Everyday transactions of a business are recorded in a journal known as General Journal. These entries are either directly entered into excel or imported from other applications into excel. The general journal entries are recorded in chronological order, and these entries form a general ledger. It also helps the users derive various reports, such as purchase statements, income statements, etc.
A General Ledger is an archive of a company’s financial activities. It holds details and potential insights about the company’s operations. A traditional ledger can be messy and hard to understand, while excel helps you customize, record, and reuse them endlessly.
Microsoft Excel is very powerful software. It has all the tools needed to create and maintain a general ledger. It is also a great alternative to accounting software. Businesses without the resources to invest in accounting software can start with Excel instead.
How to create financial statements using General Ledger
The General Ledger is the primary record of all accounting transactions in a company. It’s important to maintain proper financial data as the financial statements are derived from it. This financial statement further represents a company’s financial health.
General Ledgers classify transactions by accounts, including data such as date, entry description, journal entry, credit or debit amount, and ending balance. These accounts list the transactions made throughout the month. The cash general ledger lists only the cash section, whereas the inventory general ledger lists the inventory increase. Using general ledgers helps you analyze the transactions that have impacted a particular account.
Managing General Ledger using Excel
Every business is unique and so are its accounting needs. It’s important to sort the bookkeeping process based on the type of business.
In general, the first set of columns in a record-keeping book includes the transaction date, description, reference numbers, check numbers, etc. The next set includes accounts that are to be used throughout the year. From left to right, the first accounts listed should be income statement accounts followed by asset accounts, liability accounts, and finally, equity accounts.
After creating a General Ledger, maintaining them every month is crucial. So to help with that here are a few ways,
1- A blank general ledger template should be used to record each balance sheet account’s start balance each month.
2- After each month’s income statement is reconciled, the balances are adjusted to zero.
3- The general ledger should be updated each time you post a journal entry. The general ledger also records the activities relating to cash and inventory when you post a journal entry.
4- Calculate each account’s ending balance at the end of each month. The trial balance is created using the ending balances in the general ledger.
Creating Trial Balance in Excel
Accounts used for posting transactions and current balances are listed in the trial balance. In Excel, you can create a trial balance by following these steps:
1- A new spreadsheet should be created using the account numbers and descriptions from the chart of accounts.
2- Next to each account, add a column for debits and credits. In the spreadsheet, enter the ending balances for each account from the general ledger.
3- Take the total of all debits and credits and divide it by the number of accounts. You should have an equal number of debits and credits if you have posted journal entries and general ledger activity correctly.
Verify that you posted the data properly to the general ledger if the total debits and credits don’t balance. For errors in your general ledger spreadsheet, check the formulas. It’s time to generate financial statements after you’ve established an accurate trial balance.
Streamline your accounting and bookkeeping processes using Excel
Better insights into business financials can be gained through streamlined accounting and bookkeeping tasks. To improve your business methods, you should ensure that your accounting and bookkeeping processes are well-organized to reduce internal costs and give you plenty of time.
Following traditional methods of accounting and bookkeeping can be time-consuming and hard. They can even result in lost documents for business owners. The calculations may also be incorrect if the Data is written incorrectly in the sheet. But, using excel to manage your accounting and financial processes will be time-saving as well as result in a more accurate report.
Conclusion
Starting a business can be challenging when time and money are limited. Identifying customers and delivering high-quality products or services may be your top priorities. The bookkeeping and accounting tasks you need to perform when you first open your doors may not be automated.
Excel accounting templates are often used by small business owners when they start up. Excel is easy to use, and most people are familiar with it. Excel is a great alternative to other accounting software. They help in producing accurate accounting reports. The person keeping track of the accounting records has to have proper knowledge and understanding of different tools within Excel.
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