Accounting Formulas in Excel

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Accounting Formulas in Excel Powered By Docstoc
					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
  will automatically adjust itself.
 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
  YOUR TIME.
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
   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.
Pivot Tables can help you see relationships in the data
Pivot Tables can help you see
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)

Pivot Tables can help you see relationships
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
  business environment. Business problem-solving
 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
      Spreadsheets as a Decision Support
                   System
 A spreadsheet can serve as a decision support
  system for a business.
     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
      spreadsheet
                        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

    When copied, references adjust


                       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
  will automatically adjust itself.
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
  business environment. Business problem-solving
 You must know to properly design and
  FORMAT a spreadsheet for business applications
     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
     format a spreadsheet.

The problem is that most students
  don‟t know WHEN to format,
               or
they fail TO RECOGNIZE when
    a formatting problem has
            occurred.
      Designing Good Spreadsheets
 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

 Test out your spreadsheet to make sure that your
  results make sense.
   Your Spreadsheets should pass the
        “Reasonableness Test.”
 Do your answers make sense in a real-world
  business setting?
     Taxes
       • Subtract your income tax to find out your income after taxes.
       • Add your sales tax when purchasing goods.
     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
      understand the calculation or spreadsheets
                                                   DEA#1
       Rules for Data Entry Area
 Include Directions
 Clearly describe what information is needed
     Dollars, Units?
     Avoid Abbreviations
     Additional Directions if needed
 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.
  Spreadsheet should be totally interactive.
                 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
     Next, do all of your addition and subtraction
     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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