How to Use Excel for Accounting [+Free Templates] (2024)

Microsoft Excel is an invaluable tool for accountants to perform complex mathematical calculations that traditional bookkeeping software doesn’t provide. We don’t recommend that you use Excel as your primary bookkeeping system. However, it’s a fantastic tool to supplement your bookkeeping platform by performing needed reconciliations and calculations.

We discuss how you can use Excel to enhance your accounting. We also provide several templates, including bank reconciliation, invoice tracker, bills tracker, loan amortization, and general ledger, to assist you.

Using Excel to Reconcile Bank Accounts

A bank reconciliation is essential to keep your bank and book balances on the same page. Due to timing differences, bank and book balances don’t always agree. Most accounting software has bank reconciliation features, but they always come with the paid or premium version.

We prepared our Excel bank reconciliation template in case you want to use free accounting software that lacks bank reconciliation features. With our file, you can reconcile the check register balance and bank statement balances by adjusting them for deposits in transit and outstanding checks.

Using Excel to Track Unpaid Invoices (A/R)

An A/R aging report is used by many businesses that invoice their clients to keep track of what payments are due to them. It shows when payments are owed, the amount due, and from which customer. It serves as an effective way to forecast cash flow and know exactly how much you’re owed at any given time.

You can use Excel to generate your invoices, especially if you want unlimited customization options, such as adding your logo and changing fonts. However, you may want to consider using a free invoice generator, which automates the invoicing process. Check out our recommendations for the top free invoice generators.

Using Excel to Track Unpaid Bills (A/P)

The process of tracking how much money is owed to vendors, when the bills are due, and when they have been paid is known as A/P. If you aren’t diligent with paying your vendors on time, you can end up with bad credit and a lack of supplies, among other things. Creating an A/P aging file in Excel will help you monitor your payable accounts so that you know which bills you must pay first and how behind you are on any past-due accounts.

Using Excel to Track Cost of Goods Sold

The main challenge of inventory accounting is determining the cost of inventory on hand at the end of the year versus the cost of inventory sold during the year, also known as cost of goods sold (COGS). Tracking COGS is crucial in determining net income. With our COGS tracker, you can compute the most recent COGS balance of a particular inventory item and determine individual inventory gross profits or cost per unit.

The computation of inventory ending balance and COGS depends on whether you’re using the average cost (AVCO) method or the first-in, first-out (FIFO) method. For our free template, we use the AVCO method because implementing the FIFO method in Excel requires complex functions.

The template above uses the AVCO method of inventory costing. You should only fill out the yellow cells, and Excel will compute the rest. Don’t touch the white cells because these contain formulas that compute certain values. Remember that this template assumes that you’re only tracking one inventory product. If you have several inventory products, copy the sheet and rename it, such as sheet 1 = “Light Bulbs.”

Using Excel to Create Amortization Schedules

A loan amortization schedule shows you the schedule of payments, the amount of interest you pay, and the amount that gets deducted from the principal balance. You can use the amortization table to record monthly interest expenses and update loans payable in the books. Most accounting software doesn’t have an amortization schedule feature. Our Excel template can help you prepare journal entries to update account balances.

Using Excel as a General Journal & General Ledger

The general journal (GJ) and general ledger (GL) are the two most important records in accounting. All transactions in a business are recorded in the GJ and summarized in the GL. Without these two books, it’s almost impossible to have an organized accounting system.

Importing Data From QuickBooks Online Into Excel

QuickBooks Online can export any of its reports to Excel, which is useful as you can pull sales data, banking data, and invoices from many sources into one central workbook to support your accounting activities. Exporting the report is simple and can be done with the following steps:

Step 1: Select Reports in the left sidebar.

Step 2: Search for and select the report that you want to export.

Step 3: Scroll to the top of the report to adjust the time period, accounting method, and other preferences, if desired.

Step 4: Click the Export icon in the top right corner of the report, then select Export to Excel. You also have the option to save the report as a PDF.

Step 5: Save the report in a location that you’ll be able to find easily, such as your desktop.

Here’s a sample Profit and Loss report exported to Excel:

When to Use Bookkeeping Software

While there are many accounting uses for Excel, we don’t recommend using it as your primary bookkeeping software to track your cash flow and classify your income and expenses. While it can be done, it’s much simpler to use one of the many free accounting software that are available in both cloud and desktop formats.

Basic bookkeeping software makes it easy to maintain detailed and accurate books. In addition to automating bookkeeping tasks, such as sending invoices (A/R) and paying bills (A/P), many programs use double-entry accounting, enable you to generate financial reports, provide some form of technical support, integrate with business apps, and can scale with your business.

Unlike bookkeeping software, Excel won’t be able to:

• Generate reports based on the data from your books automatically
• Connect to your business bank accounts or credit cards and import and sort transactions automatically
• Create workflows to simplify accounting tasks because you still have to input formulas and functions

Frequently Asked Questions (FAQs)

Yes, but it’s not recommended. If you’re a very small business, using Excel is cost-effective. However, for small businesses with complex processes, Excel can be counterproductive and difficult to use. We recommend getting dedicated accounting software instead.

Accountants and bookkeeping professionals use Excel to perform complex calculations, like amortization tables and depreciation schedules. They also use it to compute product cost, allocate overhead, and perform budgeting and forecasting.

Overall, QuickBooks is better than Excel for accounting. It’s also easier to use because you don’t need to create formulas to perform calculations and process data. Excel requires users to have in-depth knowledge of formulas and even a little bit of programming to create automations.

Bottom Line

While using Excel for accounting tasks can be beneficial and inexpensive, it can also be a time-consuming process with the potential for errors. If you’re looking for a simpler and much more efficient way to manage your accounting, we recommend exploring different accounting software solutions to identify the one that’ll work best for you. Check out our list of the best small business accounting software for guidance.