# Accounting Formulas in Excel

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```					Microsoft Excel
Excel Formatting Rules
 Numbers greater than 999 should be formatted to display a comma.
 Use a consistent number of decimal places for all numbers
containing decimals. If any currency values on a spreadsheet
display cents (more than 0 cents), then all currency values on a
spreadsheet should be formatted to display 2 decimal places.
 Right-align columns of numbers. Never left-align columns of
numbers.
 Labels should be directly over the numbers that they describe.
Move the label so that it is directly over the numbers it describes.
NEVER move the numbers so that they are under the label.
 Currency values need to display with a \$ sign using the currency
style (and not accounting style which happens when you click the \$ sign button).
 Create formulas using cell references whenever possible. Don‟t
hard-code your formulas using real numbers. Creating formulas
using cell references lets you create the interactive formula, so
that when you change the contents of one cell, the formula result
 Relative vs Absolute vs Mixed Cell References
   If a cell, column or row is common to several formulas,
you can lock it down with the \$ sign so that cell, column
or row does not change when the formula is copied to a
new location \$A\$1 or \$A1 or             A\$1
 Parenthesis are used to specify that you want to “do this
operation first.”
 It is best not to type in your Excel functions straight
from the keyboard (unless you know EXACTLY what
is required and how it should be entered. It is best to
use the Function Wizard to insert Excel functions.
Excel Functions
 PMT: Used to calculate the periodic payment on a
loan (car loan, home loan)
   Most payments are made monthly.
   PMT function requires three arguments
• Interest rate per period (annual rate divided by 12 for monthly rate)
• NPER: number of payment periods (# of yrs * 12 months/year)
• Amount of the loan (entered into the function as a negative
number so your function result ends up positive)
Excel Functions
 The IF function is used in spreadsheet decision making,
and it requires 3 arguments.
   The condition being tested for (the cell and the actual test)
   What to do if the condition is true
   What to do if the condition is false
   It yields one result if the condition is true, and a different
result if the condition is false.
 The VLOOKUP function determines where
within a specified table, a value (either numeric
or text) is found, and then it retrieves a entry
from the table that corresponds to the value, and
it requires 3 arguments.
   The value to be looked up
   The table range where that
value can be found
   The column containing the
corresponding value.
Entered as a number (2,3, etc.) in your function
When creating the table used by your VLOOKUP, the table
value breakpoints (in the first column) should be arranged in
alphabetical order or low number to high number order.
Microsoft Excel
Referencing with Multiple Sheets
 Cell reference on the same sheet -- A1
 Referring to cells on another sheet
   QUARTER1!A1
   „Quarter One‟!A1 (if more than one word in name)
 You can also refer to another sheet or another file
within a function
   =VLOOKUP(\$D5, Contributors'!\$A\$2:\$E\$44,2)
   =VLOOKUP(\$D5, [CList.xls]Contributors'!\$A\$2:\$E\$44,2)

 The easiest way to create formulas like this is to
Point and Click! Don‟t type them in!
 The VLOOKUP function determines where
within a specified table, a value (either numeric
or text) is found, and then it retrieves a entry
from the table that corresponds to the value, and
it requires 3 arguments.
   The value to be looked up
   The table range where that
value can be found
   The column containing the
corresponding value.
Entered as a number (2,3, etc.) in your function
When creating the table used by your VLOOKUP, the table
value breakpoints (in the first column) should be arranged in
alphabetical order or low number to high number order.
 Numerical Average: If there are XX items, add XX items together, and then divide
by XX (won‟t use in assignment)
 Weighted Average: Items with more weight make up a bigger part of the average
(will use: weights should appear as cell references)
   (.1*100) + (.15*98)+(.75*40) = 54.7

 Parenthesis are used to specify that you want to “do this operation
first.”
   Formulas and functions can appear in parenthesis

 IF statements are used to allow decision making in a spreadsheet.
 Use the “real” currency style to format currency, and not the currency
style button (which is really accounting style).
 Creating a worksheet group allows you to apply a common format or
feature to several worksheets at the same time. Be careful when you
use this feature. If you are not careful, you can multiply errors or bad
formulas across several sheets. Sometimes, creating a worksheet
group makes sense. In other cases, you might want to avoid it. I
recommend using a worksheet group to format items, while formulas
are made on a sheet-to-sheet basis (not using groups).
 When using these features, PAY CLOSE ATTENTION TO DETAIL AND TAKE
Microsoft Excel
Have students Open Word
Excel Lists
 A common use of a spreadsheet is to manage lists of
data. Excel lists can be used to replicate a database
(each column in Excel is a field, and each row is a record)
   Create a list range
   Sort data (primary sort key, secondary sort key, third sort key)
   AutoFilter lets you search for exact matches (like Access Filters).
   Custom AutoFilter lets you search using complex criteria (just like
queries in Access)
   Conditional formatting highlights information that meets the
criteria you specify. When viewing all of the data, certain items
are brought to your attention by the use of conditional formats.
 Excel can summarize data in a list by inserting subtotals
(sums, counts, averages, maximums, minimums) for groups of data in
a list. A subtotal is inserted when a specified field changes
(so you need to sort your data prior to applying subtotals).
Pivot Tables
 Excel lists often contain a wealth of information, but
because there is so much detailed data present, it is
often difficult to form a clear overall view of the
information.

 A Pivot Table is an interactive report that enables
you to group and summarize an Excel list into a
concise table format for easier reporting and
analysis.
   Can be used to summarize data into different categories
using functions such as COUNT, SUM, AVERAGE,
MAX, and MIN.
Pivot Tables
 To generate a Pivot Table, you can specify the
dimensions by which you wish to view the data (one
factor or multiple factors), which allows you to see
relationships in the data.

 Using the data fields, you specify
   What field is to be used to create row items
   What field is to be used to create column headings.
   What field or fields are to be used data area/data items
   Report Filters (Page fields) can be used to filter the Pivot
Table
Pivot Tables
can help
you see
relationships
in the data
Pivot Tables need to be formatted
 Labels and numbers need to be in alignment
 Columns need to be narrower
 Numbers should be properly formatted (\$, decimals, commas, etc.)
 You can even change the mathematical operation used and the label text that
is displayed.
relationships in the data.

If you want to take a picture of what is on your
computer screen, use the PrtScn button (typically
found on the top row of your keyboard) and then
 Report Filters (Page
fields) can be used to
filter the Pivot Table
Multi-factor Pivot Tables use multiple data
fields Don’t hand in something like this. It looks BAD and is hard to read.

I want to see the average amount purchased, the
average number in the household and the average
number of purchases made by each household, by
region and “rent vs own” (multiple factors)

in the data
 Select
what you
want to
move
(Values),
right-click,
select
“Move
Values to”
and you
want to
When moving values to rows, ALWAYS MOVE                   “Move
THE DATA POINTS (found before the “by”
statement). The words after the “by” statement should     Values to
not be moved because they form the basis of your
rows and columns.                                         Rows”
Microsoft Excel
 I am not teaching how to make a spreadsheet. It is
assumed that you can already do that.
 My focus is on how a spreadsheet is used in a
 Our emphasis in Excel
   Building formulas and using Excel functions
• VLOOKUP, IF, PMT FV, and others
• Relative, absolute and mixed cell references
   Multiple worksheets and the formulas that go between
them
   Decision Making in Excel
• What-if Analysis
• Pivot tables, Filtering Excel lists, conditional formatting
System
 A spreadsheet can serve as a decision support
   Its analysis/results can be used to make a decision or
make a better decision.
   Managers use this tool.
• Guides you and assists you, but you have to know how to use
the tool. You have to know what you are doing, what needs to
be done, how to set up the model mathematically, when
something is not right, and you have to make the final decision.

 Perform What-If Analysis
   Change one assumption -- See the effect on the entire
Formulas
 Used to perform mathematical calculations
 Must begin with an =
 Use normal algebraic rules              Formula
   Evaluate whatever is in parentheses first
   Then, perform multiplication and division
   Then perform addition and subtraction
   Formulas are always evaluated from left to right.

 Formulas should be created using cell references
whenever possible. Avoid real numbers in your
formulas. Spreadsheet should be totally interactive.
Relative/Normal Cell References

RELATIVE
Absolute Cell Reference
 Do not adjust when copied, it will always refer to
the same cell, column or row.
 Add \$ before row and column -
   \$A\$4 = locks in cell
   \$A4 = lock column, row varies
ABSOLUTE
   A\$4 = locks row, column varies

 Easy way to make an absolute reference, click on
reference, press F4 key
 Save time by allowing copying of complex
formulas
 Development activities for creating effective worksheets
 Build the worksheet

 Enter labels

 Enter the data (the values, formulas, and functions)

 Format the worksheet

 Verify/test the worksheet to make sure everything works.

 Order of precedence for mathematical operations
   2 + 3 * 4 = 14
   (2 + 3) * 4 = 20
   2*2^2=8
   (2 * 2) ^ 2 = 16
Relative and Absolute References
 Excel automatically changes a relative cell reference, such as B8,
when a formula containing it is copied (down to become B9 or across
to become C8). To convert this to an absolute reference, which does
not change when copied to another location, each element that you
don’t want to change must be preceded by a \$. Therefore, the relative
reference B8 becomes an absolute reference when it is changed to
\$B\$8, and when it is copied, it never changes. By contrast, \$B8 and
B\$8 are mixed references. In the first example, the column is fixed
and the row is relative (it change adjust). In the second example, the
row is fixed and the column is relative (it can adjust). Copying down
would yield \$B9 and B\$8, while copying across would yield \$B8 and
C\$8. Understanding this concept is fundamental to understanding
how to structure formulas and functions which will be copied.
Without this understanding, students will constantly get incorrect
results and have to re-enter their formulas and functions.
Excel Functions
 VLOOKUP: used to look up an item in a table and
it returns its price, discount %, or other form of
result.

 IF: checks a cell. Does one thing if the test is true,
and it does something else if the test if false.

 PMT: Used to calculate yearly and monthly loan
payment amounts.
Excel Formatting Rules
 Numbers greater than 999 should be formatted to display a comma.
 Use a consistent number of decimal places for all numbers
containing decimals.
 Right-align columns of numbers. Never left-align columns of
numbers.
 Labels should be directly over the numbers that they describe.
Move the label so that it is directly over the numbers it describes.
NEVER move the numbers so that they are under the label.
 Currency values need to display with a \$ sign. If any currency
values on a spreadsheet display cents (more than 0 cents), then all
currency values on a spreadsheet should be formatted to display 2
decimal places.
 Create formulas using cell references whenever possible. Don‟t
hard-code your formulas using real numbers. Creating formulas
using cell references lets you create the interactive formula, so
that when you change the contents of one cell, the formula result
The End
Functions
 Used to perform common/complex calculations

 Use the following standard format:
=NAME(arguments)

 Arguments can be
   Numbers
   Cell References
   Formulas
COMMON FUNCTIONS
 SUM Function: Adds things together
    Individual Numbers =SUM(4,5,6)
    Specific Cells =SUM(A1,C10,D4)
    A range of Cells =SUM(A1:A5)

 Financial                                       Sum
=PV(rate, nper, pmt, fv)
Computes the present value of a series of future payments
=PMT(rate,nper,pv,fv)
Calculates a payment amount for a loan or mortgage based
on a constant interest rate and number of periods.
COMMON FUNCTIONS
 Reference
Vlookup(lookup_Value,Table_Array,
Column_Index_Value)
1. Specify a value to look up
2. Specify the table where that value can be found.
3. Specify the column where the result can be found.

 Logical
=IF(condition, value if true, value if false)
Specify a condition, what to happen if true, and what to
happen if false.
Rounding vs Formatting

=ROUND(number, number of places)

 Formatting only changes the appearance of
cell contents.

 Rounding actually changes the values in the
cells.
Formatting Cells
 Column Widths
   Rather than extending across several columns, widen
columns to fit text
   Widen columns by dragging the right border of the
column title (or double clicking it to widen to fit).

 Numbers = MUST USE CONSISTENT FORMATS
   Consistent Number of Decimal Places
   Commas             Consistent negative number format

   Align Decimals
Formatting Cells, Continued
 Borders
   Use in financial reports, draw lines

 Alignment
   Left, Right,Center
   Center Across Selection

 Bold, Italic, Fonts
 Color should be used to indicate data entry
areas or values that might change.
Working with Sheets

 Copying Sheets
 Naming Sheets
 Moving Sheets
Referencing with Multiple Sheets
 Cell reference on the same sheet -- A1
 Referring to cells on another sheet
   QUARTER1!A1
   „Quarter One‟!A1 (if more than one word in name)
 You can also refer to another sheet or another file
within a function
   =VLOOKUP(\$D5, Contributors'!\$A\$2:\$E\$44,2)
   =VLOOKUP(\$D5, [CList.xls]Contributors'!\$A\$2:\$E\$44,2)

 The easiest way to create formulas like this is to
Point and Click! Don‟t type them in!
Charts and Graphs
 Great way to present information in an
easy-to-understand format.

 Chart Types
   Pie        Line      Bar or Column Chart
   3-D Enhancement

 Use the CONTROL KEY to select ranges
of data that are not side-by-side.
 I am not teaching how to make a spreadsheet. It
is assumed that you can already do that.
 My focus is on how a spreadsheet is used in a
 You must know to properly design and
   Alignment         Borders
   Number formats: commas, decimal places
   Spelling          Data entry areas
   Charts            Proper formula construction
   Column widths     Appropriate print formats
   Attention to Detail: Be Careful: Think
Most students know HOW to

The problem is that most students
don‟t know WHEN to format,
or
they fail TO RECOGNIZE when
a formatting problem has
occurred.
 Computations should always be performed using
formulas, functions and/or cell references!
 Outputs should be Easy to Read
   Titles
   Appropriate Formatting

 It should be easy to Update/Change

results make sense.
“Reasonableness Test.”
   Taxes
• Subtract your income tax to find out your income after taxes.
   Does it make sense for a portfolio of stocks and bonds to
make or lose lots of money from one day to the next?
   After you have paid off a loan, does it make any sense
for you to still owe money, or get money back (refund)?
   Is your percentage for a change from one year to the next
realistic? Is a 1,000% change realistic?
Using A Data Entry Area
 What?
   An area where all the values used in the spreadsheet
(especially those likely to change) are entered.
   Cells in the output area reference these cells
 When?
   The spreadsheet will be used over and over
• Monthly/Weekly/Daily Reports
• What-If Analysis
   The spreadsheet will be used by someone who doesn‟t
DEA#1
Rules for Data Entry Area
 Include Directions
 Clearly describe what information is needed
   Dollars, Units?
   Avoid Abbreviations
 Clearly identify where the information
should be put
 Format Data Entry Cells Appropriately so
that information looks nice when entered.

DEA#2
Printing
 Portrait versus Landscape
 For this class
   The printout of a spreadsheet fits on 1 page
   Your Name needs to appear as a footer on EACH
sheet/printout that you make.

 Display/Print formulas
   Go to the Tools menu, select Options

Print
Proper Formula Construction
 Don‟t type in all of your formulas and cell
references from the keyboard. The easiest way
to create formulas is to Point and Click them in!
Let Excel create the formulas for you. Don‟t
type them in!

 Formulas should be created using cell references
whenever possible. Avoid real numbers.
Excel Functions
 ROUND: rounds a number or formula to a specified
number of digits.
 VLOOKUP: used to look up an item in a table and
it returns its price, discount %, or other form of
result.
 IF: checks a cell. Does one thing if the test is true,
and it does something else if the test if false.
 PMT: Used to calculate yearly and monthly loan
payment amounts.
 Always keep your labels and their related numbers
in alignment. Move the label, not the numbers.
Rounding vs Formatting
 Formatting only changes the appearance of
cell contents. What you see many not
actually be there
   March 31 vs March 31, 1999 vs 3/31/99

 Rounding actually changes the values in the
cells. What you see in the cell is what is
really there.
 I wish to display my formulas in Excel. What menu
and options within that menu do I choose?
   Tools Menu, Select Options, Select the View Tab, place
a checkmark next to Formulas

 Add / Subtract                     Multiply / Divide
 Evaluate Left-to-Right             Evaluate Items in Parenthesis
   Evaluate Items in Parenthesis first
   Next, do all of your multiplication and division
   Within equal operations, evaluate your formulas from left to right
Excel Functions
 PMT: Used to calculate the periodic payment on a
loan (car loan, home loan)
   Most payments are made monthly.
   PMT function requires three arguments
• Interest rate per period (annual rate divided by 12 for monthly rate)
• NPER: number of payment periods (# of yrs * 12 months/year)
• Amount of the loan (expressed as a negative number)

 FV: Returns the future value of an investment based on
constant payments and a constant interest rate
(investments)
 Goal Seek: allows you to set a desired end result. Tells
you what a variable must equal to get that desired result

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