In Microsoft Excel, functions and formulas work closely together. Formulas are simply mathematical operations that may or may not include the contents of cells in the spreadsheet. Functions are very similar in that they are pre-defined formulas which take their input from the parameters passed in to them. Like formulas, functions may act on data supplied in the formula definition or the contents of referenced cells (Grauer, Scheeren, & Mulbery, 2008).

A budget requires fairly simple arithmetic and is very easy to represent in a spreadsheet. If the data is laid out so that each column represents a month, the SUM() function will likely be used to add up all the cells in the column. This is an operation that can be done without a function, but is much easier if a function is used. Conversely if a cell containing the total amount of budgeted expenditures for a month needs to be subtracted from a cell containing the month's income, a simple formula of the form =A1-B1 is all that's necessary.

References

Grauer, R. T., Scheeren, J., & Mulbery, K. (2008). Exploring Microsoft Office Excel 2007, Comprehensive Edition. 2nd ed. Upper Saddle River, NJ: Pearson Prentice Hall.