Josh Aharonoff
Sep 28, 2023
Welcome to another exciting episode!
In this edition, we'll match Finance and Accounting terms, , resolve the Excel errors, and navigate the bank reconciliation.
What we’ll be covering in this edition:
Excel Errors
Bank Reconciliation
Match these 30 Finance & Accounting terms
Let's dive in...
You’re going to want to bookmark this one 🔖
⚠️ ###
This may be the easiest error that you’ll come across in excel…
it simply means that the data cannot be displayed, because the column is too narrow.
💡Resolution → simply extend the column
⚠️#REF!
This is a really popular error, and relates to when you have a range in a formula that can no longer be found…
IE it was deleted
💡Resolution → you can utilize the trace dependents button before deleting something
⚠️ #DIV/0
This is when you try and divide something by 0
💡Resolution → simply trace the reference in the formula, and revise the denominator from 0.
⚠️ #N/A
This one is similar to #REF!…
only it’s in the context of lookups, and specifically whenever a match can’t be found
💡Resolution → double check the lookup value in your formula to ensure it exists in your lookup range
⚠️ #NAME?
This is whenever you have a typo in your formula, or named range.
💡Resolution → double check the spelling and ensure you’re using the right naming
⚠️ #VALUE!
This one is whenever you have an incorrect character in a formula or reference
This can be triggered when using certain formulas that are more sensitive to the range over other formulas…for example, sumproduct.
💡Resolution → refer back to the range where the data is contained, and remove any incorrect characters
⚠️ #NULL!
This error will show whenever you either have an incorrect data type of number format in a formula, or if excel can’t perform an excel calculation.
A popular example here is when you try to take the square root of a negative number in excel.
Similarly, you may come across this error when using IRR or RATE and no result can be found.
💡Resolution → you can enable iterative calculations, just like you would with circular references.
⚠️ #NUM!
You may come across this error whenever you include a space in a formula instead of a : or a , between 2 arguments.
The resolution is simple - replace the space with a colon or comma
⚠️ #CALC!
Here’s another one that you may not have come across…
Array functions are those that return an array or results rather than a specific result.
In this case, there’s no answer to return, so you’ll get this error.
💡Resolution → double check your formula and ensure that your search value can be found
⚠️ #SPILL!
This one is pretty straight forward, and is reserved for when you try to utilize a spill function.
More specifically, it’s when your spill function is blocked by a value, and the function can’t SPILL into other cells.
💡Resolution → simply remove the values that are blocking the spill function.
⚠️ #BLOCKED!
This last one I actually never heard of, till one of my readers pointed it out - it’s when you don’t have the permissions to access data, such as a license, connection, or privacy setting.
💡Resolution → check your permissions / licenses.
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Which ones did I miss?
Bank reconciliations to me are possibly the most important part of a month end close
➡ What is a Bank Reconciliation?
A Bank Reconciliations is a matching of the transactions on your bank / credit card statements to the transactions in the general ledger
It allows you to confirm that the balances for your bank accounts & credit cards in your general ledger match to you the actual statements on the banks website
➡ Why are Bank Reconciliations so Important?
If a Bank Reconciliation isn't completed, I wouldn't trust anything that I'm reading on a company's financial statements
Why?
Because there's no way to validate that the transactions used to compile the numbers shown on the general ledger
There would be no way to confirm that there are no mistakes in the numbers being used, or even worse, that there was no fraud
➡ How are Bank Reconciliations performed?
Bank Reconciliations are performed by entering in the ending balance shown on your bank / credit card statement...
and confirming that the transactions in your accounting software + the beginning balances shown = the ending balance on your statement
If the amounts don't match, it can either mean a mistake in the data being used....
or certain exceptions which can be valid
➡ What are Some Common Reasons for an out of balance Bank Reconciliation?
Here are a few usecases
❌ There are duplicate transactions in your general ledger
➡ action here is to remove these duplicate transactions
❌ There are missing transactions in your general ledger
➡ action here is to add back these transactions
✅ There are transactions that haven't cleared the bank yet... such as checks that have not been cashed
➡ this is an acceptable reason, and should be monitored each month to ensure accuracy
✅ Transactions posted on a cutoff date
➡ often times, transactions will be posted in your general ledger on the same date in which the period ends on your bank / credit card statement.
When that happens, it is common for some transactions to be shown in your general ledger that haven't yet cleared the bank.
In this instance, you'll want to ensure that next month these transactions are cleared
Those are a few of my thoughts based off of my experiences working with startups, and closing out their books.
What would you add from your experience?
This poster contains 30 fundamental Finance & Accounting terms…
and if you understand each and every one of them...
you are in great shape for a career filled with GROWTH 🚀
Let’s go through a preview of each:
A. FP&A
FP&A stands for Financial Planning & Analysis…
and is focused on helping you PLAN for the (financial) future…as well as ANALYZE deep metrics such as costing and pricing.
B. Cash from Operating Activities
Cash from Operating Activities is one of 3 sections on your statement of cash flows…
and showcases how your cash is moving from one period to another…
as it relates to OPERATING your business
C. Tax
Ready or not…the government is going to tax you.
But what exactly is a tax?
It’s a charge or levy from the government as a cost of doing business…
and let me tell you…there is no shortage of taxes out there 😅
D. EBITDA
Perhaps the most notorious financial metric out there…
EBITDA stands for
E → Earnings
B → Before
I → Interest
T → Taxes
D → Depreciation
A → and Amortization
It’s commonly used for approximating cash flows, and valuing a business
E. Net Income
Net Income is the bottom line profitability metric of a business, and shows up on your P&L.
You can calculate this metric by taking all of your income, and subtracting out all of your expenses
F. Liability
A liability represents amounts that you OWE to creditors, and is part 1 of 2 on the right side of the Accounting Equation
G. Accrual Basis
The Accrual basis of accounting showcases your INCOME and EXPENSES…
based off of amounts EARNED…
and expenses INCURRED
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Ready to master all 30 of these concepts?
Download the answers for free!
I hope you enjoyed this week's edition of Legit Numbers!
Till next Thursday!