The concept of arrears refers to money owed that should have been paid in the past. It can occur for a variety of reasons – and it can be difficult to calculate. Fortunately, spreadsheets make this easy. Let’s learn **how to calculate arrears in Microsoft Excel.**

## How to Calculate Arrears in Excel

To learn how to calculate arrears, let’s consider a simple example. An employee was paid $2,000 per month, but on January 1 was awarded a pay raise of $500. This means that her new salary will be $2,500. However, for three months, the raise was inadvertently not paid out. It’s now March 1, and you need to determine the amount of the arrearage.

To make this calculation, let’s create a simple template in Excel. To calculate arrearage, you’ll need to know the following:

- The amount that was actually paid
- The amount that should have been paid
- The difference between these amounts
- The number of impacted pay periods

Begin by constructing a simple layout in Excel. Create three columns:** Paid, Should Have Paid,** and **Difference**. Then, create a row for each pay period missed.

In the **Paid** column, place what was actually paid in each period: **$2,000.** In the **Should Have Paid** column, place $2,500. The **Difference** column can either be a formula, or hardcoded. For example, the formula **=C2-B2** will return the correct **$500** per pay period.

Repeat this step for the subsequent pay period. Your finished layout will look like this:

Now, you can simply sum up the **Difference** column with the formula **=D2+D3.** Enter it in cell **C4**, and then hit **Enter** on your keyboard. Excel will return the amount of the arrearage that should be paid to the employee:** $1,000.**

As you can see, Microsoft Excel makes it easy to calculate arrears.