Bookkeeping in Excel

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Edited by :

Aaron Crowe

Reviewed by :

Dheeraj Vaidya, CFA, FRM

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What is Bookkeeping in Excel?

Bookkeeping in excel refers to recording day-to-day financial transactions of an entity such as purchases, 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.

Table of contents
  • Bookkeeping in Excel means a record of the day-to-day entity's financial transactions like purchases, sales, payments, receipts, and expenses in an Excel template. 
  • To record the transactions in Excel, one must customize Excel as needed, then record the day-to-day transaction in the template and save it on the computer.
  • It is helpful for organizations in the first business phase who want to avoid raising expenses by hiring an expert workforce or purchasing accounting software.

Single Entry Bookkeeping in Excel

A Single entry system 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 receipts and cash payments rather than recording each expense and income or assets and liabilities.

Bookkeeping-in-Excel

How to Create Bookkeeping in Excel

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

  2. Prepare a chart of accounts 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.

  3. Below is the sample chart of Accounts:
    Prepare income statements with the help of a chart of accounts to arrive at the gross profit 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 statement 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 statements 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 book 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 at a closing balance of $2564.

Cash book

Advantages

The following are some advantages:

  • Bookkeeping in an excel template does not require any particular accounting skill; therefore, it is easy to record transactions.
  • It is less expensive because the excel spreadsheet is available on every computer/laptop; therefore, there isn’t any need to purchase any accounting software.
  • Excel has various functions that help quickly record transactions like addition, multiplication, VLOOKUP, Pivot table, and Macros.
  • Excel helps create numerous graphical presentations like charts, such as bar charts and pie charts.
  • Multiple users in an office can access it by sharing the excel sheet in a readable mode. One person can edit the data in the excel sheet in this mode, and others can only view the data.

Disadvantages

Below are the disadvantages:

  • In excel, since bookkeeping users can prepare the data per requirement, they may be biased while preparing and presenting it to management.
  • It is necessary to enter the correct formula because, in excel, the formula needs 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 when a large amount of data is 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 organizations 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 transaction 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.

Frequently Asked Questions (FAQs)

Can you do bookkeeping in Excel?

Excel contains valuable features and functions to help create a functional small business bookkeeping system. For example, one may record and classify transactions through Excel, make several bookkeeping templates, track invoices, etc.

How to create bookkeeping in Excel?

For creating bookkeeping in Excel, one must separately maintain the business and personal finances and then decide what accounting method to use. After that, make a chart of accounts and create an income and expense sheet. Lastly, make optional bookkeeping reports.

Is bookkeeping in Excel in high demand?

Yes, bookkeeping in Excel is in high demand. Moreover, Excel skills are still in demand and used in the job market.

Is bookkeeping in Excel important?

Bookkeeping in Excel is helpful for several applications and bookkeeping. Secondly, globally major businesses use the spreadsheet-based program. Finally, the training on working on Excel is also easily accessible online to boost the employee's speed if required.