What is an Accounting Worksheet? Definition, Example, And Advantages

During the ordinary course of business, record keeping and bookkeeping tend to be increasingly important to ensure that businesses have proper clarity and understanding regarding their financial position and performance.

It is also considered pivotal because it marginally improves the management within the company to enable users of financial information to make decisions based on authentic historical information regarding the transactions that took place over time in the company.

Therefore, numerous different tools are utilized by accountants to facilitate improving record-keeping systems. An accounting worksheet is considered one tool that helps companies keep a proper record of financial transactions over time.

The worksheet usually is included unadjusted trial balance, adjusting entries, adjusted trial balance , income statement, balance sheet, and statement of change in equity

An accounting worksheet is a tool that helps bookkeepers and accountants complete the accounting cycle and prepare year-end financial reports like unadjusted trial balances, adjusting journal entries, and year-end financial statements.

Therefore, an accounting worksheet is a simple representation of a spreadsheet that helps track each step across the accounting cycle.

It normally constitutes five columns, which begin with the unadjusted trial balance accounts and end with the subsequent year-end financial statements.

These columns include Trial Balance, Adjusting Entries, Adjusted Trial Balance, Income Statement and Balance Sheet.

Alternatively, accounting worksheets can be defined as a spreadsheet that shows all the significant transactions and steps in the accounting cycle in a parallel fashion.

Therefore, with each step represented on the accounting worksheet, it can be seen that each step correctly lists debits and credits, and totals are subsequently calculated at the bottom.

Similar to trial balance, the accounting worksheet is also supposed to be headed with the company name, the report’s title, and the period during which these transactions have occurred within the company.

However, it must also be noted that accounting worksheets are mainly created for internal purposes within the organization.

Therefore, this working paper is never publicly made available to external parties. The fact that this is an internal document gives flexibility to the companies to prepare it according to their requirements to adjust the format per their own need.

Advantages of Creating an Accounting Worksheet

The main advantage of creating an accounting worksheet mainly lies in the effective management of resources, which can help companies keep track of their records and transactions for proper reconciliation.

Firstly, it can be seen that the accounting worksheet helps accountants to complete the process of preparation of financial statements in a much easier manner.

They have all the balances listed in a single worksheet that helps them prepare the final year statements with relative ease easily.

In the same manner, it also ensures that the company’s bookkeeper ensures that the company has subsequently carried out all the adjustments.

Similarly, creating and preparing an accounting worksheet also helps to have a general idea about the company’s financial health (by looking at the year-end balances) before the actual financial statement is prepared and subsequently published.

A suggested model for the preparation of the accounting worksheet is given below:

meaning of worksheet in accounting

To summarize the definition and the usage of the accounting worksheet, it can be seen that it is best described as an accounting spreadsheet that summarizes the year-end balances of almost all the accounts at the end of the given year.

Hence, it is considered an extraordinarily phenomenal and resourceful tool for organizations who want to ensure that bookkeeping and subsequent preparation occur with authenticity and there are no items left out.

Even though it is not entirely biding to create an accounting worksheet, yet is considered good practice to prepare it for purposes of internal efficiency.

However, this does not mean that an accounting worksheet can solely be used to prepare financial statements.

It is considered a subsiding aid to the process, with the help of which accountants can reconfirm account balances at the end of the subsequent year.

However, it still requires the accountants to reconcile balances at the end of every subsequent year to ensure that transactions and account balances have not been missed.

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meaning of worksheet in accounting

Work Sheet:

Learning Objectives:

Definition and Explanation:

A work sheet is a large columnar sheet of paper, especially designed to arrange in a convenient systematic form all the accounting data required at the end of the period. The work sheet is not a part of the permanent accounting record but it is a working paper of accountants, prepared by pencil. If an error is made on the work sheet, it may be erased an corrected much more easily than an error on the formal accounting records. The work sheet is designed in a manner that it minimizes the chances of errors to the maximum possible extent. It brings into light many types of discrepancies which otherwise might be entered in the journal and posted to the ledger accounts.

It must be remembered that it is not necessary to write $ signs, decimal points or commas with the amounts entered on the work sheet. The satisfactory completion of work sheet provides considerable assurance that all the details of the end of period accounting procedures have been properly brought together. It also serves as the source from which formal financial statements are prepared and the adjusting and closing entries are made in the journal and then posted to the ledger .

We may further proceed with the help of an example.

Example of Work Sheet:

Sunshine is a trading concern. Its trial balance and adjustments are given below:

Adjustments:

  • Merchandise inventory on 31.12.2005 was 40000.
  • Rent expired during the year $2800.
  • Insurance expired during the year $2500.
  • Outstanding sales salaries $2100
  • Insurance receivable $200.
  • Stores supplies inventory on 31.12.2005 was $650.
  • Depreciate furniture and fixture by 10% p.a. and office equipment by 20% p.a.
  • Write off uncollectibles at $600.

The headings of the work sheet in our example for Sunshine consists of three parts:

  • The name of the business.
  • The title work sheet.
  • The period of time covered.

The form of work sheet has an account title column and the money column arranged in five pairs of debit and credit columns. The main headings of the five set of money columns are:

  • Trial balance.
  • Adjustments.
  • Adjusted trial balance.
  • Income statement.
  • Balance sheet.

These five sets of columns have been explained below:

Trial Balance:

The trial balance data may be assembled directly on the work sheet form or they may be prepared on another sheet first and then copied on the work sheet.

Adjustments Columns:

Students are advised to record the adjusting entries first on a separate sheet of paper before recording adjustments in the adjustment columns of work sheet. It will definitely make the procedure more simple for them. The adjusting entries for the adjustments given in the example are shown below:

If the titles of some accounts in all adjusting entries are not included in the titles already appearing in the trial balance, they should be inserted below the trial balance totals in the title column. For example, the title not appearing in the trial balance are merchandise closing inventory, income summary, rent expenses, insurance expenses, outstanding expenses, outstanding sales salaries, store supplies expenses, depreciation expenses - furniture, depreciation expense - furniture, depreciation expense - equipment and bad debts.

Both the debit and credit parts of an adjusting should be inserted on the appropriate lines before going on to another adjustment. The sequence of adjustments is not important, except that there is a time and accuracy advantage in following the order in which the adjustments are assembled.

Adjusted Trial Balance Columns:

The amounts in the trial balance columns are combined with the amounts in the adjustments column and extended to the adjusted trial balance columns. For example, the prepaid rent in the debit column of trial balance is $4395 and in the adjustments column, it is in the credit column at $2800 (see adjusting entry), so the amount extended (written) in the debit column of adjusted trial balance will be $1595 (4395 - 2800).

The same procedure is continued until all the account balances have been extended to the adjusted trial balance columns. The debit and credit columns are then totaled to prove that no arithmetical errors have been made up to this point. Now, the adjusted trial balance will be a complete source of information for the preparation of financial statements.

Income Statement and Balance Sheet Columns:

The data in the adjusted trial balance columns are extended to one of the remaining four columns. The amounts of assets, liabilities, capital and drawings are extended to the balance sheet columns and the revenues and expenses are extended to the income statement columns.

In our example, the first account listed is cash and the balance appearing in the original trial balance debit column and in the adjusted trial balance debit column is 37080. Cash is an asset, it is listed on the balance sheet of the asset column. The balance of accounts receivable is extended in similar fashion. The balance of $51720 (adjusted balance) is extended to the debit column of balance sheet. The same procedure is continued until all the balances in adjusted trial balance are extended to appropriate columns.

After all the balances have been extended, each of the four columns is totaled. The net income or the net for the period is the amount of the difference between the totals of the two income statement columns. If the credit column total is greater than the debit column total, the excess is the income.

Keeping in view the above mentioned procedure the work sheet is prepared below:

Sun Shine Work Sheet for the year ended 21.12.2005

  • Accounting Cycle
  • Journal Entries
  • Ledger Accounts
  • Trial Balance
  • Unadjusted Trial Balance
  • Adjusting Entries
  • Adjusted Trial Balance
  • Closing Entries
  • Post-Closing Trial Balance
  • Income Summary Account
  • Reversing Entries
  • Compound Entries
  • Accounting Errors
  • Accounting Worksheet
  • Accruals and Prepayments

An accounting worksheet is large table of data which may be prepared by accountants as an optional intermediate step in an accounting cycle. The main purpose of a worksheet is that it reduces the likelyhood of forgeting an adjustment and it reveals arithmatic errors. A worksheet acts as a tool for an accountant and it is not usually intented to be used by third parties. It is an informal document.

A typical worksheet consists of a column on the left showing main account titles and 10 more columns of debits and credits showing trial balance, adjustments, adjusted trial balance, incomes statement and balancesheet.

The following example shows a worksheet based on the data from various pages of this chapter. Scroll the worksheet to the right to view all columns.

by Irfanullah Jan, ACCA and last modified on Apr 21, 2012

Related Topics

  • Financial Statements
  • Balance Sheet
  • Income Statement

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Worksheet: Definition, Types, and Preparation Process

Worksheet: Definition, Types, and Preparation Process

A worksheet is a multiple-column form that is used in preparing and adjusting financial statements. 3 types of the worksheet are; (1) General worksheet, (2) Detailed worksheet, (3) Audit worksheet.

For preparing accounting worksheet you must follow 8 Simple Steps to verify accounting information accuracy before preparation of financial statements. Prepare financial statements from a worksheet is relatively easy because all necessary accounting information is properly presented and structured in the worksheet.

What is Worksheet?

Multiple column sheets wherein all necessary information used for the preparation of the financial statement is recorded in a systematic process is called a worksheet.

The worksheet is not a permanent account.

It is not a part of a journal or ledger . It is a device used for easy preparation of adjusting entries and financial statements.

The worksheet is a multi-column sheet or a computer spreadsheet where the accountant writes, in brief, information necessary for the preparation of adjusting entries and financial statements.

What is Worksheet: Types of Accounting Worksheet

In bigger organizations where the volume of accounts and adjustments are much more, the possibility of error remains at the time of adjustment of adjusting entries with ledger accounts if the worksheet is not prepared.

The preparation of financial statements correctly becomes complicated and sometimes is delayed. In the present day world, it has become the practice of preparing worksheets in big organizations before the preparation of financial statements.

Accountants make adjustments of adjusting entries with other relevant ledger accounts before the preparation of financial statements.

Before the preparation of financial statements, the accountants want to be sure of the arithmetical accuracy of accounts by making adjustments of adjusting entries with ledger accounts through the worksheet and then go for the preparation of financial statements.

The worksheet is prepared at the end of the accounting period before the preparation of financial statements.

3 Types of Worksheet are;

  • General worksheet,
  • Detailed worksheet,
  • Audit worksheet.

They are explained below,

The general worksheet

The general worksheet contains four to six pairs of columns.

Generally, five pair columns or ten columns worksheets can serve the purpose of general business. These five pair columns are;

  • Trial balance,
  • Adjustment,
  • Adjusted trial balance,
  • An income statement, and
  • Balance sheet.

The detailed worksheet

The detailed worksheet is prepared for containing more detailed information over a general worksheet.

Sometimes extra sheet containing columns are enclosed for explaining particular items. The matters for which item-wise lists are to be prepared are:

  • Accounts receivable and accounts payable lists,
  • Production expenditure lists,
  • Insurance premium lists etc.

Audit worksheet

Audit worksheet is used for preparing financial statements and lists for various uses of business concerns. The audit worksheet is prepared in the light of the auditing of various items included in the worksheet.

It is an aid to audit the work of a business concern . The worksheet is a technique of accounting through which the accounting information is integrated for adjustment and classification.

The main objective of the worksheet is to verify the accuracy of accounting information before the preparation of financial statements.

For preparing an accounting worksheet one must follow 8 Simple Steps to verify accounting information accuracy before preparation of financial statements.

Columns of the worksheet are drawn mainly as per necessity. The number of columns of worksheet depends on the demand of the particular organization.

Preparing a Accounting Worksheet following 8 Simple Steps

8 Steps of Preparing Accounting Worksheet

  • Name of business organization and preparation date.
  • Drawing column and mentioning the head of the column.
  • Unadjusted Trial Balance.
  • Adjustment column.
  • Adjusted trial balance column.
  • Income statement column.
  • Retained earnings statement.

Steps of preparing accounting worksheet are explained below;

1. Name of business organization and preparation date

At the beginning of the worksheet the name of the organization for which worksheet is prepared is to be written in the bold form and also the date of preparation of the worksheet is to be mentioned.

2. Drawing column and mentioning the head of the column

Drawing column titles are to be mentioned here.

For example, serial number in the first column, the title of accounts in the second column and thereafter pair columns.

3. Unadjusted Trial Balance

After the serial number and accounts title columns, in the unadjusted trial balance, pair column ledger accounts balances are posted straight to check the agreement of trial balance.

This trial balance is called pre-closing trial balance as it is prepared with the ledger balances before keeping accounts of adjustment items.

Debit and credit balances of ledger accounts are written in the debit and credit columns of the trial balance respectively .

4. Adjustment column

At the end of the accounting period, the items or transactions which have not been accounted for are written in the debit and credit of adjustment columns.

At the time of making adjustments, if there does not exist any item in the trial balance for debiting and crediting, these adjusting items are to be written below the trial balance under appropriate head(s) in debit and credit columns of adjustment.

To identify the adjusting items separate code numbers for each item be given in debit and credit columns. Thereafter debit and credit columns of adjustments are totaled for assuring their agreement.

5. Adjusted trial balance column

Writing necessary adjustments in the adjustment column, the balance of every account relating to adjustments is ascertained and thereafter all ledger account balances including adjusted ledger balances are recorded in the debit and credit columns of adjusted trial balance.

That is, unadjusted balances of trial balance are adjusted as per rules and these are written down in the column of adjusted trial balance.

Writing all ledger balances – adjusted and unadjusted in adjusted trial balance totals of debit and credit are ascertained to prove the arithmetical accuracy of the ledger accounts.

6. Income statement column

All periodical expenses and incomes of adjusted trial balance are written in debit and credit column of income statement respectively.

The difference between total income and total expenses of the income statement is called profit or loss. The profit/loss of income statement is transferred to the balance sheet if the retained earnings statement is not prepared.

7. Retained earnings statement

In the case of a joint-stock company, the retained earning column is kept in the worksheet before the balance sheet column.

Here previous year’s profit, loss if any and income, loss of income statement of the worksheet are written in the credit money column and distribution of items regarding distribution of profit such as, dividend paid, proposed dividend, income tax paid, creation of fund are shown in the debit money column of retained earnings statement.

The difference between the totals of debit and credit columns is transferred to the balance sheet column of the worksheet.

8. Balance sheet

All assets and liabilities of adjusted trial balance including the balance of income statement, retained earnings statement are written in the debit and credit columns of the balance sheet of worksheet i.e., assets are written in debit money column and liabilities, owners equity are written in the credit money column.

Totals of debit and credit column of the balance sheet are equal.

The number of columns of worksheets and titles of columns depends on the nature and demand of the business concern.

How to Prepare financial statements from a worksheet

Prepare financial statements from a worksheet

Prepare financial statements from a worksheet is relatively easy because all necessary accounting information is properly presented and structured in the worksheet.

The worksheet contains all the information for preparing financial statements. The income statement is prepared with data of debit and credit columns of the income statements of the worksheet.

The balance sheet is prepared from the balance sheet columns of the worksheet.

Financial statements of a business concern mean income statement, retained earnings statement/owners’ equity statement and balance sheet prepared at the end of the accounting period.

The statement which is prepared for ascertaining profit (loss) of business at the end of an accounting period is called an income statement.

The income statement is of two types:

  • General or single-step income statement: In this statement, all expenses are deducted straight from income to ascertain net profit (loss). Here the expenses are not shown in the classified forum.
  • Multiple-step income statement: In this statement, the cost of goods sold is deducted from sales revenue to ascertain gross profit. From gross profit all operating expenses such as selling expenses, administrative expenses, etc. are deducted to find out net operating income.

After that, other non-operating incomes like rent revenue, interest revenue, etc. are added to net operating income from which other non-operating expenses such as interest expense, loss on the sale of assets, etc. are deducted to ascertain net profit.

What is Transactions? Types of Accounting Transactions

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What is a Spreadsheet?

Home › Business Management › What is a Spreadsheet?

Definition: A spreadsheet, also called an electronic work sheet, is a computer program that organizes data into rows and columns in the form of a graph. Each row and column can be manipulated with formulas, commands, and formats. This tool is especially useful for accountants, financial analysts, and business people to analyze business performance numbers and results.

  • What Does Spreadsheet Mean?

The most common spreadsheet program that accountants use is Microsoft Excel. This product was initially developed in the 1990s in the Office Suite program package and has since become the industry standard.

Spreadsheets allow accountants to do much more than organize data. They can manipulate it in order to test the impact that alternative strategies and performance results would have on the company’s bottom line. They can also use the software to make projections about future performance, development, and even market trends.

Without the help of accounting packages, spreadsheets are often used to prepare  financial statements ,  budgets , and stock analysis reports. Since this tool is so versatile and easy to use, it can also increase the analysis time, review capabilities, and understandability of reports.

For example, master formulas and cells can be set up to auto calculate values. This way a budget can be made using a 10 percent increase from last year’s numbers. Once the budget is analyzed, the master cell that controls the page formulas can simply be changed to reflect a 12 percent increase in performance. Then the entire budget automatically recalculates based on the new percentages.

Basically, spreadsheet programs like Excel can do any type of data organization and manipulation. Databases and other  input devices  can collect data and feed it into a spreadsheet, so management can easy turn it into useful information and analyze the company results for the  period . Pretty cool, huh. You might be thinking that this tool is just for nerds. Well, it kind of is. : )

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Parts of a Worksheet

meaning of worksheet in accounting

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on May 02, 2023

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Table of Contents

A worksheet consists of two main parts:

A description of these parts, each of which consists of several elements, is given in the next sections.

The heading of a worksheet consists of three parts:

  • Name of the business
  • The title "Worksheet"
  • The accounting period for which the worksheet is prepared

A worksheet's body contains a large column for the names of accounts, along with 10 money columns (or 5 pairs), each pair consisting of a debit column and credit column. The 5 pairs of money columns are arranged in the following order:

Elements of a Worksheet Body

Later on, with practice, it is possible to eliminate the adjusted trial balance columns. In that case, the worksheet will contain 8 money columns instead of 10 money columns.

Parts of a Worksheet FAQs

What is the difference between a heading and a body.

The heading of a worksheet consists of three parts: (a) the business name, (b) the title “worksheet”, and (c) the accounting period for which the worksheet is prepared. A worksheet's body contains 10 money columns (or 5 pairs), each pair consisting of a debit column and credit column, arranged in this order: assets, liabilities, income statement items (with some exceptions for certain businesses), stockholders' equity, expenses, dividends. The worksheet is headed by the account names from the Accounting Equation - assets = liabilities + owners' equity.

What is the relationship between a worksheet and an adjusted Trial Balance?

The items in the heading of a worksheet are identical to those of an adjusted Trial Balance. The body of a worksheet contains information that will be shown on the company's Financial Statements, which is not necessarily the same as that shown on the company's adjusted Trial Balance.

What is a Double-entry System?

As defined in this tutorial, a Double-entry System is a method of accounting used to ensure that each debit entry appears with an equal and corresponding credit entry. The term “double-entry” refers to the fact that every entry requires two accounts for its recording, one account called the debit account, into which is posted the amount of the debit entry; and one account called the credit account, into which is posted the amount of the corresponding credit entry.

What are debits and credits?

The words “debit” and “credit” are accounting terms that indicate whether an amount is to be entered (posted) as a positive (plus) or negative (minus) value, either on the left-hand side of an account (one who “debits”) or on the right-hand side of an account (one who “credits”). When recording transactions in accounting records, debit entries are made for expenses and losses; credit entries are made for income and gains.

What is an account?

An account is a record of money (or other items of value) in which the total debits must equal the total credits at all times. The term "account" can refer to either an individual or a group of accounts, depending on the context in which the term is used.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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How to Use Excel for Accounting (and When to Level Up)

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I own a small business with five full-time employees, several dozen freelance contractors and a half-dozen big-name clients, and I do all my “accounting” in Microsoft Excel. I put that word in quote marks, though, because I know that what I do is not real accounting — it’s transaction tracking. I’ve learned all about real accounting from professionals my company has worked with over the years to produce expert accounting content for multiple clients, from a Big 4 accounting firm to a consumer finance provider with a vested interest in its customers’ personal finance education.

So, when the request came to write a how-to article about doing accounting in Excel, I called our company’s certified public accountant (CPA), who advises us on financial matters and prepares our taxes. “Do any of your clients use Excel to do real accounting?” I asked. “Absolutely not,” he said. “That would be insane.”

What Is Excel Accounting?

Excel is an excellent accounting tool for a self-employed individual or a very small business with only basic accounting requirements because it is simple to use yet infinitely malleable. And for the many small businesses using the Microsoft 365 Office suite, it’s already paid for, while purpose-built accounting software would be an additional cost. Yes, Excel can also be set up to generate full-blown financial statements using true double-entry accounting methods. But the effort necessary to build such accounting tools in Excel and the manual workload necessary to do the actual accounting operations would be costly in labor hours and would bring significant risk of accounting errors.

It’s Excel’s flexibility and familiarity that make it attractive to individuals and very small businesses. If a business is so small that the only financial document it’s likely to produce for external consumption is a tax return, it need not comply with the rules of U.S. Generally Accepted Accounting Principles (GAAP). Instead, it can set up Excel spreadsheets in ways that precisely, and simply, mirror the nature of its business operations. The business can use Excel to record all its financial transactions — essentially, customer payments coming in and expenses going out.

That’s exactly what I did for my business. My first Excel accounting effort was a file containing five worksheet tabs:

  • Receivables listed all invoices sent to clients, with columns for our invoice number, the client’s name, a description of the work, the amount invoiced, the date the invoice was sent and the date payment was received. (Note that “receivables” and “payables” are accrual-basis accounting terms that I misapplied for my cash-basis business out of my ignorance back then.)
  • Income showed all client payments, with columns for date received, client name, amount and invoice number.
  • People payables were for all payments made to contractors, with columns for their invoice number, name, amount paid, date paid and services performed. At the time, there were no employees, hence no payroll.
  • Expenses were for other (non-contractor) business expenses, with columns for date, amount, type of expense and a description of the expense.
  • Distributions were the payments the business made to me — essentially, my salary — with columns for date, amount and description (if needed).

Again, it’s important to note that these five worksheets do not constitute real accounting — for example, there is no balance sheet to account for the business’s assets, nor is there an income statement showing profit and loss. Nonetheless, our CPA was delighted with the excellent quality of those records because they enabled him to calculate everything he needed to file the business’s tax returns with the IRS and New York state.

Key Takeaways

  • Microsoft Excel can be a great accounting tool for self-employed entrepreneurs or very small businesses that need not comply with standard accounting principles.
  • It is possible to set up Excel for double-entry accounting, with a proper chart of accounts, general journal, general ledger, trial balance, income statement, balance sheet and statement of cash flows.
  • But doing so would take significant effort and bring risk of accounting errors to the business, making purpose-built accounting software a far superior alternative.
  • Using Excel for accounting requires strong bookkeeping knowledge to compensate for the lack of built-in accounting guidance and controls included in accounting software.

Excel Accounting Explained

Because Excel starts as a blank canvas, and all of the forms, formulas and transaction data for a business’s accounting must be developed and entered manually, accounting in Excel is best-suited for small and relatively simple businesses that don’t, for example, carry inventory. In accounting terms, this means cash-basis accounting with single-entry bookkeeping. Accrual-basis accounting, which the IRS requires for companies at or above $27 million (indexed to inflation) in annual revenue, as well as smaller companies that have inventory, requires double-entry bookkeeping. That makes it exponentially harder to do in Excel because double-entry bookkeeping demands that multiple manual data entries be made in different types of accounts for a single business transaction (discussed in more detail below in the “How to: Accrual-Basis Accounting in Excel” section). That volume of manual data entry is why my CPA said doing so “would be insane.” 

To help small businesses overcome the “blank canvas” challenge, Microsoft and many third parties provide free, downloadable Excel accounting templates. These include templates for the basic documents a business needs to get started doing “real” cash-basis accounting: a chart of accounts , which lists all of the business’s categories of revenue and expenses; a cash book — sometimes called a general journal or transaction sheet — that lists all financial transactions along with their categories from the chart of accounts; and an income statement that summarizes revenue and expenses for a specific period to show the business’s profit or loss.

Some businesses, like mine, separately track accounts payable and accounts receivable (respectively, money the business owes to suppliers and money owed to the business by customers) to make managing collections and payments easier. Free templates are available for accounts payable and accounts receivable worksheets, too.

Excel vs. Accounting Software

Ironically, small business entrepreneurs who lack accounting expertise often gravitate toward using Excel instead of buying accounting software because they think it’ll be simpler and easier. But Excel’s blank-canvas issue makes the opposite true. If you’re not already an expert bookkeeper or a CPA, it’s impossible to do real accounting in Excel because of myriad rules that are hard to understand for people who don’t have the formal accounting education and training. Accounting software, on the other hand, comes with accounting rules preprogrammed into it, so even inexpert users are prevented from making most basic mistakes. 

What Excel Can and Can’t Do

For me, Excel has been a great accounting tool in two ways: tracking cash transactions and performing ad-hoc analysis. Recording the business’s cash transactions in Excel enabled our CPA to quickly and easily generate the cash-basis forms needed for federal and state tax returns. But only 28 contractor payment transactions were made to eight contractors our first year; in 2022, that grew to 319 payments to 50 different contractors. Keeping up with all those transactions, manually, has become a time-consuming chore. Also in 2022 were material errors for the first time, like failing to pay an invoice until the contractor called asking what happened to her missing payment.

The ad-hoc analyses we do are things like checking the “Receivables” sheet to get a rough estimate of how much cash to expect from customers in the next month, or comparing year-to-date customer payments to the same period last year to track revenue growth. Of course, these are so simple that it’s a stretch to label them “analyses” — my estimate of incoming cash is nothing like a serious cash-flow analysis — but they are all our business has needed until now.

In 2023, it has become clear that, in order to manage our resources more efficiently so that we can continue our profitable growth, we need monthly, client-specific profit-and-loss (aka, income ) statements. By default, that means accrual-basis accounting. But we haven’t actually converted from cash basis to accrual basis ; instead, we’re doing monthly P&Ls as a sort of overlay. In addition to our cash-basis transaction tracking, we create a separate worksheet for each client listing all of the deliverables that earned revenue from that client that month, along with the amount earned and the expenses incurred to generate it — regardless of when we paid (or will pay) the expense or when we received (or will receive) the client’s payment. That, in essence, is accrual-basis accounting: the combination of the matching principle and the revenue recognition principle that are core to GAAP. What we do in Excel is a crude facsimile, and even that is painful to construct by hand.

Consequently, we’re working with a consulting CPA to take a hard look at how to convert to accrual-basis accounting and the software necessary to do so. Here’s the list she provided of the advantages accounting software can bring to the table versus Excel:

  • Automation: Accounting software automates many bookkeeping and accounting tasks, such as generating invoices, tracking expenses and reconciling bank transactions. Compared to Excel, this significantly reduces manual data entry and the risk of errors.
  • Double-entry accounting: Accounting software is usually designed for double-entry, accrual-basis accounting, which provides indispensable support for GAAP’s matching and revenue recognition principles . Those principles, in turn, enable accrual-basis accounting to produce more accurate and complete pictures of a business’s financial health compared to single-entry accounting in Excel.
  • Security: Most accounting software can be configured with robust identity and access management controls that limit users’ access to sensitive information. Excel files can be opened by anyone who has them, so the business must develop independent security controls. This becomes a major concern as an organization grows.
  • Backup: Especially in the cloud, accounting software provides a backup of records, rather than locally saved Excel spreadsheets that can become corrupted, deleted or stolen. Again, the business would have to develop independent processes for backup.
  • Scalability: Accounting software is built to handle large numbers of accounts and transactions, but because prices are often tied to the number of users accessing the system, businesses can afford to buy in while still small and let the software scale as their organizations grow.
  • Real-time reporting: Because of its inherent automation capabilities, accounting software can generate balance sheets, income statements, cash flow statements and custom reports in real time, making it easier to monitor a company’s financial performance .
  • Integrations: Accounting software often integrates with other business applications, such as payroll, inventory management and customer relationship management (CRM) systems. By sharing data among those systems, a business can automate many business processes that would otherwise require human action and multiple data entries with Excel.
  • Tax compliance: Many accounting software solutions include features for tax preparation that automate compliance with necessary tax rules.
  • Multiuser access: Multiple users can access accounting software simultaneously, enabling collaboration and more efficient workflows. Access controls and permission levels can be set to allow each individual user access to only the level needed for their role, ensuring data security and accountability.
  • Auditing: Accounting software maintains a detailed audit trail, making it easier to track changes to financial records and providing valuable information for internal or external audits .
  • Industry-specific capabilities: Some accounting software solutions offer industry-specific features, such as specialized reporting or unique workflows, which are not available in Excel.

How To: Cash-Basis Accounting in Excel

The primary focus of cash-basis accounting is the flow of cash into and out of a business. Cash-basis companies account for revenue when they receive it and for expenses when they’re paid. In theory, they need only enter each transaction once. In practice, though, any serious growing business doing its accounting in Excel will end up entering transactions in a few different worksheets so that owners and managers get a clearer view of the business’s near-term health than they could by looking only at the inflow and outflow of cash.

So for the purpose of this how-to scenario for cash-basis Excel accounting, consider a hypothetical business — Wantagh Widgets, Inc. — that establishes the following five Excel worksheets: a chart of accounts, a transaction journal, a customer invoice log, a purchases log and an income statement.

The owner of Wantagh Widgets begins by setting up the chart of accounts, which will list all of the accounts it will use to record transactions. For cash-basis single-entry accounting, a business will need at least two main categories: revenue and expenses. Subcategories within each main category would better organize transactions for later analysis. For example, revenue might have subcategories for product and service revenue or for each customer, depending on the nature of the business. Expense subcategories might include payroll, supplier payments, rent, utilities and office supplies, to name a few possibilities. A more complete list, with good alignment among the categories and the way the business operates in the real world, will later produce financial statements that are clearer and more accurately reflect the health of the business. 

While obviously oversimplified, the chart of accounts for Wantagh Widgets might look like this:

Wantagh Widgets Chart of Accounts

A business’s chart of accounts provides the crucial underlying structure for all of its other Excel accounting worksheets.

The core bookkeeping activity for Wantagh Widgets’s Excel accounting will be to record all financial transactions in the transaction journal as they occur, using the account numbers from the chart of accounts. Each journal entry should include the date, description, account number and amount. Say Wantagh Widgets received four customer payments of $5,000 each during March 2023 and paid out $9,000 in four supplier payments, $6,500 in payroll costs and $1,000 in rent. Its transaction journal worksheet might look like this:

Wantagh Widgets Transaction Journal

A transaction journal for cash-basis accounting in Excel lists every transaction in which cash flows into or out of the business in chronological order.

While cash-basis accounting focuses on when cash is received, it’s still important to monitor outstanding payments. The customer invoice log worksheet (equivalent to accounts receivable in accrual-basis accounting) tracks money owed to a business by its customers. It should be updated when the business invoices a customer and when it receives payment. Wantagh Widgets’s customer invoice log for the business activity discussed so far might look like this:

Wantagh Widgets 2023 Customer Invoice Log

The customer invoice log worksheet is a record of all invoices sent to customers. For a cash-basis company, it plays the same role as an accounts receivable worksheet would for an accrual-basis company.

As with the customer invoice log, the purchases log is the cash-basis equivalent of the accrual basis’s accounts payable worksheet, helping the business keep track of bills and debts owed by the business. Invoices are recorded when they’re received, along with their due dates. Then the worksheet is updated when payments are sent. Wantagh Widgets’s purchases log for the business activity discussed so far might look like this:

Wantagh Widgets 2023 Purchases Log

The purchases log worksheet is a record of all bills received from suppliers. For a cash-basis company, it plays the same role as an accounts payable worksheet would for an accrual-basis company.

An income statement summarizes the business’s financial performance over a specified period. In cash-basis accounting, only income and expenses that were actually received and paid during the period are included. The hypothetical March 2023 income statement below for Wantagh Widgets was created by transferring that month’s income and expense amounts from the transaction journal to the appropriate categories on the income statement worksheet. Then formulas in the spreadsheet calculate the total income, total expenses and net income (or loss), expressed in dollars and as a percentage of total revenue.

Wantagh Widgets Income Statement

In cash-basis accounting, an income statement sums all of the customer revenue payments a company received and the expenses it paid in a specific period (like a month, a quarter or a year), revealing the business’s cash profit or loss.

These five hypothetical statements are dramatically simpler than a real business would require and are meant only to illustrate the relevant cash-basis accounting concepts. A real business would likely flesh out its chart of accounts with several more sources of revenue and dozens, or even hundreds, of expense categories. But that’s just more of the same in terms of the five examples. The underlying formulas involved are simply addition, subtraction and division, and data can be relayed from worksheet to worksheet. For example, the income statement can be programmed with formulas that grab all of the needed information from the transaction journal, as guided by the unique account numbers in the chart of accounts.

Accounting becomes exponentially more complex when using the accrual-basis method required by GAAP and by the Securities and Exchange Commission for all U.S. public companies.

How To: Accrual-Basis Accounting in Excel

The primary focus of accrual-basis accounting is to paint the most accurate picture possible of a business’s financial health, for both the period being covered by the accounting data and, by extrapolation, for future periods. To do so, accrual-basis accounting attempts to reflect the true value of all of the business’s activities for the period, regardless of the timing of when revenue is received or expenses are paid. This is where the two previously mentioned core principles, revenue recognition and matching, come into play. But even though these principles are simple — recognize revenue when it is earned and expenses when they are incurred (so that expenses match, in the same period, to the revenue they generated) — applying them is what makes accrual-basis accounting more work than any sane individual would attempt to perform using Excel.

For example, the following two illustrations are accrual-basis versions of Wantagh Widgets’s chart of accounts and transaction journal. Note that the hypothetical data presented in these two charts reflects business activity that is identical to that of their cash-basis counterparts shown in the previous section. They’re expanded only enough to show the minimal additions necessary to perform accrual-basis accounting on the same activity.

Wantagh Widgets Accrual - Basis Chart of Accounts

For accrual-basis accounting, the chart of accounts must be expanded to include categories for assets, liabilities and equity.

The chart of accounts now has expanded to include categories for assets, liabilities and equity to address the fundamental accounting equation: assets = liabilities + equity. Before customers pay their bills, for example, the monies due from them are considered an asset in the accounts receivable account. And when an expense is incurred but not yet paid, it is considered a liability in the accounts payable and accrued expenses accounts. By accounting for all of a business’s activities in this way, even if no money has changed hands, accountants can construct financial statements that reflect the true health of the business — i.e., revenue growth, profitability and the sources of both.

Now, review the accrual-basis accounting journal pictured below.

Wantagh Widgets Accrual-Basis Accounting Journal

An accrual-basis accounting journal reflects all business activity that has a financial impact during a period, regardless of whether money changed hands.

The 11 entries seen in the cash-basis journal doubled to 22, because each requires a debit and a credit . (Debits increase the value of asset and expense accounts and decrease the value of liability, revenue and equity accounts, while credits have the opposite effect. Debits and credits must balance each other out.) Further, the entries are categorized under a larger set of accounts (the account numbers shown correspond to categories assigned in the chart of accounts). But the accrual-basis journal has additional entries because it must account for four customer invoices that Wantagh Widgets issued in March but have yet to be paid (journal entries 00002 through 00005) and two supplier bills that were received but also remain unpaid (entries 00015 and 00016).

In addition, accrual-basis accounting would require the following Excel worksheets:

  • General ledger , which has separate worksheets for each account in the chart of accounts and repeats each entry in the journal above as a debit or a credit in its corresponding general-ledger account.
  • Trial balance , which summarizes the debits and credits for all of the accounts in the general ledger and is used to test whether all of the debits equals all of the credits, identify any discrepancies and make appropriate adjustments before financial statements are issued.
  • Accounts receivable , which reflects monies owed to the company by customers.
  • Accounts payable , which reflects monies the company owes its suppliers.
  • Balance sheet , which shows the company’s assets, liabilities and equity at a specific point in time.
  • Income statement , which summarizes revenues and expenses for a specific period, resulting in the bottom line — the company’s net income or loss.
  • Statement of cash flows , which provides an overview of the business’s cash inflows and outflows during a specific period. It exists to convert the accrual-basis income statement into cash terms so that business managers can properly manage the company’s cash flow.

The complexity of accrual-basis accounting and the sheer volume of manual data entry required for any but the smallest of businesses are why accounting software is a far better solution than Excel for accrual-basis companies.

Most Useful Excel Accounting Formulas and Formats

When putting together a company’s cash transaction journal, sales and purchases journals and financial statements, the most useful Excel formulas are basic addition (sum) and subtraction. Over time, it’s also useful to calculate averages and percentages, such as the average value of customer purchases or the business’s net income as a percentage of revenue.

To enter a formula in Excel, the first character you type must be an equal sign (“=”). To sum a vertical set of 10 cells starting from cell A2 and ending on cell A11, you would type “=SUM(A2:A11).” Similarly, to sum a horizontal set of 10 cells starting from A2 you would type “=SUM(A2:K2).” To calculate an average, simply substitute the word “AVERAGE” for “SUM” and then define the range of cells to include in the computation.

Subtraction and percentage formulas usually involve only two cells (because you’ve previously summed or averaged the values you want to use) and, therefore, a different calculation approach. For subtraction, you choose the two cells and use the minus operator (“-”). The image below on the left reiterates the Wantagh Widgets Income Statement but with the subtraction formula, “=F9-F17,” exposed. For the percentage, you choose cells representing the part whose percentage you wish to know and the whole of which it is part and use the division operator (“/”). The second image below shows the percentage formula exposed; net income is the part whose percentage is being calculated and total revenue is the whole of which it is a part.

info excel accounting

It’s common practice to format dollar amounts to two decimals places, using Excel’s currency formatting with right justification. Positive amounts or cash inflows are typically in black, while negative amounts or disbursements are typically in red and have parenthesis. Subtotals are single-underlined while grand totals (like net income) are double-underlined. (The double underlines in the accompanying images are obscured when the formulas are visible.) Account numbers use a general format, without commas or other notations. Dates are typically mm/dd/yyyy.

Other helpful Excel features are the sort function and pivot tables. Sorting by account number can help with analysis and aggregating data into line items for financial statements. For example, a simple sort can group invoices that have been paid by customers from those that are still outstanding. For more advanced Excel users, pivot tables can be created to quickly summarize data in multiple dimensions, such as extracting the unpaid invoices from the sales journal, summarized by customer and listed in chronological order by date billed. In such cases, it’s helpful to copy and paste data into separate worksheets before performing further analysis so as to preserve the original data.

How to Know When You Need Accounting Software

Several excellent “rules of thumb” can make it obvious when a business using Excel for accounting should move up to accounting software. For example, does the business need to share financial statements with outside stakeholders, like lenders, investors or potential buyers? Those statements would need to be GAAP-compliant, which demands accrual-basis accounting. In the U.S., IRS rules require C corporations, any companies that carry inventory or any business with $27 million or more in annual revenue to use accrual-basis accounting. As this article has established, using Excel for accrual-basis accounting would be nonsensical. 

Other considerations include the complexity of the business, growth in the number of business transactions requiring manual data entry in Excel and the number of employees who need access to financial information. As any or all of these business attributes rise, the case for switching to accounting software becomes stronger. Similarly, if the business is concerned about the security of financial data or has questions about its accuracy (due to the inevitable errors that arise from higher volumes of manual data entry), it’s time to consider accounting software.

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Graduate From Excel With NetSuite Accounting Software

For any business still doing accounting in Excel, adopting a cloud-based accounting solution like NetSuite will improve the efficiency, accuracy and decision-making of its financial management. NetSuite accounting software can automatically generate invoices based on customer activity, track expenses and reconcile banking transactions with the company’s books. It automates and enforces compliance with GAAP — or International Financial Reporting Standards if the business is subject to IFRS — and offers role-based access management for greater security. It automates the generation of financial reports, which can actually toggle between cash and accrual basis views and be updated in real time to extend business managers’ visibility into their financials right up to the minute. All of these attributes help to improve the speed of a business’s monthly close. Best yet for a small growing business, NetSuite cloud accounting is scalable — it’s affordable for small businesses with few users but can grow along with the business to support very large, publicly traded enterprises. And finally, it can grow “horizontally,” too, meaning it can support and automate a range of business processes, such as human resources, customer relationship management, inventory management and procurement, as the business expands into those areas.

Accounting in Excel has served my cash-basis business well for seven years but is now hitting the wall. As the business has grown in terms of the number of customers and transactions, the different products and services offered and the number of employees and contractors, the volume of manual data entry and analysis has become burdensome and errors have begun to pile up. At the same time, we’ve realized we have a need to better understand the profitability of our business activities each month and can foresee the day when we’ll need to switch to accrual-basis accounting. For all of these reasons, our next step will be to upgrade from Excel to accounting software. 

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Excel Accounting FAQs

Can Excel be used for accounting?

Yes, Excel can be suited to the cash-basis accounting requirements of many self-employed individuals and very small businesses. But once a business grows beyond that, has a larger number of transactions or carries inventory, it’s likely to require accrual-basis accounting. Excel is not a good fit for accrual-basis accounting.

What are the accounting formulas in Excel?

Although accounting has many rules and guidelines to follow, the actual math required usually isn’t fancy. Basic addition, subtraction, averages and percentage calculations are the main formulas you’ll program into Excel worksheets to perform most accounting tasks.

How should businesses treat retained earnings?

A business’s retained earnings are its accumulated undistributed net income and are considered owner’s equity. Companies usually use retained earnings to reinvest in the business, as emergency funds or to pay off debts. For reporting purposes, they appear in the equity section of the balance sheet.

How do you use accounting in Excel?

Businesses with simple, basic accounting requirements can use Excel by establishing worksheets for a chart of accounts plus any additional records the organization needs to track, which will depend on the nature of the business. For example, most businesses will require a transaction journal to track cash payments made to the company and expenses paid out, a customer invoice log, a purchases log and an income statement, all of which can be established as separate worksheets within an Excel workbook. If using Excel, however, all of the bookkeeping data necessary to track business transactions must be entered manually into those worksheets.

How do you create an accounting account in Excel?

In accounting, accounts are discrete records used to document financial transactions that relate to a particular aspect of business activity, such as customer payments and supplier payments, or, in accrual-basis accounting, accounts receivable, accounts payable, assets, liabilities and equity. Creating any such account in Excel requires opening a new workbook or worksheet within a workbook and formatting it with the right headers and formulas for that account type. The account must also be listed in a chart of accounts, with an appropriate account number for tracking the account’s transactions across the multiple worksheets in which they may appear.

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Excel Accounting and Bookkeeping (Template Included)

Bryce Warnes

Reviewed by

July 12, 2023

This article is Tax Professional approved

Sometimes life forces you to use spreadsheets. If you’re planning to do your small business accounting with Excel, this is one of those times. But there are ways to make the process easier. We’ll show you how, using Bench’s Income Statement Excel Template to get started.

I am the text that will be copied.

First: What Excel can and can’t do

Microsoft Excel (and its simpler, online cousin Google Sheets) is adaptable. The better you know how to use it, the more you can get done. That being said, even if you’re good enough at Excel to compete internationally , there’s only so much you can do with it in a DIY bookkeeping context.

Single-entry bookkeeping in Excel

Before we get started on DIY bookkeeping, download a copy of Bench’s Income Statement Template . Later, you may prefer to use a different template, or even create your own. But when you’re getting started, the Income Statement Template is tidy and approachable. And it has everything you need to get a grasp of single-entry bookkeeping in Excel.

Single-entry bookkeeping is a good choice if you run a small, simple business with a low volume of transactions. Every time money enters or leaves your business, it’s recorded once, as a positive (income) or negative (expense) value.

A quick heads up about double-entry bookkeeping. The double-entry method of bookkeeping is standard for larger, more complex businesses. It’s more effective than single-entry for tracking cash flow and protecting against errors and fraud. However, it’s also more work to maintain—and difficult to set up in Excel. If you’re at the point where you believe your business needs double-entry bookkeeping, it’s time to use accounting software. Or, think about hiring a bookkeeper (like Bench ).

What you need to use the Income Statement Template for DIY bookkeeping

Before you get started with Bench’s Income Statement template, make sure you understand the differences between single-entry and double-entry bookkeeping. You’ll also need access to spreadsheet software such as Excel or Google Sheets.

Understanding the Income Statement Template

There are three sheets in Bench’s Income Statement Template:

1. The Chart of Accounts

This lists all the accounts that make up your books. Think of each account a category. Every transaction you record gets sorted into one of these categories.

2. Transactions

This contains details of every business transaction you perform—the date, a description, the amount, and the account.

3. The Income Statement

This pulls info from your Transactions and performs some basic calculations. Then it summarizes how much income your business has earned and spent within a defined date range.

Are you currently doing your own books for your business?

Customizing the Income Statement Template for your business

The info in the copy of the Income Statement Template you downloaded is only there as a placeholder. Here’s how you adapt it to your business.

1. Add or remove accounts from the Chart of Accounts

The Chart of Accounts includes an account for “Gas & Auto.” But if you don’t drive for work, you don’t need this row—so you can delete it. The same follows for any other account that doesn’t apply to your business.

Likewise, if there are any transaction categories you need for your business that are missing from the Chart of Accounts, you should add them.

A note about account types:

  • Income designates any account used to track money coming into your business.
  • Expense designates any account used to track money leaving your business.
  • Cost of Sale (COS) and Cost of Goods Sold (COGS) are unique. These accounts track the money you have to spend to create the product you sell your customers or clients. They’re often used interchangeably—COS by retailers, and COGS by manufacturers. Learn more about calculating these expenses.

bookkeeping in Excel 1

2. Clear the Transactions sheet

Before you can start tracking your own transactions, you need to clear the placeholder data.

Select everything in the Date, Description/Transaction, and Category columns, and delete it.

bookkeeping in Excel 2

3. Add or remove accounts from the Income Statement

By default, the Income Statement includes data for every account listed in the Chart of Accounts. If you’ve added or removed accounts from the Chart of Accounts, make the same changes to the Income Statement. For instance, if you don’t track “Gas & Auto” as an expense, delete the row.

bookkeeping in Excel 3

4. Make copies of the Income Statement for each month

In order to generate monthly Income Statements, you’ll need separate sheets for each month. Make twelve copies of the original income statement, one for each month in the year.

Then, on each Income Statement sheet, change the Date Range (Beginning Rate and End Date) to cover the relevant month. Name the sheet after the month it covers.

bookkeeping in Excel 4

5. Optional—Add a sheet for tracking invoices

When you enter income from paid invoices into your Transactions sheet, include the invoice number in the description. That way, you can cross-reference it, and avoid errors—like forgetting to enter invoice payments, or entering the same invoice twice. This is a lot easier if you’ve got a separate sheet to track your invoices.

First, download a free invoice template for Excel , or get one for Google Sheets . Then, add a new sheet to your Income Statement Template. Copy and paste the data from the invoice template you downloaded into the new sheet.

Keep the tab for your invoice tracker to the right of the Transactions sheet, but to the left of your monthly Income Statements. It’ll be easier to check for reference.

6. Optional—Add a sheet for projecting cash flow

Excel spreadsheets aren’t up to the task of creating a proper Cash Flow Statement that you can present to investors. However, for your own personal planning, you can still plan your cash flow month by month in a simple spreadsheet.

To get started, check out our Google Sheets Cash Flow Projection Template . Copy and paste it into a blank sheet next to your Transactions.

Keeping your books up to date in Excel

Once you’ve customized the Income Statement Template for your business, you’ll mostly be using the Transactions sheet.

Input and categorize transactions

Every time a transaction takes place—whether you’re moving money, cash, or credit—you need to enter it into the Transaction sheet, in its own row. Then you need to categorize it.

When you use Bench , your transactions are automatically imported and categorized for you. But for DIY bookkeeping in Excel, you’ll be doing it yourself.

  • Get a record of the transaction. That could be a credit or bank card statement, info in your Paypal account, or receipt from a cash payment.
  • Enter the date the transaction was recorded under the Date column, using DD/YY/MM format.
  • Categorize the transaction. Enter its relevant account under the Category column. Be sure to type it exactly as it appears on the Chart of Accounts. The Income Statement will look at the data you enter in order to figure out how the transaction will be categorized.
  • Add any notes for yourself in the Description/Transaction column.

Save income sheets

By the end of every month, the Income Sheet should have all the data it needs to summarize your bookkeeping for that period. Make sure to keep the Income Sheets separated, organized by month.

You may want to make a copy of each one at the end of the month, and either save it or upload it to the cloud. Come tax season, your accountant will need your income sheets for the year.

Advanced accounting in Excel

If you want to get beyond bookkeeping and start understanding your finances in deeper ways within Excel, we recommend starting with pivot tables.

Pivot tables allow you to visualize and summarize your accounting info.

In our Income Statement template, we select Data > Summarize with Pivot Table

Accessing Pivot Tables in Excel

After we select all the categories we want to see summarized, here’s what we get.

Pivot table example in accounting

This pivot table gives us a simple summary of how much we spent from each vendor and how often we bought from them.

There’s much more you can do with pivot tables. If you want to learn more, check out the Microsoft Office training page for pivot tables .

And if you just want some good old fashioned Excel tips to level up, check out this in-depth blog article from Hubspot.

Outgrowing DIY bookkeeping in Excel

If your business keeps growing, you’ll eventually need to move on from Excel.

Signs you’re ready for a bookkeeper:

  • Data entry - Manually entering and categorizing transactions for your books is starting to take up too much of your time. (This can happen when you start processing more transactions per month)
  • You decide to upgrade to double-entry bookkeeping
  • You decide to switch to accrual accounting
  • You need complex financial statements such as a Balance Sheet or Cash Flow Statement
  • You start working with an accountant, and they need access to professionally kept books
  • You’ve just experienced a hectic tax season, and realize you need to be better organized for next year
  • You’ve experienced a phishing or malware attack on your business computer, and need a more secure way to maintain your business records
  • You have bookkeeping questions that can’t be answered by searching online

Sound like you? Learn how to dump spreadsheets and outsource your bookkeeping .

Join over 140,000 fellow entrepreneurs who receive expert advice for their small business finances

Get a regular dose of educational guides and resources curated from the experts at Bench to help you confidently make the right decisions to grow your business. No spam. Unsubscribe at any time.

meaning of worksheet in accounting

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What is a 10-Column Worksheet?

A 10-column worksheet presents an overview of the account books of a company at the end of an accounting period. It can be prepared for any accounting period like any other financial statement.

A 10-column worksheet serves many purposes for a business. It can also be used to prepare financial statements and extract valuable financial information for business managers.

Let us discuss what is a 10-column worksheet, how it is prepared, and what are its key purposes for a business.

A 10-column worksheet is a columnar file format that displays the summary of key accounting reports together.

It is prepared at the end of an accounting period by accountants and bookkeepers. It is only used for the convenience of the accountants and to summarize key accounts.

It includes five major financial accounts showing debit and credit for each, hence named the 10-column worksheet.

It serves as a link between accounting data and financial statements. Accountants can perform the reconciliation of accounts on this worksheet and remove any errors.

In short, a 10-column worksheet shows an informal summary of accounts of a company for a particular accounting period. It is not mandatory or part of the formal financial statements for any company.

Also, companies that have automated accounting systems often do not require this worksheet. However, it is still in use for companies using worksheets and working offline with their account books.

Structure of a 10 Column Worksheet

A 10-column worksheet comprises five major accounts with debit and credit entries. Therefore, it would have 10 columns for each worksheet, hence the name 10-column worksheet.

The five components of the 10-column sheet include:

Trial Balance

  • Adjustments for the end of the Accounting Period

Adjusted Trial Balance

Income statement, balance sheet.

A formal column of serial number or account name is added before these major account sections. Each account has a debit and a credit column, therefore, 10 columns in total.

Trial or unadjusted trial balance shows the ending balances of ledger accounts. The trial balance summarizes all ledger accounts at the end of an accounting period.

A business records each account on its general ledger. Each transaction is then recorded on the general ledger. The trial balance then shows the ending balance of debit and credit entries of each ledger account.

Adjustments to Trial Balance

A trial balance may contain discrepancies and errors. Often, general ledger accounts record transactions on or after the ending date of the accounting period.

Either way, a trial balance may need adjusting entries for one or several accounts. For accounting consistency, the 10-column worksheet records these adjusting entries.

As the name suggests, it is the adjusted trial balance of the ledger accounts. Once the adjusting entries are recorded, the updated trial balances are recorded separately.

All ledger accounts may not require adjusting entries. However, any adjustments are visibly shown through the adjusted trial balance in this worksheet.

This section shows the income statement accounts. Mainly the expense and revenue account summaries.

Like the traditional income statement, the debit and credit sides of income statement accounts in the 10-column sheet would not balance. The difference would occur due to a profit or loss of the business.

If the two sides are balanced, then the business would be in the break-even position.

This section shows the balance sheet account balances at the end of the accounting period. It will carry the assets, liabilities, and equity balances for the company.

Usually, a business would record the net profit or loss in the balance sheet section as well. Otherwise, the debit and credit sides of the balance sheet accounts would not balance.

How to Prepare the 10 Column Worksheet?

Let us first look at the format of the 10-column worksheet. It consists of 10 columns for each account for debit and credit entries plus one column for the account title or serial number.

10 Column Worksheet

Now let us consider some key steps in creating the 10-column worksheet.

Before creating the worksheet, you’ll need to prepare the ledger accounts. Prepare all ledger account balances by the end of the accounting period or month-end.

The second step is to create the 10-column worksheet in your MS excel or paper book. Create one column for account titles that will enlist all ledger accounts.

Then, create five major worksheet account columns. Divide all account columns into debit and credit columns. So, there will be 10 columns for the five major sections.

Take the ending debit and credit balances of all ledger accounts and register them against each account column under the trial balance heading.

This step will prepare your unadjusted trial balances for the worksheet.

Next, you’ll reconcile the ledger accounts as you do normally before the month-end preparations.

All adjusting entries should be recorded separately against the relevant account heading and under the “adjusting entries” section.

The next simple step is to list the adjusted balances of the ledger accounts under the adjusted trial balance section.

This will prepare the adjusted trial balance for the current accounting period. It is the common reconciliation step that accountants would perform normally as well.

The next step is to prepare the income statement. It means you’ll list down the income and expense accounts under this section.

The debit and credit sides will only be equal if the company is at the break-even point and makes no profit or loss.

If the credit side is greater than the debit side, it means the company has made profit. If the debit or the expense side is greater, then the company has incurred losses.

You’ll list the difference under the relevant section showing a profit or loss.

Finally, you’ll prepare the balance sheet of the company. This step will list down all assets and liabilities of the company with the current balances.

Some companies carry over the profit or loss accounts to the balance sheet. It is the retained earnings section that accountants normally prepare in any balance sheet.

Purpose of 10 Column Worksheet in Accounting

A 10-column worksheet works for businesses following the double-entry bookkeeping system.

The primary purpose of this worksheet is to summarize all ledger account balances in one place. If a business does not use an automated accounting system, this worksheet can be very useful.

It eliminates the need of preparing trial balance, adjusting entries, and adjusted trial balance sheets separately. Accountants can prepare and present these working sheets at the same time.

Then, it serves an important purpose of reconciliation of the ledger accounts.

When the accountant prepares an adjusted trial balance, the errors and omissions are reconciled.

Once a 10-column worksheet is prepared and reconciled, it helps an accountant to present the income statement and the balance sheet.

Although it presents these statements in a different format, the purpose is served. Thus, a business can summarize its financial accounts at the same time and present them in a single 10-column worksheet.

A 10-column worksheet is not mandatory for all businesses. However, when prepared, it can serve as a source document for the company.

A source document presenting ledger accounts can be useful in the auditing process as well. Also, it can help the management extract key financial information for planning and monitoring purposes.

Is a 10-Columns Worksheet Mandatory for all Businesses?

A 10-column worksheet is not mandatory for all businesses. It is an optional source document that businesses can prepare for their utility.

Is a 10-column Worksheet Part of the Financial Statements?

It is not a formal part of the financial statements. However, businesses can prepare financial statements by using the data presented in a 10-column worksheet.

How Does a 10-Column Worksheet Classify Accounts?

A 10-column worksheet classifies accounts according to the ledger book. Unlike the income and balance sheet, it does not classify accounts by asset, liabilities, or equity sections.

Why Does Not the Balance Sheet Accounts Balance?

Account balances for the income statement and the balance sheet would show a difference in the 10-column worksheet.

The difference arises due to a profit or loss of the company. It is shown separately after totaling the account balances. When this balance is carried forward to the balance sheet, the account balances would show the same numbers.

Related Posts:

  • What is the Difference Between an Unadjusted Trial…
  • What is a Daybook? Uses, Types, Advantages and Disadvantages
  • What is Vertical Analysis of Financial Statements?
  • What is Nominal Ledger?

meaning of worksheet in accounting

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  1. (PART A) introduction How to prepare #worksheet #incomestatement #balancesheet #accounting

  2. Accounting

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  4. ACCOUNTING WORKSHEET PROBLEM AND SOLUTION (PART 2 of 2) #BasicAccounting #CoachJuvs

  5. Preparing a Worksheet

  6. WORKSHEET FIRST PART

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  1. Accounting Worksheet (Definition)

    Accounting Worksheet is a spreadsheet tool that records all accounting information and is used to prepare the company's financial statements at the end of the accounting cycle, thereby ensuring its financial accuracy. These accounting spreadsheets are designed mainly for internal purposes only where the external users of the company, like ...

  2. Accounting Worksheet

    Format. The accounting worksheet is essentially a spreadsheet that tracks each step of the accounting cycle. The spreadsheet typically has five sets of columns that start with the unadjusted trial balance accounts and end with the financial statements. In other words, an accounting worksheet is basically a spreadsheet that shows all of the major steps in the accounting cycle side by side.

  3. Accounting worksheet definition

    An accounting worksheet is a document used within the accounting department to analyze and model account balances. A worksheet is useful for ensuring that accounting entries are derived correctly. It can also be helpful for tracking the changes to an account from one period to the next. An accounting worksheet is commonly employed as an ...

  4. What are Accounting Worksheets?

    Definition: Worksheets are prepared at the end of an accounting period and usually include a list of accounts, account balances, adjustments to each account, and each account's adjusted balance all sorted in financial statement order. As you can imagine, after a worksheet is completely filled out, preparing financial statements manually is quite simple.

  5. Understanding a Worksheet & Its Importance

    A worksheet is not part of the permanent accounting record. It is a columnar statement containing information at the end of a trading period which helps accountants to minimize errors by automatically bringing to light many types of errors that might otherwise end up in the General Journal and, in turn, be posted to ledger accounts.

  6. What is an Accounting Worksheet? Definition, Example, And Advantages

    Definition. An accounting worksheet is a tool that helps bookkeepers and accountants complete the accounting cycle and prepare year-end financial reports like unadjusted trial balances, adjusting journal entries, and year-end financial statements. Therefore, an accounting worksheet is a simple representation of a spreadsheet that helps track ...

  7. Accounting Worksheet

    Accounting Worksheet is basically a spreadsheet tool that assists bookkeepers and accountants in completing the accounting cycle. Or, we can say that it helps accountants to get ready the year-end reports. These reports include trial balances (adjusted and unadjusted), adjusting journal entries, and financial statements.

  8. Work Sheet

    Definition and Explanation: A work sheet is a large columnar sheet of paper, especially designed to arrange in a convenient systematic form all the accounting data required at the end of the period. The work sheet is not a part of the permanent accounting record but it is a working paper of accountants, prepared by pencil.

  9. Chapter 5 • Adjustments and the Worksheet

    Step 3 Post the data about transactions. Step Step 4 4 Prepare Prepare a a worksheet worksheet. Step 5 Prepare financial statements. • Teaching TIP --Using the T accounts on the board, illustrate the book value of the equipment owned by the business after the depreciation expense adjustment has been entered.

  10. Accounting Worksheet

    Accounting Worksheet. An accounting worksheet is large table of data which may be prepared by accountants as an optional intermediate step in an accounting cycle. The main purpose of a worksheet is that it reduces the likelyhood of forgeting an adjustment and it reveals arithmatic errors. A worksheet acts as a tool for an accountant and it is ...

  11. Worksheet: Definition, Types, and Preparation Process

    Worksheet is a multiple column form that is used in preparing and adjusting financial statement. There are 3 types of the worksheet; (1) General worksheet, (2) Detailed worksheet, (3) Audit worksheet. For preparing accounting worksheet you must follow 8 Simple Steps to verify accounting information accuracy before preparation of financial statements. Prepare financial statements from a ...

  12. 4 Types of Accounting Worksheets for Financial Preparation

    1. Write your company's name. The first step toward completing an accounting worksheet is writing the name of the organization about which you're gathering information. This often appears in bold font at the top of the spreadsheet. Also, consider including the date you're completing the worksheet. 2. Create column titles.

  13. What is a Spreadsheet?

    Definition: A spreadsheet, also called an electronic work sheet, is a computer program that organizes data into rows and columns in the form of a graph. Each row and column can be manipulated with formulas, commands, and formats. This tool is especially useful for accountants, financial analysts, and business people to analyze business performance numbers and results.

  14. Parts of a Worksheet

    The heading of a worksheet consists of three parts: (a) the business name, (b) the title "worksheet", and (c) the accounting period for which the worksheet is prepared. A worksheet's body contains 10 money columns (or 5 pairs), each pair consisting of a debit column and credit column, arranged in this order: assets, liabilities, income ...

  15. Master Accounting Basics: Free Spreadsheets

    Here is Reliable's balance sheet as of October 31, 20X9: Download this template—and two more basics of accounting spreadsheets—here. Not all assets are created equal. Each asset account is defined as current or non-current. Current assets include cash and assets that will be converted into cash within 12 months.

  16. The 8 Important Steps in the Accounting Cycle

    The eight steps of the accounting cycle are as follows: identifying transactions, recording transactions in a journal, posting, the unadjusted trial balance, the worksheet, adjusting journal ...

  17. How to Use Excel for Accounting (and When to Level Up)

    The core bookkeeping activity for Wantagh Widgets's Excel accounting will be to record all financial transactions in the transaction journal as they occur, using the account numbers from the chart of accounts. Each journal entry should include the date, description, account number and amount.

  18. Excel Accounting and Bookkeeping (Template Included)

    Copy and paste the data from the invoice template you downloaded into the new sheet. Keep the tab for your invoice tracker to the right of the Transactions sheet, but to the left of your monthly Income Statements. It'll be easier to check for reference. 6. Optional—Add a sheet for projecting cash flow.

  19. What is a 10-Column Worksheet?

    A 10-column worksheet is a columnar file format that displays the summary of key accounting reports together. It is prepared at the end of an accounting period by accountants and bookkeepers. It is only used for the convenience of the accountants and to summarize key accounts. It includes five major financial accounts showing debit and credit ...

  20. Accounting Explained With Brief History and Modern Job ...

    Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business, and it also refers to the process of summarizing, analyzing and reporting these ...

  21. Worksheet

    A worksheet, in the word's original meaning, is a sheet of paper on which one performs work. They come in many forms, most commonly associated with children's school work assignments, tax forms, and accounting or other business environments. Software is increasingly taking over the paper-based worksheet. It can be a printed page that a child ...

  22. Balance Sheet: Explanation, Components, and Examples

    Balance Sheet: A balance sheet is a financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments ...

  23. PDF Accounting Cheat Sheet

    to retained earnings at the end of the accounting period REVENUE AND EXPENSE Revenue recognition Recognize (book into accounting record) revenue when it is earned and realizable Expense recognition Expenses are recognized when incurred, as goods are used and services received Net income or loss Revenue minus expenses results in net