How To Prepare Trial Balance In Excel
How To Prepare Trial Balance In Excel – Most ERP and accounting software solutions out there can generate decent standard reports. However, we often need more than that.
One way to approach preparing more detailed statements is to do it in Excel. We can export data from our systems and prepare a template for an Excel statement, where we collect this data.
How To Prepare Trial Balance In Excel
This is common among many accountants. But it is a time-consuming, error-prone exercise. Once we have prepared our statements by hand, it is difficult to make corrections and it is almost impossible to reuse the work for the next periodic report.
Trial Balance Problems And Solutions
The good news is that with a few Excel tricks, we can automate much of this process. And it’s actually pretty easy once we get past setting up our original structure.
We can use any structured source data to prepare a mapping table for any report. When it comes to mapping our trial balance to the financial statements, we can follow this general guideline.
When we prepare report maps, we usually have more than one map level. For example, we might have one chart for our trial balance for the financial statements (income statement, balance sheet), and then another for the detailed accompanying notes, where we present the data in more detail.
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By following this approach to preparing our reports, we can eliminate some of the problems inherent in manually adding our statements.
Reports typically present more aggregated data, and we may have many lines of data corresponding to a single sentence line, which would require complex and hard-to-read SUM functions.
Let’s say in the trial balance our Cash in Bank account is on row 44 this period but on row 47 next period due to addition of new accounts. If we follow the traditional approach of adding sums, our formula will point to the wrong cell address next time.
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The names of the trial balance accounts may differ from those in our reports, which will make it difficult to manually match them when we prepare the summary for each period. This can lead to discrepancies between statements.
When we develop a map model in Excel, we can use the built-in data validation function. In this way, we guarantee the correct map and avoid errors.
One of the ways to validate data in Excel is to bind the cell contents to a list of items. This is useful when we prepare more detailed statements that our ERP or accounting software cannot automate on its own.
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We can also convert our map area to a table and name it. In this way, we will make it more robust to add new elements to our statements. Using Excel’s table functionality helps us to:
First, we will start preparing the structure of our statements. We will prepare the profit and loss account and the balance sheet, based on the company’s evidence balance sheet.
The next step is to get our source data. In this case, this will be the accumulated balance for the reporting period. Here is our trial balance for 2020:
Given Is The Trial Balance Of M/s. Shailesh And Nilesh As On 31^st March, 2016 . You Are Required To Prepare Trading And Profit And Loss Account For The Year Ended 31^st
Let’s also create another page that contains our mapping table and some report settings, such as the date of the statement.
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We will also have two options for validating our maps. An account on our trial balance can be either the income statement or the balance sheet. Therefore, we will prepare a table showing these options.
As mentioned above, we can convert the Excel table to ensure that it automatically expands if we add new items. However, in this example we are taking a slightly more elegant approach that will allow for conditional data validation. But more on this a little later.
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Remember, if we rely on table functionality, it’s good practice to give our table a more meaningful name. While we have selected a cell in the table, go to the Table tab and enter the identifier in the Table Name field.
Below, let’s add all our line items and identify them as part of the income statement or balance sheet. You can select cells containing line items from report sheets and copy and paste them into the Settings page.
We use the data validation functionality (Data tab) and start with cell D8 (the first row in the statement header). Let’s use Allow > List.
Trial Balance Import
Click OK and here we are: a drop-down menu that allows us to select a summary for each trial balance account. Transfer the data validation format by copying it to all rows.
We want to display the options available for each account class based on the selected summary option. Let’s add an unselected option that we can reference on our Settings page.
Next, we follow the same approach as with Statement Data Validation, but for the first row in the Class column.
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We use two nested IF statements. The first one checks if the selected tax return matches the first option on our Settings page: Tax Return. In that case, we will return a selection of all possible account class assignments that match this statement option. If the IF statement is FALSE, we check the second declaration option. And if this returns FALSE again, we give no choice.
If we try to drop down into the class column when we have nothing in the statement, we will only see the Select Statement.
But if we choose Income Statement, the class shows us all the dropdown items from the Settings page in this section.
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Data validation ensures that we avoid mistakes or using an article that does not exist in our reporting structures. If we try to enter something that is not part of the list, the validation throws an error.
The next step is to go ahead and use our knowledge of the contents of each account to map them to our statements. This requires a deep understanding of business processes and how accounting data reflects them.
We can then link the income statement and balance sheet directly to this date using the identifier.
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All we need to do is use Excel’s SUMIF formula to add our source data based on the map. Let’s start with the income statement.
The first parameter in the formula is the range we want to match our criteria. This will be the Class column.
And the third parameter is the sum interval. For revenue and income, we usually choose Credit invoicing of accounts.
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The formula basically aggregates the source data by order line in the same row in our report.
For expenses, we need to switch from debit to invoicing. We present the debits as positive values in the trial balance, but they represent expenses in the reports, they appear as negative values. That’s why we put a minus sign in front of the SUMIF formula.
However, if we look closely at our trial balance, we will notice that 704 PPE Sales Revenue has both debit and credit transactions. Because we use the same account to record the income and costs of the asset we sell.
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To account for such cases, we can add a net billing column and use it for our SUMIF functions. We can take the net value as PPE sales are not significant and are not part of standard operations. We can usually present them clearly in our financial reports.
We can then adjust all our SUMIF formulas to use the Net T/O column. At the beginning we will add a negative sign, as in TB we will have Debit (expenses) as positive and Credits (income) as negative.
We will follow the same approach to the balance sheet. However, we need to add the closing net balance to our trial balance. We have also added net opening balance if we decide to prepare comparative data for our statement.
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Remember to put a minus sign in front of our SUMIF Assets and Liabilities formula because the credit balances will appear negative in the Closing Net Balance column.
However, we see that the balance check is not zero. This is because our trial balance has not yet been closed, and the result of the income statement does not result in retained earnings.
We can then match our retained earnings adjustment to the year’s net profit in our income statement. And that corresponds to our balance check.
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As accounting and reporting professionals, we are often required to prepare management reports and accounts. Designing a structured model and using Excel’s capabilities to automate the process can have a big impact on our work.
We will avoid basic repetitive tasks and focus on analyzing the numbers and implementing a more robust reporting process.
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