How to use Excel as general ledger

Microsoft Excel is a powerful tool that can be used for a variety of reasons. For a small business with few transactions, a savvy business owner can use Excel as a replacement for accounting software.

Excel has all the tools needed to create and maintain a great general ledger, but requires a solid understanding of basic accounting and careful attention to detail. For business owners who don’t have the resources to invest in accounting software, Excel can be a good starting point for keeping accounting records until you purchase the accounting software. Here is a guide that will help you determine the best way to use Excel for accounting purposes.

Using Excel as General Ledger

It is important to note that every company is different from the rest and therefore has different reporting requirements. The first step in setting up an accounting process is to determine which accounting metrics to include based on the nature of the business.

A simple record setup should initially include columns for the transaction date, transaction description, and a reference number, e.g. B. Invoice or check numbers. The following columns list all accounts to be used during the year. Account selection should be carefully considered as it will be difficult to go back and make changes later. From left to right, the first accounts listed should be income statement accounts, starting with income and ending with expenses. Next come the asset accounts, then the liability accounts, and finally all the equity accounts.

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General ledger uses double entry bookkeeping to keep track of all business transactions and it is important to understand this concept before using Excel as general ledger. With double-entry bookkeeping, the debit and credit amounts of a transaction are entered in such a way that the books are balanced at the end.

Double entry bookkeeping in Excel

If it is a new company, the first transaction will likely be the capital invested in the company. As an example, suppose an entrepreneur named Jane decides to open a machine shop. She has $750,000 in savings to start the business and uses the saved funds to open a business checking account at her local bank.

Using double-entry bookkeeping concepts, Jane knows that this transaction increases the company’s cash account (the debit entry) and is offset by an increase in the owner’s equity account (the credit entry). In this Excel system, all debits should be recorded with positive values ​​while all credits should be recorded with negative values.

In this example, Jane would enter the date of the transaction and a description such as “Equity Investment” in the first row of the table. She then makes a positive entry of $750,000 in the “Cash” column of the spreadsheet account and a negative entry of $750,000 in the “Equity” column of the spreadsheet account. To check the numbers, Jane needs to use Excel’s summation formula to ensure that all entries in each row add up to zero dollars.

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From there, Jane will continue to enter a line for each transaction. When she purchases materials with company money, Jane enters a transaction to show a debit or positive entry in the Materials account column and a credit or negative entry in the Types account column. When it sells machining services to a customer, it posts a credit to the “Revenue” account and a debit to an “Equity” account.

Finally, the sum of each account column should be added at the end of the worksheet. The sum of all income accounts can be added to the current net income. Other columns to be calculated can be configured as required, e.g. B. Total Assets, Total Liabilities and Total Equity.

The essential

Running a business requires a tremendous amount of bookkeeping which is best served through the use of accounting specific software. If that is not an option for a business owner, using Microsoft Excel is a good alternative. The person who keeps the company’s accounts must be proficient in accounting terms and techniques and understand the various Excel tools to create accurate accounting entries. As the company grows, it is advisable to use appropriate accounting software.