Bookkeeping in Excel

What is Bookkeeping in Excel?

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

Single Entry Bookkeeping in Excel

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 records only one side of the transaction, and the effect of these transactions goes to only one place. Whereas in the double-entry accounting system, every transaction is recorded by debit and credit, thus, affecting two accounts.

In a single entry system, transactions are recorded by keeping in mind the objective and result of the transactions. Single-entry bookkeeping focuses 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 recording of each expense and income or assets and liabilities.

Bookkeeping-in-Excel

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How to Create Bookkeeping in Excel

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

  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 the 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 spent on creating the finished goods.

    Below is the sample chart of Accounts:

  3. Prepare income statements with the help of a chart of accountsChart Of AccountsA chart of accounts (COA) lists all the general ledger accounts that an organization uses to organize its financial transactions systematically. Every account in the chart holds a number to facilitate its identification in the ledger while reading the 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 over the period. For the monthly income statement, prepare 12 income sheets, and after that, prepare one annual income statement sheet 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 the income statement will be as below:

    Bookkeeping Format

  4. Prepare one excel sheet where all the invoice no. will be recorded. This will help track which invoices were paid or which invoices are pending.

  5. Prepare cash flow statementsCash Flow StatementsA Statement of Cash Flow is an accounting document that tracks the incoming and outgoing cash and cash equivalents from a business.read more to ascertain the entity’s cash position.

  6. After preparing all the above excel sheets, save the file to a secure location by giving a 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 using single-entry bookkeeping.

As of April 1, 2018. the opening balance of cash and bank is $1000. Therefore, 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, since bookkeeping users can prepare the data as per requirement, they may be biased while preparing and presenting data to the management.
  • It is necessary to enter the correct formula because in excel formula need to be entered manually. Therefore, if there is any mistake in a procedure, the result will change, which will affect decision-making.
  • Excel bookkeeping is less secure than data maintenance in accounting software, and hackers can easily hack it in an organization.
  • The process becomes time-consuming where large amount of data is to be entered into excel.
  • In contrast to accounting software, which can automatically import data from other software, it is impossible to import data from bank software or other software into Excel.

Conclusion

Bookkeeping with Excel is useful for organisations in the initial phase of business who don’t want to increase their expenses by recruiting a skilled workforce or purchasing 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 in excel as compared to the recording of transactions in accounting software. Still, at the same time, it is less secure and not valid for a large number of transactions, as the chances of errors 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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