Using Excel to Prepare Trial Balance Worksheets

What are Trial Balance Worksheets? Trial Balance Worksheets are prepared by accountants at the end of an accounting period. A Trial Balance is prepared from the General Ledger. All accounts and their respective balances are listed on a worksheet. The Trial Balance is footed. Total Debit Accounts must equal Total Credit Accounts.

The Trial Balance

The Trial Balance-A Closer Look

The Trial Balance – An Even Closer Look

Why Do Accountants Prepare Trial Balance Worksheets? Trial Balance Worksheets allow accountants to adjust general ledger balances for economic events that have occurred but are not yet reflected in the books and records.

What kind of events require adjustments? Allocations Accruals Corrections

What accounts require allocation adjustments? Prepaid Expenses, [Assets] that have been used up or expired, require adjustment to reflect actual end of accounting period balances: –Prepaid Rent –Prepaid Insurance –Supplies –Accumulated Depreciation Unearned Revenues, [Liabilities] arising from customer deposits and advances, that have been earned also require adjustment to reflect actual end of accounting period balances: –Unearned Fees –Unearned Subscriptions

What Accounts Require Accruals? Revenue that has been earned but has not yet been recorded at the end of an accounting period must be adjusted for accruals: –Accrued Receivables –Interest Receivable –Accounts Receivable Expenses that have been incurred but not yet recorded at the end of an accounting period must be adjusted for accruals: –Accrued Payables –Wages Payable –Utilities Payable –Accounts Payable

Adjusting Entries-Examples Lucille’s Phone Service is preparing adjusting entries for the period ended March 31, 20X3 for the following economic events. a. The remaining supplies not yet used are counted and found to be equal to $260. b. On January 1, 20X3, Lucille paid 4 months rent ($1,600). An adjustment needs to be made to record the expired portion of rent which covered January, February, and March. c. Depreciation for the period is $110. d. $300 of Unearned Answering Service Revenue has been earned by March 31, 20X3. e. Wages of $200 due to employees on March 31, 20X3 will not be paid until April 3, 20X3.

Adjusting Entries Adjusting entries are recorded in the General Journal. The Accountant Posts the adjusting entries to a Trial Balance Worksheet. The Worksheet is used to determine the ending balances for the period before the adjustments are actually posted to the general ledger. Financial statements can be prepared from the Worksheet.

Adjusting Entries-A Closer Look Journal Entries need to be prepared in good form before the Trial Balance can be adjusted

The Trial Balance Worksheet Using Excel to prepare a Trial Balance Worksheet can reduce errors and duplication of effort.

The Trial Balance Worksheet

The Trial Balance Worksheet-A Closer Look The Trial Balance Worksheet is labeled with: - Name of Company - Date - Columns for the Trial Balance Accounts - A Reference Column (REF) for Labeling the Adjustments - Columns for posting Adjustments - Columns for the Adjusted Trial Balance Totals - Columns for Balance Sheet Accounts - Columns for Income Statement Accounts

Trial Balance Worksheet-An Even Closer Look Columns in an Excel Worksheet must be formatted: -Columns need to be adjusted for “Width”. -Cells need to be adjusted for numerical content. -Formulas may need to be entered.

Trial Balance Worksheet- Formatting Columns Formatting column width requires moving to a column clicking “Format” then “Column” then “Width” and inserting a number that will allow a column to be wide enough to accommodate the numerical information. A column that is too small will not be able to show a number and will show “####” instead. Sometimes experimentation is the best way to find the right width. A column’s width can be determined by going to it and clicking “Format” then “Column” then “Width” and seeing what number is already inserted.

Trial Balance Worksheet- Formatting Cells Formatting cells requires going to the individual cell or highlighting a group of cells clicking “format” then “cells” then choosing an option from the menu. (This is a good time to experiment.)

Trial Balance Worksheet- Formatting Cells Click: “Format” “Cells” “Number”……Choose “Number” Choose “(1,234)” (This option will show negative numbers in brackets.) Remember to assign the number of decimal places. (Use zero today.) Remember to check the box that says: “Use 1000 Separator (,)”. (This will separate thousands with commas- for example 1000 becomes 1,000.)

Posting Adjustments Now its time to post the adjustments to Lucille’s Phone Service

Posting the Adjustments

Posting Adjustments (Continued) Now its time to finish posting the adjustments to Lucille’s Phone Service

Posting the Adjustments (Continued)

Cross Footing Columns

Cross Footing Columns- Adding Formulas  When adding the numerical content of the cells in vertical columns use the “=SUM” formula.  When adding the numerical content of the cells in horizontal rows use a formula that will add debits and credits correctly.

Cross Footing Columns The Formula for An Account that has a Normal Debit Balance should be: = Debit Column + Debit Column(s) – Credit Column(s) The Formula for An Account that has a Normal Credit Balance should be: = Credit Column + Credit Column(s) – Debit Column(s)

Cross Footing the Columns- A Closer Look

Finishing the Worksheet The Trial Balance Worksheet can be used to prepare Financial Statements. The account balances in the Adjusted Trial Balance must be carried over to the appropriate columns:  Balance Sheet items (Assets, Liabilities & Equity accounts).  Income Statement items (Income & Expenses).

Finishing the Worksheet (Continued)

Using Excel to Carryover Balances Highlight All Balance Sheet Accounts in the Adjusted Trial Balance Columns -Click “Edit”. -Select “Copy”. -Click on the first debit cell under the Balance Sheet debit column. -Click “Edit” then “Paste Special” -Click on “Values” then “OK”. Highlight All Income Statement Accounts in the Adjusted Trial Balance Columns -Click “Edit”. -Select “Copy”. -Click on the first debit cell under the Income Statement debit column. -Click “Edit” then “Paste Special” -Click on “Values” then “OK”.

Finishing the Worksheet- Final Touches The formulas for calculating the totals of the Balance Sheet Columns and the Income Statement Columns must be entered.

Finishing the Worksheet- A Closer Look

The Finished Worksheet

The Finished Worksheet- Balance Sheet Columns As can be seen from the previous slide:  Balance Sheet column debits do not equal Balance Sheet column credits.  Debits are greater than Credits!  The Difference is $12,662.

The Finished Worksheet – Income Statement Columns As can be seen from the previous slide:  Income Statement column debits do not equal Income Statement column credits.  Credits are greater than Debits!  The Difference is $12,662.

The Finished Worksheet- Determining Net Income The Income Statement difference=$12,662. The Balance Sheet difference=$12,662. Net Income=$12,662!

The Finished Worksheet- Retained Earnings

The Finished Worksheet The finished worksheet can be used to prepare the Financial Statements:  Balance Sheet  Income Statement  Statement of Retained Earnings

Beyond the Worksheet Excel can be used to prepare Financial Statements. Excel can be used for analysis of Financial Statements. Excel can be used to prepare schedules. Using Excel saves time and money.

Beyond the Worksheet (Continued) The ability to use Spreadsheet Programs like Excel is an important skill. (Not only for accountants.) Excel is used by business people everywhere.