Bookkeeping in Excel

What is Bookkeeping in Excel?

Bookkeeping in excel means recording of day to day financial transactions of an entity such as purchase, sales, payments, receipts & expenses in an excel template. For a recording of transactions into excel,  first need is to setup/customize excel as per requirement and then record day to day transaction in this template and save it in your own computer.

Single Entry Bookkeeping in Excel

In a Single entry systemSingle Entry SystemThe Single Entry System is an accounting approach under which every accounting transaction is recorded with only a single entry towards the results of the business enterprise, shown in the statement of income of the company.read more, only one side of the transaction will be recorded, and the effect of these transactions will go to only one place. Whereas in the double-entry accounting system, every transaction will be recorded by debit and credit, and these will affect two accounts.

In single entry system transactions will be recorded by keeping in mind the objective and result of the transactions. In single-entry bookkeeping, the main focus will be given on cash receiptsCash ReceiptsA cash receipt is a small document that works as evidence that the amount of cash received during a transaction involves transferring cash or cash equivalent. The original copy of this receipt is given to the customer, while the seller keeps the other copy for accounting purposes.read more and cash payments rather than a recording of each expense and income or assets and liabilities.

Bookkeeping-in-Excel

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How to Create Bookkeeping in Excel

Step #1: Prepare an excel template for a recording transaction according to the requirement while preparing an entity that can take the help of accounting professionals.

Step #2: Prepare a chart of accountsPrepare A Chart Of AccountsThe acronym COA stands for "Chart of Accounts." It is a list of accounts (revenue, expenditure, assets, liabilities, etc.) that a company generates in order to organize, record, and segregate all accounts that have been utilized for transaction purposes in its accounting system.read more for recording and categorizing the transactions according to the nature of business. Generally, a chart of accounts is divided into three categories which are:

  1. Income: For recording the money which is coming into the business.
  2. Expense: For recording the money which is going out or business.
  3. Cost of Goods Sold: Money which is spent on creating the finished goods.

Below is the sample chart of Accounts:

Bookkeeping category

Step #3: Prepare income statements with the help of a chart of accountsChart Of AccountsChart of Accounts (COA) is a list of all the accounts in which a business records its regular operational expenses. It is used to collect information for preparing a Company’s financial statements. read more to arrive at the gross profitGross ProfitGross Profit shows the earnings of the business entity from its core business activity i.e. the profit of the company that is arrived after deducting all the direct expenses like raw material cost, labor cost, etc. from the direct income generated from the sale of its goods and services.read more and net profit for over the period. For the monthly income statement, 12 income statement sheets will be prepared, and after that, one annual income statement sheet will be prepared by merging all 12 income statementIncome StatementThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements.read more sheets. The flow of income statement will go as below:

Bookkeeping Format

Step #4: Prepare one excel sheet where all the invoice no. will be recorded so that it can be the track which invoice was paid or which invoices are pending for payment.

Step #5: Prepare cash flow statementsCash Flow StatementsStatement of Cash flow is a statement in financial accounting which reports the details about the cash generated and the cash outflow of the company during a particular accounting period under consideration from the different activities i.e., operating activities, investing activities and financing activities.read more for ascertaining the cash position of the entity.

Step #6: After preparing all the above excel sheet to save the file to a secure location by giving the proper name to the folder. We can protect this file by password also.

Example of Bookkeeping in Excel

Below is the cash bookCash BookThe Cash Book is the book that records all cash receipts and payments, including funds deposited in the bank and funds withdrawn from the bank according to the transaction date. All the transaction which is recorded in the cash book has the two sides i.e., debit and credit.read more for Apr’18 to Jun’18 maintained in the excel spreadsheet, where cash inflow and outflow have been recorded by using single-entry bookkeeping.

As on 01.04.2018 Opening balance of cash and bank is $1000 after adding and deducting income and expenses over the period, we will arrive closing balance of $2564.

Cash book

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Advantages

The following are some advantages:

Disadvantages

Below are the disadvantages:

  • In excel, bookkeeping users can prepare the data as per requirement, and he may be biased while preparing and presenting data to the management.
  • It is necessary to enter the correct formula because in excel formula will be entered manually. If there is any mistake in a formula, then the result will change, and this will affect decision making.
  • Excel bookkeeping is less secure than data maintenance in accounting software, and hackers can easily hack it, and in an organization also anyone can access the data.
  • It is not useful and time consuming where a large amount of data to be entered into excel.
  • In excel, it is not possible to automatically import data from bank software or other software like other accounting software, which allows us to automatically import data from other software.

Conclusion

Bookkeeping in the excel sheet is useful for those organizations which are in the initial phase of business and don’t want to increase their expenses by recruiting skilled manpower and purchasing of accounting software. It is easy to maintain accounting transactionAccounting TransactionAccounting Transactions are business activities which have a direct monetary effect on the finances of a Company. For example, Apple representing nearly $200 billion in cash & cash equivalents in its balance sheet is an accounting transaction. read more into excel as compared to the recording of transactions in accounting software. Still, at the same time, it is less secure and not useful for a large number of transactions, and chances of error are very high.

Recommended Articles

This article has been a guide to what bookkeeping is in excel. Here we discuss an example and how to create bookkeeping in an excel template along with advantages and disadvantages. You can learn more about accounting and financing from the following articles –

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