Labyrinthelab com lrc

Microsoft Excel is a worksheet application that can be used

to facilitate accounting tasks. You will find that even the most

basic elements of accounting can be completed more efficiently

in the Excel environment. In this chapter, you will examine two

fundamental accounting concepts: the accounting equation and

the transaction recording process. These accounting concepts will

provide the foundation for all subsequent topics. As you examine

these topics, you will be introduced to a number of basic Excel

features.

1 The Accounting Equation and Recording Journal Entries LEARNING OBJECTIVES

■■ Display the accounting equation

■■ Record journal entries

■■ Enter data and numbers in Excel

■■ Use Undo and Redo in Excel

■■ Print worksheets

EFA.indb 1 7/13/18 5:50 PM

© Labyrinth Learning. All rights reserved. http://www.lablearning.com

2 Excel for Accounting Chapter 1: The Accounting Equation and Recording Journal Entries

City Music World City Music World is a retail store located in Niskayuna, NY. The store sells musical equipment and offers lessons for beginning and experienced musicians. The company has used pen and paper to track accounting activity since its inception in 1979 and has now decided to work with Excel to increase its efficiency. You are spearheading this process.

In this chapter, you will examine how the accounting equation and journal entries can be expressed within Excel. You will then examine how this data can be managed within Excel and then conclude by reviewing printing methods.

Journal entries for City Music World (left) and their corresponding impact on the accounting equation (right) can be easily entered in Excel.

P R O J E C T

EFA.indb 2 7/13/18 5:50 PM

© Labyrinth Learning. All rights reserved. http://www.lablearning.com

Entering Data to Display the Accounting Equation 3

The Accounting Equation The accounting equation is a simple formula that must remain in balance at all times. The equation is as follows:

Assets are items of value within the business. Types of assets include Cash, Accounts Receivable (monies owed to the business from a customer), Supplies, Inventory, Equipment, and Land. These resources are used to generate income for the business.

Liabilities are the portions of assets owed to entities outside the business. Examples include Accounts Payable (monies owed by the business to other companies), outstanding loans, mortgages, and monies received in advance of services rendered (such as a sports team receiving season ticket revenue before the actual games are played).

Owner’s Equity is the portion of the assets not owed to entities outside the organi- zation. This portion of the assets represents that to which the owner(s) can lay claim, hence the term owner’s equity.

Stated in different terms, the accounting equation dictates that all items of value (assets) equal the portion of the assets owed to others (liabilities) plus the portion of the assets not owed to others (owner’s equity). Remember that the accounting equation must always be in balance. If you find that total assets do not equal total liabilities plus total owner’s equity, you must identify and correct the error.

Entering Data to Display the Accounting Equation

Within Excel, data is entered into the active cell, which is surrounded by a thick border known as the highlight. Data may be entered as text (used for headings and entries containing alphabetic char- acters) or numbers (can be entered directly or can be calculated using formulas). Excel recognizes whether the data you enter is text, a number, or a formula.

EFA.indb 3 7/13/18 5:50 PM

© Labyrinth Learning. All rights reserved. http://www.lablearning.com

4 Excel for Accounting Chapter 1: The Accounting Equation and Recording Journal Entries

Data Types Entries are defined as one of two main classifications: constant values or formulas. Depending on the method used, the accounting equation can use entries from each classification. Constant values can be text, numeric, or a combination of both. Formula entries display the results of dynamic calculations.

Completing Cell Entries Text and numbers are entered by positioning the highlight in the desired cell, typing the text or number, and completing the entry. You can use [Enter], [Tab], or any of the arrow keys to complete an entry. The method you use determines where the active cell moves.

Entry Completion Method Where the Active Cell Will Appear

(Enter] It will move down to the next cell.

(Tab) It will move to the next cell to the right.

[¥][£][¡][¢] It will move to the next cell in the direction of the arrow key.

[Esc] The entry will be deleted and the current cell will remain active.

When [Tab] is used to populate multiple cells in a row and [Enter] is used to complete the entry, the highlight is returned to the beginning of the next row. This simplifies the process of entering multiple rows of data.

The Enter and Cancel buttons appear on the Formula Bar whenever you enter or edit an entry. The Enter button completes the entry and keeps the highlight in the current cell. Similar to the [Esc] key, the Cancel button discards changes made before completing the entry.

TIP! Simply clicking within a different cell after typing a cell entry also confirms the typed entry.

Deleting and Replacing Entries You can delete an entire entry after it has been completed by clicking in the cell and tapping [Delete]. Likewise, you can replace an entry by clicking in the cell and typing a new entry.

Number Formats When entering numbers, it isn’t necessary to type commas, dollar signs, and other number formats. Instead, you can use Excel’s formatting commands (located on the Home tab of the Ribbon) to add the desired number formats.

This entry is a constant value. This entry is a formula that results in the sum of 33,250 being displayed.

Cancel button

Enter button

EFA.indb 4 7/13/18 5:50 PM

© Labyrinth Learning. All rights reserved. http://www.lablearning.com

Entering Data to Display the Accounting Equation 5

Decimals and Negative Numbers You should always type a decimal point if the number you are entering requires one. Likewise, you should precede a negative number entry with a minus (–) sign or enclose it in parentheses ( ).

Formatting Changes Other formatting changes can be made from the Font group on the Home tab, including bold, italics, and underline. In order to apply these changes to non-adjacent cells, the [Ctrl] key can be used while highlighting the desired cells with the mouse.

Home→Font→Bold | [Ctrl]+[B] Home→Font→Italic | [Ctrl]+[I] Home→Font→Underline | [Ctrl]+[U]

Develop Your Skills EA1-D1

In this exercise, you will create a workbook in Excel and enter the headers and amounts that comprise the accounting equation for City Music World.

Before You Begin: Be sure to visit the Learning Resource Center at labyrinthelab.com/lrc to retrieve the student files for this course before beginning this exercise.

1. Start Excel and open a Blank Workbook template file.

2. Save the file in your Chapter 01 folder as: EA1-D1-AcctEquation-[YourName]

Enter Headers for the Accounting Equation

3. Make cell A1 active by clicking the mouse pointer in it.

4. Type Assets and tap [Tab].