO (First-In, First-Out) Method, items that are purchased first are assumed to be sold first and the remaining items will be the latest purchases. You can use FIFO accounting even if the physical flow of your goods doesn’t match this assumption. The accounting for FIFO inventory costs is much more complicated than average cost and I highly recommend you use specialized software to do it. QuickBooks Online Plus has outstanding inventory features and uses the FIFO cost method.

Creating Amortization Schedules in Excel

Excel Amortization Schedule Example

The most fundamental information about your loan and how you’ll repay it is included in a loan amortization plan. It usually provides a detailed summary of all the payments you’ll have to make throughout the course of the loan’s term. The percentage of each payment that goes toward interest and principal is broken out for each installment on the schedule. You’ll also be able to see a running count of the remaining loan amount after each monthly payment, so you can watch how your debt diminishes over time as you return the loan.

The information in the amortization schedule may be used in a variety of ways. The primary goal is to divide payments into two categories: interest, which is an expenditure, and principal, which lowers your debt. When you know how much interest you’ll pay over the course of the loan, it’s a strong motivator to make your principle payments as soon as feasible. This spreadsheet is particularly handy if you’re evaluating various loans since it allows you to input the loan amount, interest rate, and duration to calculate your monthly payment and how long it will take you to pay it off. The procedures for constructing a loan amortization schedule in Excel are as follows:

1. Enter the first payment’s date.
2. Enter the loan’s total amount.
3. Enter the loan’s annual percentage rate.
4. Enter the loan term’s length in months. The spreadsheet can handle up to 360 months (30 years) of data.
5. You may see your payment schedule, the initial balance of your loan, the interest paid, the payment amount, and the final balance below the input area.

Using Excel to Import Data from Bookkeeping Software

QuickBooks Online allows you to export any of its reports to Excel, which is handy for consolidating sales data, banking data, and invoices from several sources into a single file to assist your accounting duties. The process of exporting the report is straightforward and may be accomplished by following the steps below:

In QuickBooks Online, you may export reports to Excel.

1. In the left sidebar, click Reports.
2. Find the report you want to export and choose it.
3. If needed, you may change the time period, accounting method, and other choices by scrolling to the top of the page.
4. Select the Export icon in the upper right corner of the report. Select Export to Excel from the drop-down menu. You can also save the report as a PDF document.
5. Save the report to a spot where you can quickly locate it, such as your desktop.

Here’s an example of a Profit and Loss report in Excel:

Sample Profit and Loss (P&L) Statement exported to Excel from QuickBooks Online

It’s possible that the file is in protected view if you can’t find any data when you open the report in Excel. To see the whole report, choose Enable Editing in Excel.

Conclusion

While utilizing Excel for some accounting activities may be advantageous and cost-effective, it can also be a time-consuming and error-prone procedure. If you’re seeking for a more straightforward and effective approach to handle your accounting, we suggest looking into numerous accounting software options to find the one that best suits your needs. For ideas, look at our list of the top small company accounting software.

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