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Basic Accounting
Basic concept of accounting
Introduction
Accounting is a process of identifying, recording, summarizing and reporting economic information
to decision makers in the form of financial statements. Financial statements will be useful to the
following parties:
Suppliers
Customers
Employees
Banks
Suppliers of equipments, buildings and other assets
Lenders
Owners
Types of Accounts
There are basically three types of Accounts maintained for transactions :
Real Accounts
Personal Accounts
Nominal Accounts
Real Accounts
Real Accounts are Accounts relating to properties and assets, which are owned by the business
concern. Real accounts include tangible and intangible accounts. For example,
Land
Building
Goodwill
Purchases
Cash
Personal Accounts
Personal Accounts are Accounts which relate to persons. Personal Accounts include the following.
Suppliers
Customers
Lenders
Nominal accounts
Nominal Accounts are Accounts which relate to incomes and expenses and gains and losses of a
business concern. For example,
Salary Account
Dividend Account
Sales
Accounts can be broadly classified under the following four groups.
Assets
Liabilities
1
Tally Notes
Income
Expenses
The above classification is the basis for generating various financial statements viz., Balance Sheet,
Profit & Loss A/c and other MIS reports. The Assets and liabilities are taken to Balance sheet and the
Income and Expenses accounts are posted to Profit and Loss Account.
Golden Rules of Accounting
Real Accounts
Debt
What Comes in
Credit
What Goes out
Personal Accounts
The Receiver
The Giver
Nominal Accounts
Expenses and Losses
Incomes and Gains
Business transaction: A business transaction is The movement of money and moneys worth from
one person to another. Or exchange of values between two parties is also known as Business
Transaction.
Purchase: A purchase means goods purchased by a businessman from suppliers.
Sales: Sales is goods sold by a businessman to his customers.
Purchase Return or Rejection in or Outward Invoice: Purchase return means the return of the full or
a part of goods purchased by the businessman to his suppliers.
Sales Return or Rejection out or Inward Invoice: Sales return means the return of the full or a part of
the goods sold by the customer to the businessman.
Assets: Assets are the things and properties possessed by a businessman not for resale but for the
use in the business.
Liabilities: All the amounts payable by a business concern to outsiders are called liabilities.
Capital: Capital is the amount invested for starting a business by a person.
Debtors: Debtor is the person who owes amounts to the businessman.
Creditor: Creditor is the person to whom amounts are owed by the businessman.
Debit: The receiving aspect of a transaction is called debit or Dr.
Credit: The giving aspect of a transaction is called credit or Cr.
Drawings: Drawings are the amounts withdrawn (taken back) by the businessman from his business
for his personal, private and domestic purpose. Drawings may be made in the form cash, goods and
assets of the business.
Receipts: It is a document issued by the receiver of cash to the giver of cash acknowledging the cash
received voucher.
Tally Notes
Account: Account is a summarized record of all the transactions relating to every person, every thing
or property and every type of service.
Ledger: The book of final entry where accounts lie.
Journal entries: A daily record of transaction.
Trail Balance: It is a statement of all the ledger account balances prepared at the end of particular
period to verify the accuracy of the entries made in books of accounts.
Profit: Excess of credit side over debit side.
Profit and loss account: It is prepared to ascertain actual profit or loss of the business.
Balance Sheet: To ascertain the financial position of the business. It is a statement of assets and
liabilities.
Journals
Journal entry is an entry to the journal. Journal is a record that keeps accounting transactions in
chronological order, i.e. as they occur. Ledger is a record that keeps accounting transactions by
accounts. Account is a unit to record and summarize accounting transactions.
When a small business makes a financial transaction, they make a journal entry in their accounting
journal in order to record that transaction. The transaction is recorded in the general journal or one
of the special journals for the most active accounts. The most common special journals are the Sales
Journal, the Purchases Journal, the Cash Receipts Journal, and the Cash Disbursements Journal.
Tally Notes
purchasing of furniture. 2nd rules second
part will be applied.
Tally Notes
Rent Account Debit 3000
Tally Notes
Machinery Account Debit 1000
Interest on capital Account Debit 600
Cash Account Credit 1000
Capital Account Credit 600
16. Depreciation on fixed assets Rs. 500
20. Interest charged on drawings Rs. 500
a) Depreciation on fixed assets is the loss of
business, and every loss will be debited.
Tally Notes
Insurance company Account Debit XXXX
Tally Notes
Introduction to Tally
Tally is a Financial and Inventory Management System. Tally is one of the acclaimed Accounting
Software with large user base in India and abroad, which is continuously growing. Tally is developed
in India using Tally Development Language (TDL).
Features of Tally
1. Accounting without codes
2. Comprehensive accounting. Maintains complete range of books of Accounts, Final Accounts
like Balance Sheet, Profit and Loss Accounts, Cash and fund flow, Trial Balance and others.
3. Provide multiple reports in diverse format.
4. Various options for interest calculations.
5. Maintain multiple Godowns for Stock Management.
6. Unlimited sub-classifications to get multi-dimensional analysis and comparatives.
7. Allow accounts of multiple companies simultaneously.
8. Multiple currencies in the same transaction and viewing all reports in one or more currency.
9. Prints online.
10. Print Daybook, Balance Sheet, Ledger, Trial Balance, Profit and Loss Accounts.
11. Backup and restore options.
12. Tally is allowed to print cheques.
13. Multiple tax calculations like VAT, TDS, TCS, FBT etc.
14. Payroll Calculations.
15. Use security levels for audit purpose.
Company Creation
From the Gateway of Tally click on F3: Cmp Info from the right side panel or press ALT+F3.
From the Company Info, click on Create Company
Enter the following fields
Directory
Name
Mailing Name
Address
Statutory compliance
for
State
PIN Code
Specify the path where the company file should be stored in your computer. By default
C:\Tally\Data is the path taken
Enter your company name
Enter your company name for mailing purpose
Enter Company address
This address will display all your tally printout statement
Select the country in which your business exists. It is used for tax calculation for country
wise
Select your state
Enter your company area PIN Code
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Tally Notes
Telephone
Email
Currency Symbol
Maintain
Meaning of Ledger
Ledger in tally
Classification of similar transactions under a particular head is known as Ledger. Here in tally, ledger
is an accounting head, which is used to enter a transaction and also to identify the same in the
reports. Cash account and profit & loss account are the two predefined ledgers available in tally. The
other required ledgers can be created by the user. All the ledger are classified under the various
groups. The user has to identify the ledger and create it under the appropriate accounting group.
For example: Rent paid by cash, Rent account is debited and cash account is credited. In this
transaction, there are two ledger account viz., Rent account and Cash account. In book keeping all
the ledger accounts are primarily classified under four heads namely assets, liabilities, expenses and
incomes.
In tally, accounting ledgers can be created using accounts information menu which is available in
Gateway of Tally. An accounting ledger can also be displayed or altered using accounts information
menu. Create helps to create a new ledger, Display to view a ledger which is existing already but
need not be modified. Alter helps to make changes in an existing ledger account.
Ledgers can be deleted in the alteration menu by using the short cut key 'ALT+D', but deletion of a
ledger is not possible if transactions have been recorded in it. Every ledger should be unique in its
nomenclature; else Tally gives duplication warning and also will not accept the ledger creation.
Tally Notes
A ledger is an accounting book that facilitates the transfer of all journal entries in a chronological
sequence to individual accounts. The process of recording journal entries into the ledger is called
posting.
Type of Ledger
General Ledger
Debtors Ledger
Creditors Ledger
Accounts Name
Accrued Income
Accrued Rent/ Accrued Income
Advertisement Expenses
Advertisement Payable
Air Conditioner
Apprentice Premium
Audit Fees
Bad Debts
Bad Debts Received
Bad Debts Reserve (last year balance)
Bank
Bank Balance
Bank Charges
Bank Commission
Bank Loan
Bank Overdraft
Bills Payable
Bills Receivable
Bombay Branch
Bonds
Groups
Current Assets
Current Assets
Indirect Expenses
Current Liabilities
Fixed Assets
Direct Incomes
Indirect Expenses
Indirect Expenses
Indirect Incomes
Indirect Incomes
Bank Account
Bank Account
Indirect Expenses
Indirect Expenses
Loans & Liabilities
Bank OD
Current Liabilities
Current Assets
Branch & Division
Current Assets
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Accounting Nature
Liability
Liability
Assets
Assets
Expenses
Expenses
Income
Tally Notes
Building
Capital
Car
Car Expenses
Car Repair
Carriage
Carriage on Sales
Cash
Cash at Bank
Closing Stock
Coal & Fuel
Coal, Gas & Water of Factory
Coffee Expenses
Coke Expenses
Commission (Cr.) / Commission Received
Commission (Dr.)
Computer
Consignment Stock
Consumed Material
Coolage
Creditors
Debtors
Deferred Expenses
Deferred Income
Delhi Branch
Depreciation
Depreciation Reserve
Difference in Trial Balance (Dr or Cr)
Discount (Cr.) / Discount Received
Discount (Dr) / Discount Allowed
Donation
Drawing
Electricity Expenses
Expenses on Purchases
Expenses on Sales
Export Duty
Factory
Factory Expenses (Lighting, Power etc.)
Factory Incomes
Farm House
FDR
Fire Insurance
Fitting Charges Received
Forex Gain Loss
Freight
Freight Inward
Freight on Purchase (Freight Inward)
Fixed Assets
Capital Account
Fixed Assets
Indirect Expenses
Indirect Expenses
Direct Expenses
Indirect Expenses
Cash in Hand
Bank Account
Stock in Hand
Direct Expenses
Direct Expenses
Indirect Expenses
Indirect Expenses
Indirect Incomes
Indirect Expenses
Fixed Assets
Current Assets
Direct Expenses
Direct Expenses
Sundry Creditors
Sundry Debtors
Current Assets
Current Liabilities
Branch & Division
Indirect Expenses
Current Liabilities
Suspense Account
Indirect Incomes
Indirect Expenses
Indirect Expenses
Capital Account
Indirect Expenses
Direct Expenses
Indirect Expenses
Indirect Expenses
Fixed Assets
Direct Expenses
Direct Incomes
Fixed Assets
Current Assets
Indirect Expenses
Indirect Income
Indirect Expenses
Direct Expenses
Direct Expenses
Direct Expenses
11
Tally Notes
Freight on Sale (Freight Outward)
Freight Outward
Fuel & Power of Factory
Furniture & Fitting
Furniture & Fixture
Gas and Water
General Expenses
General Reserve
Godown Rent
Goods Sent on Consignment
Goodwill
Horse & Carts
House Rent
Hundi (Assets)
Hundi (Liability)
Import Duty
Income From Repair
Income on Assets
Income on Investments
Income Tax
Input VAT 4%, 12.5%
Insurance
Insurance Claim
Insurance Company
Interest (Dr.)
Interest on Capital
Interest on Drawing
Interest on Loan
Interest Received (Cr.)
Invest in Govt. Bond
Investment
Labour Charges
Land & Building
Lease Hold Building
Legal Expenses
LIC Premium (Dr)
LIC Refund (Cr)
Life Insurance
Loan on Mortgage, Loans
Loose Tools
Loss By Damage
Loss by Fire
Loss in Transit
Loss on Assets
Loss on Joint Venture
Machine & Tools
Machine Repair
Indirect Expenses
Indirect Expenses
Direct Expenses
Fixed Assets
Fixed Assets
Direct Expenses
Indirect Expenses
Current Liabilities
Indirect Expenses
Sales Account
Fixed Assets
Fixed Assets
Capital Account
Current Assets
Current Liabilities
Direct Expenses
Indirect Incomes
Indirect Incomes
Indirect Incomes
Capital Account
Duties & Taxes
Indirect Expenses
Indirect Incomes
Sundry Debtors
Indirect Expenses
Indirect Expenses
Indirect Incomes
Indirect Expenses
Indirect Incomes
Investment
Investment
Indirect Expenses
Fixed Assets
Fixed Assets
Indirect Expenses
Capital Account
Capital Account
Capital Account
Loans & Liabilities
Fixed Assets
Indirect Expenses
Indirect Expenses
Indirect Expenses
Indirect Expenses
Indirect Expenses
Fixed Assets
Indirect Expenses
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Tally Notes
Managers Commission
Manufacturing Expenses
Master Plus
Miscellaneous Expenses
Miscellaneous Income
Motor Cycle
Motor Cycle Repair
Mutual Fund
Octroi
Office Expenses
Oil
Opening Stock
Output VAT 4%, 12.5%
Outstanding Expenses
Packing Exp.
Pan and Tea Expenses
Personal Expenses
Petrol Expenses
Plant & Machine
Postage & Telegram
Power & Fuel
Prepaid Expenses
Printing & Advertisement
Printing & Stationery
Printing, Papers & Advertisement
Production Wages
Profit on Consignment
Profit on Jointventure
Provision for Bad Debts
Provision for Discount on Creditors
Provision for Discount on Debtors
Provision for Office Expenses
Purchase
Purchase of New Land
Purchase of Raw Material
Purchase Return
Purchase UP/ Ex-UP
Railway Authority
Rates & Taxes
Refreshment Expenses
Refrigerator
Rent
Rent & Tax
Rent on Purchase
Rent Payable
Rent Received
Repair & Renovation
Indirect Expenses
Direct Expenses
Investment
Indirect Expenses
Indirect Incomes
Fixed Assets
Indirect Expenses
Investment
Direct Expenses
Indirect Expenses
Direct Expenses
Stock in Hand
Duties & Taxes
Current Liabilities
Indirect Expenses
Indirect Expenses
Capital Account
Indirect Expenses
Fixed Assets
Indirect Expenses
Direct Expenses
Current Assets
Indirect Expenses
Indirect Expenses
Indirect Expenses
Direct Expenses
Indirect Incomes
Indirect Incomes
Indirect Expenses
Indirect Incomes
Indirect Expenses
Current Liabilities
Purchase Account
Fixed Assets
Purchase Account
Purchase Account
Purchase Account
Sundry Debtors
Indirect Expenses
Indirect Expenses
Fixed Assets
Indirect Expenses
Indirect Expenses
Direct Expenses
Current Liabilities
Indirect Incomes
Indirect Expenses
13
Tally Notes
Repairing Charges Received
Return Inward
Return Outward
Salary
Salary & Wages
Salary Payable
Sales
Sales Return
Sales UP/ Sales Ex-UP
Scooter
Shares / Bonds
Shop
Shop Expenses
Shop Rent
Showroom / Shop
Showroom Repair
Stable Expenses
Stamp & Postage
Stationery
Stock (1st April and 31st March)
Stock of Material
Sundry Creditors
Sundry Debtors
Tea Exp. Payable
Tea or Coffee Expenses
Telephone Expenses
Telephone Securities
Trade Expenses
Train Freight & Rent
Travelling Expenses
Typewriter
Unearned Income
UPTT
VAT Payable
Vehicle Repair
Wages
Wages on Production
Indirect Incomes
Sales Account
Purchase Account
Indirect Expenses
Indirect Expenses
Current Liabilities
Sales Account
Sales Account
Sales Account
Fixed Assets
Investments
Fixed Assets
Indirect Expenses
Indirect Expenses
Fixed Assets
Indirect Expenses
Indirect Expenses
Indirect Expenses
Indirect Expenses
Stock in Hand
Current Assets
Sundry Creditors
Sundry Debtors
Current Liabilities
Indirect Expenses
Indirect Expenses
Indirect Expenses
Indirect Expenses
Direct Expenses
Indirect Expenses
Fixed Assets
Current Liabilities
Duties & Taxes
Current Liabilities
Indirect Expenses
Direct Expenses
Direct Expenses
14
Tally Notes
2. Current Assets
Directly under Current Assets, you may find place for assets that do not fall under the following sub
groups:
Bank Accounts
For Current, savings, short term deposit accounts, etc.
Cash-in hand
Tally automatically opens one Cash A/c under this group. You are permitted to open more cash
accounts, if necessary.
Note: An account under Cash-in-hand group or Bank Accounts/Bank OCC A/c group is printed as
separate Cash Book in the traditional Cash Book format and does not form part of the Ledger.
Deposits (Asset)
In essence, a place for Fixed Deposits, Security Deposits, or any deposit made by the company (not
received by the company, which is a liability).
Loans & Advances (Asset)
For all loans given by the company and advances of a non-trading nature, e.g., advance against
salaries, or even for purchase of Fixed Assets. We do not recommend you to open Advances to
Suppliers account under this group. Doing so gives rise to the difficulty in ascertaining advance
position of a particular supplier and to adjust future bills against such advances. For further details,
please refer to the section on Common Errors.
Stock-in-hand
This is a special group. You may wish to open accounts like Raw Materials, Work-in- Progress and
Finished Goods. How the balances are controlled depends on whether you opted to maintain an
integrated account-cum-inventory system in the company features. (refer to Company creation
section for more details) Let's consider the options:
Integrated Accounts-cum-Inventory
You are allowed transactions in Inventory records and the account balances are automatically
reflected in the Balance Sheet as Closing Stock. You are not allowed to directly change the closing
balance of an account under this group.
Non-integrated Accounts-cum-Inventory
Accounts that fall under this group are not permitted any transactions. It allows you to hold opening
and closing balances only. Since no vouchers can be passed for these accounts, they are the only
accounts for which the closing balances can be directly altered (by an authorised user only)
Sundry Debtors
For your customer accounts. Do not open them under the Sales Account group, which is a revenue
account. For more information on common and possible errors in grouping of accounts, please refer
below to the separate paragraph on the topic.
3. Current Liabilities
You may open accounts like Outstanding Liabilities, Statutory Liabilities and other minor liabilities
directly under this group. Sub-groups under Current Liabilities are Duties and Taxes, Provisions and
Sundry Creditors
Duties and Taxes
15
Tally Notes
For all tax accounts like VAT, MODVAT, Excise, Sales and other trade taxes. A convenient place to
find the total liability (or asset in case of advances paid), as well as the break-up of individual items.
Provisions
For provision accounts like Provision for Taxation, Provision for Depreciation, etc.
Sundry Creditors
For trade creditors of the company. Do not open your supplier accounts under the Purchases
Account group, which is a revenue account. For more information on common and possible errors in
grouping of accounts, please refer below to the separate paragraph on the topic.
4. Investments
To group your investment accounts like Investment in Shares, Bonds, Govt. securities, long term
Bank deposit accounts, etc. A convenient place to view the total investments made by the company.
5. Loans (Liability)
For loans, typically long term, taken by the company.
Bank OD Accounts [Bank OCC Accounts]
Tally gives two distinct types of Bank Accounts, The Bank OCC A/c is meant to record the company's
overdraft accounts with banks. e.g., Bill Discounted A/cs, Hypothecation A/cs etc.
Note: An account under Bank OCC A/c group is printed as separate Cash Book in the traditional Cash
Book format and does not form part of the Ledger.
Secured Loans
For term loans and other long/medium term loans that have been obtained against security of some
asset. Tally does not verify the existence of the security. Typical accounts would be Debentures,
Term Loans, etc.
Unsecured Loans
For loans obtained without any security .e.g., Loans from Directors/partners or outside
parties.
6. Suspense Account
Theoretically speaking, this group should not exist. However, in modern accounting, many large
corporations use a Suspense Ledger to track moneys paid or recovered, the nature of which is not
yet known. The most common example is money paid for Travelling Advance whose details would be
known only upon submission of the TA bill. Some companies may prefer to open such accounts
under
Loans and Advances (Asset) group.
Please note that Suspense Account is a Balance Sheet item. Any expense account even if it has
'suspense' in its name, should be opened under a Revenue group like Indirect Expenses and not
under Suspense Account group.
7. Miscellaneous Expenses (Asset)
This group is typically used more for legal disclosure requirements, like Schedule VI of the Indian
Companies Act. It should hold incorporation and pre-operative expenses. Companies would write off
16
Tally Notes
a permissible portion of the account every year. A balance would remain to the extent not written
off in Profit & Loss Account. Tally does not, however, show a loss, carried forward in the Profit & Loss
Account, under this group. The Profit & Loss Account balance is shown separately in the Balance
Sheet.
8. Branch/Divisions
This group is provided to keep the ledger accounts of all companies that are your company's
branches, divisions, affiliates, sister concerns, subsidiaries, etc. This is a group of convenience. You
may not wish to utilise it in this manner. Note that Tally permits Sales and Purchase transactions to
take place with accounts opened here. Remember, these are their accounts in your books and not
their books of accounts. Just treat them as you would any party account. If you wish to maintain the
books of that branch/division on you computer, you must open a separate company. (Tally allows
maintenance of multiple company accounts).
Revenue Primary Groups
9. Sales Account
For different sales accounts. The natural segregation of your sales accounts could be based on Tax
slabs or type of sales. This also becomes a simple mechanism for preparation of Tax returns.
An example of such classification may be helpful:
Classify under Sales Accounts the following sub-groups
Domestic Sales
Export Sales
Now under Domestic Sales open the following ledgers:
Sales (10%)
Sales (5%)
Sales (exempt)
You may even open an account Sales Returns under the group Domestic Sales to view your net sales
after returns (or the returns may be directly passed through journal against the specific sales
account). Please do not open customer accounts under this group. For more details on possible
errors in this regard, please refer to the paragraph given below.
10. Purchase Account
This is similar to sales accounts, except for the purpose of the transaction.
11. Direct Income [Income Direct]
For non-trade income accounts that affect Gross Profit. All trade income accounts would naturally
fall under Sales Accounts. You may wish to use this group for accounts like Servicing Contract
Charges that follow sales of equipment. If yours is a professional services company, you may not use
the Sales Account group at all. Instead, open accounts like Professional Fees under this group.
12. Indirect Income [Income Indirect]
For miscellaneous non-sale income accounts, e.g., Rent Received and Interest Received.
13. Direct Expenses [Expenses Direct]
17
Tally Notes
For manufacturing or direct trading expenses. These accounts determine the Gross Profit of the
company. the Profit & Loss Account which is a reserved primary account. You may use this account
to pass adjustment entries through journal vouchers .e.g., transfer of profit or loss to Capital or
Reserve account.
18
Tally Notes
6.2.5 Creating Cost Centre
Go to Gateway of Tally > Accounts Info. > Cost Centres > Create.
Category: Select Projects & Assignments.
Name: Projects.
Under: Primary.
19
Tally Notes
20
Tally Notes
21
Tally Notes
Budgets
Tally allows you to create multiple budgets. There could be a budget for specific purposes, e.g., for
the bank, for the head office, optimistic budget, realistic budget, pessimistic budget, etc.
Departmental Budgets can also be created, e.g., Marketing Budget, Finance Budget, etc. As usual,
you first create budgets. You can of course alter them. Budget figures are used to compare against
actuals and to display variances. This is done by bringing up a new column when displaying a
statement and selecting the appropriate budget. We shall now go through the creation and
alteration of budgets.
Gateway of Tally > Accounts Info > Budgets
How to Manage and Operate Budgets?
Gateway of Tally > Accounts Info > Budgets Create
Name
Give the budget a name, in this case, Corporate Budget. As you may have other budgets as well, the
name distinguishes them.
Under
In the true Tally tradition, you can have a hierarchical budget set-up. At the top level is the Primary
Budget. You can set up more than one Primary Budget. Under each Primary Budget, sub-budgets can
be created.
Period of Budget
Specify the period of the budget. The period could be a month, a year or any period starting from
any date to any date.
Set/Alter Budgets of
You may want to set the budget for groups of ledger accounts or for ledger accounts individually or
for cost centres or all of them. We shall take up budget for group only. Follow the same process for
setting budgets for individual ledgers and cost centres.
Alter a Budget
Accts Info. > Budgets > Select the budget to alter
22
Tally Notes
If you select to alter the Corporate Budget of Groups of ledger accounts, say Yes to 'Set / Alter
Budgets of Groups'. The default is No. The same sub-screen for Group Budget pops up for alteration
of the figures. Alter necessary fields and accept.
Delete a Budget
From the Menu Go to Alter select the Budget and Press [ALT]+[D] to delete it.
Budget Variance
The Trial Balance and Group Summaries carry an additional 'Budget Variance' button
(Alt+B) which is active if Budgets are active and at least one budget exists. Pressing this button will
create an automatic display of Budgets, Actuals with Percentage, Variance from budget with
Percentage in three columns. This is a first-step offering of the facility and is being fine-tuned to
enhance its range and diversity of options which you should see shortly.
Inventory Information
The different inventory information that you would provide to Tally by way of
masters are:
Gateway of Tally > Inventory Info Stock Items
Like Ledgers, Stock items are the primary inventory entity. You will use stock items while recording
their receipts and issues. This is lowest level of information about your inventory. Each item that is
required to be accounted for, needs to be created. In fact, you will create a stock ledger account for
each item and Tally calls this account 'Stock Item'.
Stock Groups
Stock items can be grouped together under Stock Groups to reflect their classification based on
some commonality. Grouping would enable easy location and reporting of stock items in statements.
Hence, items of a particular brand can be grouped together so that you can extract stock of all items
of that brand. For example, create Stock Groups like Sony, Maxell, Verbatim. Your stock items could
then be Sony 3.5" disks, Maxell 3.5" disks, Sony tapes, Maxell tapes, etc. Classify the Sony products
under the Stock Group Sony. Now you have ready details of all Sony products suitably classified. You
may even group items as Raw materials and Finished Goods. You can create sub-groups of Stock
Groups for deeper analysis.
Stock Categories
The concept is similar to Cost Categories. You may wish to refer to the Chapter on Cost
Categories to grasp the similarity/differences.
This option will come up in the menu only if you have opted for stock categories in [F11]
Comp. Features.
Stock Categories offers parallel classification of items. You may create Stock Categories like Floppy
Disks and Floppy Drives. In the above example in Stock Groups, you would know how many Sony
3.5" floppies are in stock and separately, the stocks of Maxell floppies. You would also know from
the Sony stock group the stock of all Sony items. However, should you require information like total
stock of floppy disks or alternative items that could be used, these would be best available through
Stock Categories. If you classify both Sony 3.5" diskettes and Maxell 3.5" diskettes under the Stock
Category Floppy Disks, you know your total stock of floppy disks. Since the items are substitutes of
each other, if one is out of stock, you can offer the other of the same category.
23
Tally Notes
Note: The Stock Query option under Statements of Inventory Display will reveal the strength of this
feature.
Note: You should configure inventory info using [F12] and [F11] to select only those
features that you need. Try not to select features that you do not need.
Stock Groups
Gateway of Tally > Inventory Info > Stock Groups
What is a Stock Group?
The concept of stock groups has been explained above. Before we consider stock groups you would
need to know about stock items. Like Ledgers, Stock items are the primary inventory entity. You will
use stock items while recording their receipts and issues. This is lowest level of information about
your inventory. Each item which you want to account for, needs to be created. In fact, you will
create a stock ledger account for each item and Tally calls this account 'Stock Item'. Stock items can
be grouped together under Stock Groups to reflect their classification based on of some
commonality. Grouping would enable easy location and reporting of stock items in statements.
Hence, items of a particular brand can be grouped together so that you can extract stock of all items
of that brand. For example, create Stock Groups like Sony, Maxell, Verbatim. Your stock items could
then be Sony 3.5" disks, Maxell 3.5" disks, Sony tapes, Maxell tapes, etc. Classify the Sony products
under the Stock Group Sony. Now you have ready details of all Sony products suitably classified. You
may even group items as Raw materials and Finished Goods. You can create sub groups of Stock
Groups for deeper analysis
Creating a Stock Group
Gateway of Tally > Inventory Info > Stock Groups > Single Create
Name
Give the name of the stock group. Here we wish to create a group Sony.
Under
Specify whether it is a primary group or a sub-group of another group. Select from the pop up list.
Here we select Primary from the list. Use Alt+C to create a parent if you do not have the group you
want in the list.
Can quantities of items be ADDED?
This really pertains to information on the stock items that you would create under this stock group
Sony in this case. The stock items created under the group should have similar units to be 'addable'.
You obviously would not want to add Kgs with Pcs (where you have a group like 'Consumables' and
items like 'grease' and 'rag cloth' which are measured in kg and metres respectively). We select Yes
here because we want to create items like floppy disks and disk drives etc which at this point we feel
would be addable and the total meaningful. You may later set it to No, if you find that the totals do
not make sense. It is, possibly, easier to set it to No initially and later set it to Yes on assessing the
item units in the group.
Tally Notes
Vch Types
Units
Currency
You may switch to these master types to create them. Currency & Budget option are
activated only when you have opted for the same in [F11]:Company Features.
Tally Notes
Payment Voucher.
The Payment Entry screen appears in Single Entry Mode by default (as the option "Use
Single Entry mode for Pymt/Rcpt/Contra" is set to YES > in F12: Configure from
Payment Voucher).
For example, the company settles expenses of conveyance, staff welfare, postage and
stationery through cash all in one voucher. The entry is displayed as:
You are prompted to choose the cash or bank ledger, which will pay the amount (the
credit ledger).
Tally Notes
The entry in double-entry mode is displayed as:
On the Receipt entry screen, access F12: Configure -> activate the option "Use
Payment/Receipt as Contra" the behaviour is similar to that of Payment entry as Contra.
Important:
1. Use the buttons on the right-hand side of the screen to Explore the Potential of Tally.
2. Press [Enter] wherever the cursor is placed to know the Depth of Tally!
Tally Notes
Gateway of Tally > Accounting Vouchers > selecting F8, Tally displays the Sales
Invoice screen. The Invoice mode is default. To enter details of sale transactions use
Tally's Sales entry (F8 in Accounting Vouchers).
Sales entries can be made in the Voucher as well as Invoice Formats.
Invoicing or sales invoicing is not very different from sales voucher entry. The advantage of using the
invoice format for sales invoice entry is that, automatic calculations of taxes and duties (ledger
accounts classified under the group 'Duties & Taxes') is possible. The default Sales Invoice screen
appears as:
Tally prompts for the Sales Ledger to be allocated to - at the beginning of the entry. There after, any
number of stock items or account ledgers can be selected one after another enabling faster data
entry. This is possible as the option Use Common Ledger A/c for Item Allocation in F12: Configure
on the invoice entry screen is set to YES (by default)
There are two types of Invoices, namely,
Item Invoice > you can select ITEMS for invoicing
Account Invoice > you can select LEDGERS for invoicing
Note: Click on the links "Example" for more details
Tally Notes
1. Receipt note voucher (Alt + F9)
2. Rejections-in voucher (Ctrl+F6)
3. Delivery note voucher (Alt +F8)
4. Rejections-out voucher (Alt+F6)
5. Stock journal voucher (Alt+F7)
6. Physical stock voucher (Alt+F10)
Unless you have Tracking numbers activated in F11:Company Features, the Goods In Receipt Note
and Goods Out Delivery Note vouchers will not be activated. Tally will assume that goods are
received along with Purchase Vouchers and Goods are delivered along with Sales Vouchers/Invoices.
When Tracking Numbers are activated, you inform Tally that you may receive goods that are not
accompanied by Supplier's invoice the invoice will arrive separately. Also that you may not deliver
goods together with your invoice you may invoice later.
Note: You are allowed, however, in a voucher, to select 'Not Applicable' when the
Tracking Number sub-screen comes up. This would update inventory right away without the need to
pass a separate inventory voucher. The vice-versa is also true. See Advanced voucher entry for more
details.
You can alter these vouchers to suit your company, as well as create new ones. For example, if you
wish to distinguish between delivery notes for stock delivered from different locations, you can
create vouchers to do this. The function of each voucher type is now explained.
Tally Notes
How to Create a Stock Journal?
Gateway of Tally > Voucher Entry > [ALT]+F7 or Click on Stock Journal
A stock journal is used to transfer materials or stock from one location to another location.
Stocks could even simply be shown as consumed. Or even only produced without both
consumption and production. Hence, it is not like other journal where debits and credits
must match.
You can specify quantities that are move as well as their rates and amounts. If standard
rates have been entered in the stock item masters, they will appear. In the target location,
you can specify additional costs incurred without actually affecting accounting at all. Only
the stock value goes up. Hence, it is technically correct where an expense incurred on
production or inward has been accounting for in the cost of that item.
The Stock Journal Screen has three parts the top part accepts general information,
the left hand side is the Source location or Consumption Part and the right hand side is
the Destination location or the Production Part. While you must furnish the common
information required in the top part, you may elect to give information for only the left or
the right part or both.
How to Create a Purchase Order?
Purchase Order details will also depend on configuration settings. Hence, have a look at
the configuration and voucher types.
Gateway of Tally > Voucher Entry > F9:Purchase > Select Purchase Order
Party's A/c Name
Give the supplier's name. Type in the same manner as voucher entry and select from list
of Ledger Accounts. Use [alt]+[C] to create a new account.
Order No
The voucher number can be treated as your Purchase Order number. You may configure
the voucher type through Acct. Info > Voucher Types to set prefixes and suffixes for
Purchase Orders. This particular Order No. field is an additional field to record order
number if different from the voucher number.
Name of the Item
Give the name of the stock item for which the order is to be placed. Once the name is
given the Item Allocations sub-screen pops-up that needs to be filled in.
Due on
The due date for delivery of the item. This will enable monitoring of outstanding deliveries.
The order can be split for delivery on different dates.
Location
In case multiple location feature is active, this field is required to be given, else it does not
appear.
Quantity, Rate and Amount
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Tally Notes
Give the quantity of the item required, and its rate. The amount is calculated but is
modifiable to enable rounding off.
Additional Cost Details
Additional cost on the item may be incurred which can be mentioned here. Give by way
of percentage of the item cost or a flat amount. If not, select End of List. Additional costs
increase the value of the item and do not independently appear in the nominal ledger
account or expense.
Next Item
The cursor then comes to the Item field once again and you can enter another item to
order. If no other item is required, press [enter] on the blank field to take the cursor to the
tax/expense field.
Expense/Tax
Once the item details have been entered, you might specify tax to be charged and other
expenses like freight, if any. The tax or expense has to exist as a ledger account or it may
be created using [alt]+[C]. We shall select tax @ 17.5% to be charged on the item
values. The order entry screen would then appear thus:
Narration
Optional. You may give some particulars about the order.
How to Create Sales Orders?
Sales order entry is exactly like Purchase Orders.
Sales Order details will also depend on configuration settings. Hence, have a look at the
configuration and voucher types.
Gateway of Tally > Voucher Entry > F8:Sales > Select Sales Order
Party's A/c Name
Give the customer's name. Type in the same manner as voucher entry and select from
list of Ledger Accounts. Use [alt]+[C] to create a new account.
Order No
The voucher number can be treated as your internal serialised order number. The field
Order No. is advised to be used for the customer's order number.
Name of the Item
Give the name of the stock item for which the order is to be placed. Once the name is
given the Item Allocations sub-screen pops-up that needs to be filled in.
Due on
The due date for delivery of the item. This will enable monitoring of outstanding deliveries.
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Tally Notes
The order can be split for delivery on different dates.
Location
In case multiple location feature is active, this field is required to be given, else it does
not appear.
Quantity, Rate and Amount
Give the quantity of the item required, and its rate. The amount is calculated but is
modifiable to enable rounding off.
Additional Cost Details
There is no additional cost details for sales orders. They exist only for Purchases as the
values are added to the cost price. In case of sales, additional cost need to be entered
below the line along with tax.
Next Item
The cursor then comes to the Item field once again and you can enter another item to
order. If no other item is required, press [enter] on the blank field to take the cursor to the
tax/expense field.
Expense/Tax
Once the item details have been entered, you might specify tax to be charged and other
expenses like freight, if any. The tax or expense has to exist as a ledger account or it may
be created using [alt]+[C]. We shall select tax @ 17.5% to be charged on the item
values. The order entry screen would then appear thus:
Narration
Optional. You may give some particulars about the order.
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