Monday, November 21, 2011
Accounting In Excel
Accounting In Excel, or the term spreadsheet that
covers a wide variety of elements useful for
quantitative analysis of all kinds. Essentially,
a spreadsheet is a simple tool consisting of a
matrix of cells that can store numbers, text,
or formulas. The spreadsheets power
comes from its ability to recalculate results
as you change the contents of other cells.
No longer does the user need to do
these calculations by hand or on a calculator.
Instead, with a properly constructed spreadsheet,
changing a single number (say, a sales forecast)
can result in literally
thousands of automatic changes in the model. The freedom
and productivity enhancement provided by modern
spreadsheets presents an unparalleled opportunity for
learning financial analysis.
Building an Income Statement in Excel(accounting in excel)
The image below presents the income statement for Elvis Products
International (EPI) for the year ending December 31, 2004. We
will build this income statement first, and then use it as a base
for creating the 2003 income statement.(click the image to enlarge)
Make Excel do as much of the
work as possible. Whenever
possible, a formula should be
used rather than entering
numbers. In the long run this
will minimize errors.
Format the worksheet so that
it is easy to understand.
Borders, shading, and font
choices are more than just
decorations. Properly chosen,
they can make important
numbers stand out and get the
attention they deserve.
While we are building the income statement, we want to keep
a couple of general principles in mind. Principle 1 says that we
want to make Excel do as much of the work as possible.
Any time a value can be calculated, we should use Excel to do
so. The reasoning behind this principle is that we want to avoid
mistakes and increase productivity. A little thought before
beginning the design of a worksheet can help to minimize data
entry errors, and increase productivity by reducing the
amount of data that needs to be entered. Principle 2 says
that we should format the worksheet in such a way as to make
it easy to comprehend. There are many times that you will be
creating a worksheet for others to use, or for your own use at a later
date. Properly organizing the cells and judicious use of color and
fonts can make the worksheet easier to use and modify.
1 Worksheets that are disorganized and sloppily formatted do not
engender faith in their results.
It is usually helpful when working with multiple worksheets in a
workbook for each sheet to be given a name other than the default.
With the right mouse button, click
Tag: Accounting In Excel