Tally Notes.doc

TALLY: CONCEPT OF FINANCIAL ACCOUNTING: Financial Accounting (FA) Software is used to store and maintain daily business transactions of a company or shop like purchases, sales, receipts, payments, purchase returns, sales returns, deposits and withdrawals etc. Popular FA software packages are Tally, WinCA, DacEasy and Peachtree. Tally is the Number One Financial Accounting package used in India and abroad. It is marketed by Tally Solutions Pvt. Ltd. It is a codeless accounting system i.e. accounts are maintained without any account code. With tally you could be the owner, the financial controller, accountant, manager or auditor. ACCOUNTING SYSTEM: There are two methods of Accounting Systems— Single Entry System and Double Entry System. Single Entry System is purely based on cash accounting. Only cash transactions are taken into account and credit transactions are eliminated. In Double Entry System, both cash and credit transactions are entered. All commercial organizations follow this method. According to this, all transactions shall have two aspects called Debit (+) and Credit (-). Therefore it is called Double Entry System. Tally follows Double Entry System of accounting. HOW TO WORK IN TALLY: After opening Tally it displays the activation form to enter the product number, activation key and Email id. To work in Educational information need not be filled, press ESC key. Tally will display the Info, menu, which allows the user create or select the companies. CREATING A COMPANY: For the first time, to start working with Tally, a company has to be Creating a company involves — Typing the name of company, Address, Country, State, Email address, Method of maintaining accounting, Financial year from, Books beginning from, Security control etc. A Company can be created from Company Info menu. When Tally is loaded this menu will be displayed automatically. But if a company is already created,

the company 10000 will be automatically opened and Gateway of Tally menu will be displayed. Then return to Company Info, menu by closing the open company, press Alt+F1 or to return to Company Info, menu without closing the company, press Alt+F3. When starting Tally, to display the Company Info, menu automatically, without opening any existing companies, edit the following two lines (using Tally configuration file TALLY.INI located in folder TALLY as given below Default Companies = No ;; Load=10000 To create a company, select Create Company (or press C) from Comp Info menu. Following are the features to be entered while creating a company: 

Directory is related to the folder, where the files of the company must be stored. By default, it is C:\TALLY\DATA. Inside it, a sub-folder based on the company number (starting from 10000) given by tally, will be created and company files will be stored inside it. To change it, either press Shift+Tab or press backspace and type the desired directory name e.g., C:\TALLY\BRANCHES.

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Company In formation Type the name of the company Typing company name is compulsory. Mailing name is the name of company to be used in all reports statements. By default, it will be same as name entered above. It can changed, if different name has to be used in reports and statements. Type the address of company (this is optional and can be left blank pressing Enter). Type the PIN Code of the company place. It is optional. Type the Telephone Number of the company. It is optional. Type the E-Mail address. of the company, which is used to E-mail the company’s reports and documents Currency Symbol will be automatically displayed based on the country selected. If required, it can be changed. The Maintain option allows you to specify the method of maintaining the accounts. There are 2 options in it. Accounts Only — It is used to maintain only the Financial Accounts of the company. Inventory management is not involved in it.

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Accounts with Inventory — This is the default option, which allows to maintain both Financial Accounts and Inventory of the company. In this case, stock ledger accounts are not created. Instead, different stock items are created and closing stock figures will be calculated automatically. 

Type the starting date of Financial Year of the company. Generally it will begin from the 1st of April. For example, 1-4-2007.

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In Books beginning from, type actual date from which the accounts of the company has to be maintained. Generally, Financial Year From and Books Beginning From date will be the same. If Books Beginning From date is different from the date of Financial Year From, it must be greater than Financial Year From date. For example, Books Beginning From date 1-6- 2007, indicates, financial year starts from 1-4-2007.

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There is a provision to give a Security Control by giving the name of administrator and a password.

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Base currency information will be displayed at the bottom portion, is not changed.

SELECTNG A COMPANY After Tally is loaded, if the company is already created, in order to make it must be selected, (a company will be automatically opened, after creating the company). To select / open the company, from Company Info, Select Company. Available company names with their directory number financial period will be listed. Select the required company name by and pressing Enter. A company can also be selected by double company name. ACCOUNTS INFORMATION In any financial accounting, the amount is entered in an account. When the company is created, Tally automatically creates two accounts. They are: 1. 2.

Cash and Profit and Loss Accounts

Other accounts must be created by the user as per the requirements. As the reports are created automatically, Tally should be in a position to identify which account is to be taken into which report, because, all accounts will not be present in Trial Balance, Profit and Loss Account or Balance Sheet. For example, Closing Stock will appear in Profit and Loss Account and Balance Sheet but not in Trial Balance, all types of incomes and expenses will appear in Trial Balance and Profit and Loss Account and not in Balance Sheet. Therefore, various groups are maintained in Tally. Any account created in Tally must belong to one of the groups. These account groups are based on Assets, Liabilities, Income and Expenses All accounts that belong to group of Assets or Liabilities will be taken into Balance Sheet and the accounts that belong to group of Income or Expenses will be taken into Profit and Loss Account. ACCOUNT GROUPS Based on the requirements of Accounting System, Tally provides a set of 28predefined groups, of those 15 are primary groups and 13 are sub-groups. The group and ledger accounts can be created under each group is given below:

1. Capital Account: It includes Capital and Reserves & Surplus of the Company, Preference and Equity share capital, Partners Capital and Drawings, Proprietors Capital and Drawings. 2. Loans (Liability): This is a primary group to place all loan accounts. It has three sub-groups — Bank OD A/c [Bank OCC A/c], Secured Loans and Unsecured Loans. Bank OD A/c [Bank OCC A/c]: The ledger accounts related to Bank Overdraft, Cash/Credit Accounts, Hypothecation A/c, Bill Discounting A/c are created under this sub-group. Secured Loans: The ledger accounts of Term Loans and other Medium / Long term loans taken by the company from banks, financial institutions upon furnishing security must be placed under this sub-group. Unsecured Loans: The ledger accounts of loans received from outside parties, directors, friends and relatives, to whom no security is provided created under this sub-group. Deposits received by the company from can also be placed under this sub-group. 3. Current Liabilities: This is a primary group to hold the outstanding statutory liabilities of the company like outstanding expenses, contribution ESI, PF, TDS, Professional tax of employees or contractors deducted f their salary, should be placed under this group. It has three sub-groups. Duties & Taxes: For all tax accounts like VAT, Excise, CST and other trade taxes. Provisions: It is used to hold all provisions like Provision for Taxation, Provision for Bad Debts, Provision for Dividend etc. But Provision Depreciation A/c will be created under the group Fixed Assets. Sundry Creditors: All trade creditors of the company, generally suppliers’ account, with whom transactions are entered through Purchase Vouchers, Debit Note and Journal should be placed under this sub-group. 4. Fixed Assets: This is a primary group to hold the ledger accounts of Fixed Assets (Plant, Machinery, Building, Furniture & Fittings, Land, Vehicle etc.), Immovable Properties, Patents, Trade Rights, Goodwill, live stock like horse, elephant, camel etc. 5. Investments: This is a primary group. Ledger Accounts like investments in Shares, Bonds, Debentures of other companies and, Govt. Securities (NSC, Kisan Vikas Patra, RBI Bonds, IDBI Bonds etc.) are placed under this group. 6. Current Assets: This is a primary group to keep the assets of the company. Generally ledger accounts are created under its six different sub-groups. Stock-in-hand: It is used to hold opening and closing stock figures of some accounts like Raw Materials, Work-in-Progress and Finished Goods. When maintaining accounts with inventory, as closing stock is automatically calculated, this sub-group is not used. It is used in case of Accounts Only. These accounts can not be used in voucher entries. The closing balance of this sub-group ledger accounts must be entered through ledger accounts alteration only.

Deposits (Assets): Ledger accounts related to deposits made, by the company (not deposits received by the company) like Fixed Deposits, Recurring Deposits, Security Deposits in other companies, Rental Deposits, Deposits with Electricity Dept, Deposits with Telephone Dept. et., can be created under this sub-group. Loans & Advances (Asset): All advances of non-trading nature like Salary advance, loans to employees, all short term loans given by the company, advances to purchase fixed assets etc., can be placed under this sub-group. Sundry Debtors: Ledger account of customers (all parties to whom credit sales are made) is created under this sub-group. Advances received from customers can also be kept under this sub-group. Cash-in-Hand: Cash A/c is created automatically by Tally when the company is created, under this sub-group. Ledger accounts like Petty Cash A/c, Cash-atBranch A/c etc., can be created under this sub-group. Bank Accounts: All current and savings bank accounts are created under this sub-group. 7. Branch/Divisions: This primary group is used for inter-branch reconciliation and consolidation. The company’s branches, Divisions, Affiliates, Sister Concerns, Subsidiaries, under this group. 8. Sales Accounts: This is a primary group to record regular business sales and sales returns (not sale of fixed assets) 9. Purchase Accounts: This is a primary group to hold all regular business purchases and purchase returns (not purchase of fixed assets for office use). 10. Direct Income [Income Direct]: It is a primary group to hold the ledger accounts of income, which will be used to calculate gross profit. Professional service charge, Servicing Charges etc. can be created under this group. 11. Indirect Income [Income Indirect]: This is a primary group to record all Rent, Interest on Deposits, Commission, and Dividends etc. received, Packing and Forwarding charges, Distribution charges collected from the customers. 12. Direct Expenses [Expenses Direct]: This is a primary group to hold the ledger accounts of all trading expenses like Carriage Inwards, Unloading charges, Wages, Coolie, Power and Fuel, Freight Inwards, Handling Charges, Scrap Sorting Charges etc., can be created under this group. 13. Indirect Expenses [Expenses Indirect]: This is a primary group to record all expenses paid by the company for office, maintenance, selling and distribution like Advertisement, Rent, Traveling Expenses, Maintenance & Cleaning. Expenses, General Repairs, Staff Welfare Expenses, Salary, Electricity Expenses, Telephone Expenses, Printing and Stationary, Postage & Stamps, Depreciation for current year, payment for Rent, Commission, Interest on Loans etc., Company’s share of contribution t PF, ESI etc. can be created under this group.

INVENTORYINFORMATION STOCKGROUPS Stock items can be grouped together under Stock Groups to reflect their classification based on some common features. It is the classification of different items of the shop. To create a stock group: 1. Select Inventory Info under Masters from Gate way of Tally. 2. Select Stock Groups from Inventory Info menu. 3. Select Create under Single Stock Group in Stock Groups menu. 4. Type the name of stock group to be created for example Sony. 5. By default, only Primary stock group is available. Therefore, select Primary from the option Under. 6. To get the total stock of all items created under the group, select Yes for the option Can Quantities of Items be ADDED? 7. Select Accept Yes or press Ctrl+A. Like multiple ledger accounts, multiple stock groups can also be created, displayed or altered. UNITS OF MEASURE Each stock item must have a unit of measure to count the quantity, like Liters, Meters, Kilo Grams, Numbers etc. There are two types of units of measure: They are Simple Unit of Measure (default) and Compound Unit of Measure. Simple Unit of Measure is a unit that consists of only one unit of measure e.g., KG, Meters, Liters, Numbers, Pieces etc., Compound Unit of measure is a unit that consists of two or more units e.g., a dozen of 12 numbers, one box of ten pieces, one kg of 1000 gms etc. To Create a Simple Unit of Measure, 1. From Gateway of Tally, select Inventory Info. 2. Select Units of Measure from Inventory Info menu. 3. Select Create from Units menu 4. Type a symbol to identify the unit of measure e.g. Kgs, Pkts, Dzn, Ltr, etc., 5. Type the full name of unit of measure in Formal Name e.g. Kilograms, Numbers, Liters etc. 6. Depending upon the stock item to which this unit is to be applied, specify the number of decimal places. 0 to 4 decimal places can be given. For Kgs, Ltrs, Mtrs etc., give 3. After stock items are created using the units, number of decimal places given to the units cannot be changed. 7. Press Ctrl+A or select Accept, Yes.

A compound unit is a relation between two simple units. hence, before creating a compound unit, ensure that at least two simple units are created. For example, Create two simple units Dzn. (Dozens) and Nos. (Numbers). Now give the relation between dozens and numbers as one dozen equals twelve numbers. To create a Compound Unit of Measure, 1. First create simple unit of measures e.g., Dozen and Number. 2. In Unit Creation screen, in place of Symbol, press Backspace or Shift+TAB to display the Type options — Simple and Compound. Select Compound. 3. In place of First unit, select the higher measurement e.g., Dzn. 4. In place of Conversion, type the conversion number e.g. 12. 5. In place of Second unit, select the lower measurement e.g., Nos. It will create a compound unit of measure - a dozen of 12 numbers. LOCATIONS and GODOWNS Before creating stock item to differentiate between stock held on site and at the1 warehouse, create separate storage locations called Godowns. Tally’s default locations can be edited or new locations can be created for the warehouse. Tally permits any number of locations that can be grouped and sub-grouped to match the structure as per the requirements. Creating locations is optional. Creating a Location From Gateway of Tally menu, press F11 to change company features, select Inventory Features. Select Maintain Multiple Godowns : Yes. From Gateway of Tally, Inventory info., Godowns, Single Godown Create • Name: In the name field, give the name of location. • Under: Give the location under which this location is to be sub-grouped. Select primary if it is not a child of any location. • Allow Storage of Materials: Tally permits to create a location/godown where items are not stored and treat it as a virtual location. Virtual locations are useful in case like Head Office who may have many different stock points under it that stores materials. Hence, Head Office acts like a primary group location. For example, designate London as a virtual location with Wimbledon Warehouse, Harrow Warehouse, Brixton Warehouse as sublocations/godowns. These sub-locations will allow storage of materials.

STOCK ITEMS

Like Ledgers, Stock items are the primary inventory entity. The stock items are used while recording purchase, sales, purchase returns and sales returns. This is the lowest level of information about inventory. Each item that is required to be accounted for needs to be created. In Tally, a stock ledger account for each item is termed as a “Stock Item”.

VOUCHER ENTRY INTRODUCTION

A voucher is a basic recording document of a shop or business . Day to day business transactions are entered in Tally through vouchers. For example purchase of items, sales of items, salary payment to the staff, electric bill payment etc. A voucher contains details of the transaction. A business transaction entered in the form of a Journal Entry is a Voucher. Making a voucher entry, basically includes, entering the two states of transaction, Debit (+) Credit (-) As Tally follows Double Entry System of Accounting, both Debit and Credit aspects of a transaction must be entered. To identify Debit and Credit aspects of a transaction, basic knowledge of accountancy (principles of accounting) is necessary. For the purpose of making the voucher entry (to identify Debit and Credit account in a transaction), the accounts are broadly classified into 3 types: Personal Accounts: Accounts related to person (individual, body corporate, company, association, organization, institution, bank etc.). Normally account related to names such as Raman A/c, Goodlook Shop A/c, Syndicate Bank A/c, Corporation Bank A/c, Mandovi Motors A/c, Kidiyoor Hotel A/c, M/s ABC & Co., Guru Electronics A/c, Kitabghar A/c etc. The rules of using Debit and Credit with Personal Account is as follows: Debit The Receiver

Credit The Giver

Real Accounts: Accounts related to tangible, visible items and things such as cash, cheque, all type of assets including motor vehicles, computer, land, building, machinery, furniture, live stock etc. The rules of using Debit and Credit with Personal Account is as follows: Debit What comes in

Credit What goes out

Nominal Accounts: Accounts related to intangible and invisible things, which do not have a specific shape (but it can be counted in terms of money). For example, all incomes (interest on bank deposits, commission, rent, discount received etc.) and all expenses (traveling expenses, salary, wages, freight, carriage, advertisement, depreciation, printing and stationary, selling and distribution expenses, discount on sale, commission, rent given, interest on bank loan, payment for electricity bill, water bill, telephone bill, office expenses etc.).

The rules of using Debit and Credit with Personal Account is as follows: Debit All expenses and Loss

Credit All gains and Income

VOUCHER TYPES Tally provides different types of vouchers, for recording different natures of transactions. They are broadly classified into two types. They are Accounting Vouchers and Inventory Vouchers: Accounting Vouchers Contra Voucher Payment Voucher Receipt Voucher Journal Voucher Sales Voucher Credit Note Purchase Voucher Debit Note Reversing Journal Memorandum Voucher

Key F4 F5 F6 F7 F8 Ctrl+F8 F9 Ctrl+F9 F10 Ctrl+F1O

Inventory vouchers Purchase Order Purchase Quote Purchase Order Sales Order Sales Quote Rejection In Rejection Out Stock Journal Delivery Note Receipt Note Physical Stock Voucher

Key Alt+F4 Ctrl+F4 Alt+F5 Ctrl+F5 Ctrl+F5 Ctrl+F6 Alt+F6 Ctrl+F7 Alt+F8 Alt+F9 Alt+F1 0

STEPS TO MAKE A VOUCHER ENTRY

1. Select Accounting Vouchers from Gateway of Tally menu. 2. Check the date of voucher to be entered. If the date displayed on the screen (at the top right side of voucher) is different from voucher date, to change the voucher date, press F2 function key. Type the required date and press Enter. 3. Identify the voucher type of transaction like Receipt, Payment, Purchase, Sales, Contra, Journal etc., and select voucher type by pressing appropriate function key or clicking required voucher type listed on the right side. 4. Identify the ledger accounts in the transaction. At least 2 accounts must be identified and these accounts should have been created by selecting appropriate group. 5. Identify the Debit and Credit accounts by applying the rules of Personal, Real and Nominal accounts. 6. Identify the Debit and Credit amount, total of both must be equal. 7. Enter the voucher by selecting Debit and Credit accounts, typing respective amount and a narration. 8. Select Accept Yes or Press Ctrl+A. When making a voucher entry, RECEIPT VOUCHER (F6) Receipt voucher is used to enter all receipts of cash or bank cheques or interest on bank deposits. Amount received from customers, capital introduced into the business (cash or cheque), loans taken, loans and advances refunded, commission, rent, dividend, interest etc., income received, taken back from term deposits etc., will be entered using Receipt Voucher. Even the amount received from the sale of fixed assets (not being the regular course of business) must also be treated as Receipts. A Receipt Voucher can be entered, by pressing the function key F6. The voucher background color is green. PAYMENT VOUCHER (F5) Payment voucher is used to enter all type of payments by cash or bank (payment by bank cheques). Payment of salary, wages, commission, rent, advertisement, electricity bill, traveling etc., expenses, loan installment, making term deposits, giving loans and advances, payment to sundry creditors etc., will be entered using Payment Voucher. Even the amount paid for the purchase of Fixed Assets like purchase of Machinery, Land, Building, Furniture etc., (not being the regular course of business) must also be treated as Payments. A Payment Voucher can be entered, by pressing the function key F5. The background color is yellow.

CONTRA VOUCHER (F4) Cash or cheque deposited into bank, cash withdrawn from bank, transfer of funds from one bank account to another bank will be entered through Contra Voucher. Here Debit and Credit accounts can be only Cash and Bank Accounts. The Bank Account should be a current a/c or savings bank a/c and NOT a term deposit or loan a/c. That is, Bank Account should have been created under the group Bank Accounts or Bank 0CC A/c. If the amount is deposited into the bank, then Bank A/c will be Debited and Cash A/c will be Credited. If the amount is withdrawn from, the bank, then Cash A/c is debited and Bank A/c is credited. PURCHASE VOUCHER (F9) Purchase Voucher is meant for Purchase entries. Purchases made in the regular course of business (not for office use but for, production or selling purposes) will be entered in this voucher. Purchase of fixed assets. (not being the regular course of business) must be entered through Payment Voucher (cash purchases) or Journal Voucher (credit purchases) and not by Purchase Voucher. SALES VOUCHER (F8) Sales Voucher is meant for Sale entries. Sales made in the regular course of business (not sale of fixed assets of the office) will be entered in this voucher. Sale of fixed assets (not being the regular course of business) must be entered through Receipt Voucher (cash sales) or Journal Voucher (credit sales) and not by Sales Voucher JOURNAL VOUCHER (F7) A Journal Voucher is an adjustment voucher. All amounts to be adjusted between two accounts are to be passed as a journal. Here, adjustment between the accounts means, there is no physical movement of funds. Depreciation on Fixed Assets, interest on loan charged, purchase or sale of fixed assets on credit or adjustment between two accounts etc., can be entered through the Journal. Journal entries can be entered by pressing the function key F7. The background color of voucher is blue.

CREDIT NOTE (CTRL+F8) Credit Note is used to enter the transaction related to Sales Returns or when there is an excess debit to a party.

In case of Credit Note, always Credit (To) aspect (ledger account of party who is returning the goods.) is entered first. DEBIT NOTE (CTRL+F9) Debit Note is used to enter the transaction related to Purchase Returns or when a customer is short-billed. In case of Debit note, always the Debit (By) aspect the ledger account of party to whom the goods are returned) is entered first. STOCK JOURNAL (ALTI-F7) This is used to enter transfer of materials like items are moved from one godown to another without affecting the financial accounts. To make the entry for Stock Journal press the keys Alt + F7. . In Source (Consumption) select the name of item to transfer. . From the list of Godowns, select the source godown. . Enter the quantity of items being transferred in place of Quantity. . Enter the rate of goods being transferred in place of Rate. . In Destination (Production) enter the name of item received. . Type the quantity and rate of item received at different godowns. . Type a brief note of transaction in place of Narration. Stock Journal is an inventory voucher. In it, expenses related to manufacturing an item cannot be included. To include expense details also, create an accounting voucher type named Manufacturing Journal, by selecting type of voucher Stock Journal, selecting Yes to the option Use as a Manufacturing Journal. To make a Manufacturing Journal entry press AIt-i-F7 and select Manufacturing Journal. At the top, select the name of product manufactured and type the quantity. In left side, select the items used in the production (consumption), enter the quantity. On the right side, select different expense ledger accounts and type the amount. PHYSICAL STOCK VOUCHER (ALT+F1O) This voucher is used to enter actual stock of items on a given date. Whenever the actual stock is checked, make an entry in the Physical Stock Voucher to specify the correct stock. The stock at this point is considered to be the stock in hand and all calculations are based on this stock. Type the Name of item and the quantity. If multiple locations is selected, specify the name of Godown. MEMORANDUM VOUCHER (CTRL+F1O) This is purely a non-accounting voucher. That is the entries in this voucher do not affect the accounts because, these entries are not posted to ledgers and they do not affect the final result of the company. Tally stores Memorandum Vouchers in a separate register called Memo Register. To use memorandum vouchers, F11, Company Features, in Accounting Features, select Yes to the option Use Reversing Journal & Optional Vouchers. Memorandum entries are made if any suspense payments are made (if money is given to an employee to buy some stationary items, actual payment entry can be passed only after the purchase is made. Instead of waiting till the

purchase is made and the remaining amount is returned, a memo voucher to the extent of amount given to the employee can be entered and when the transaction is finalised, it can be converted to a payment voucher), if the items are given on approval basis .or not to forget payment of some important expenses like electricity expenses to be paid on or before a specific date. VAT COMPUTATION To decide how much VAT is payable, use VAT Computation report. Actual amount of VAT payable is Output VAT — Input VAT. That is the difference between the VAT collected on sales from the Customers and VAT paid on the purchases made during a given period of time, generally, a month. To display the amount of VAT payable, select from Gateway of Tally, Display, Statutory Reports, VAT Reports, VAT Computation. PAYMENT OF VAT After deciding how much VAT is payable through the VAT Computation the Output VAT is more than the Input VAT, enter two vouchers for the of VAT. They are Journal Voucher and Payment Voucher. If the Output Vat is less than the Input VAT, then the VAT is refundable and it will be forwarded to next month. For entering payment of VAT, an additional ledger account named VAT Payable A/c created under the account group Duties and Taxes, by selecting others as the Type of Duty/Tax. In Journal Voucher, debit different Output VAT ledger accounts, credit different Input VAT ledger accounts and also credit VAT Payable A/c.