Computerize-Professional Accounting

Course Duration- 1 Year’s and 6 months’ 

Course Semesters

These are three Semesters-

1. 1.       First Semester- Computer Basic, Word-Processing, Spreadsheet, Internet

   2.       Second Semester- Manual Accounting

   3.       Third Semester- Computerize Accounting

   a.       Business’s Transaction

   b.       Company Management

It is necessary to understand some basic accounting terms which are daily in business world. These terms are called accounting terminology.

Ø  Transaction

“An event the recognition of which gives rise to an entry in accounting records. It is an event which results in change in the balance sheet equation. That is, which changes the value of assets and equity. In a simple statement, transaction means the exchange of money or moneys worth from one account to another account Events like purchase and sale of goods, receipt and payment of cash for services or on personal accounts, loss or profit in dealings etc., are the transactions”. Cash transaction is one where cash receipt or payment is involved in the exchange.

Ø  Debtor

A person who owes money to the firm mostly on account of credit sales of goods is called a debtor. For example, when goods are sold to a person on credit that person pays the price in future, he is called a debtor because he owes the amount to the firm.

Ø  Creditor

A person to whom money is owing by the firm is called creditor. For example, Madan is a creditor of the firm when goods are purchased on credit from him

Ø  Capital

It means the amount (in terms of money or assets having money value) which the proprietor has invested in the firm or can claim from the firm. It is also known as owner’s equity or net worth. Owner’s equity means owner’s claim against the assets. It will always be equal to assets less liabilities, say:

Capital = Assets – Liabilities.

Ø  Liability

It means the amount which the firm owes to outsiders that is, excepting the proprietors. In the words of Finny and Miller, “Liabilities are debts; they are amounts owed to creditors; thus the claims of those who ate not owners are called liabilities”. In simple terms, debts repayable to outsiders by the business are known as liabilities.

Ø  Asset

Any physical thing or right owned that has a money value is an asset. In other words, an asset is that expenditure which results in acquiring of some property or benefits of a lasting nature.

Ø  Goods

It is a general term used for the articles in which the business deals; that is, only those articles which are bought for resale for profit are known as Goods.

Ø  Revenu

It means the amount which, as a result of operations, is added to the capital. It is defined as the inflow of assets which result in an increase in the owner’s equity. It includes all incomes like sales receipts, interest, commission, brokerage etc., However, receipts of capital nature like additional capital, sale of assets etc., are not a pant of revenue.

Ø  Expense

The terms ‘expense’ refers to the amount incurred in the process of earning revenue. If the benefit of an expenditure is limited to one year, it is treated as an expense (also know is as revenue expenditure) such as payment of salaries and rent.

Ø  Expenditure

Expenditure takes place when an asset or service is acquired. The purchase of goods is expenditure, where as cost of goods sold is an expense. Similarly, if an asset is acquired during the year, it is expenditure, if it is consumed during the same year, it is also an expense of the year.

Ø  Purchases

Buying of goods by the trader for selling them to his customers is known as purchases. As the trade is buying and selling of commodities purchase is the main function of a trade. Here, the trader gets possession of the goods which are not for own use but for resale. Purchases can be of two types. viz, cash purchases and credit purchases. If cash is paid immediately for the purchase, it is cash purchases, If the payment is postponed, it is credit purchases.

Ø  Sales

When the goods purchased are sold out, it is known as sales. Here, the possession and the ownership right over the goods are transferred to the buyer. It is known as. ‘Business Turnover’ or sales proceeds. It can be of two types, viz.,, cash sales and credit sales. If the sale is for immediate cash payment, it is cash sales. If payment for sales is postponed, it is credit sales.

Ø  Stock

The goods purchased are for selling, if the goods are not sold out fully, a part of the total goods purchased is kept with the trader unlit it is sold out, it is said to be a stock. If there is stock at the end of the accounting year, it is said to be a closing stock. This closing stock at the year end will be the opening stock for the subsequent year.

Ø  Drawings

It is the amount of money or the value of goods which the proprietor takes for his domestic or personal use. It is usually subtracted from capital.

Ø  Losses

Loss really means something against which the firm receives no benefit. It represents money given up without any return. It may be noted that expense leads to revenue but losses do not. (e.g.) loss due to fire, theft and damages payable to others,

Ø  Account

It is a statement of the various dealings which occur between a customer and the firm. It can also be expressed as a clear and concise record of the transaction relating to a person or a firm or a property (or assets) or a liability or an expense or an income.

Ø  Invoice

While making a sale, the seller prepares a statement giving the particulars such as the quantity, price per unit, the total amount payable, any deductions made and shows the net amount payable by the buyer. Such a statement is called an invoice.

Ø  Voucher

A voucher is a written document in support of a transaction. It is a proof that a particular transaction has taken place for the value stated in the voucher. Voucher is necessary to audit the accounts.

Ø  Proprietor

The person who makes the investment and bears all the risks connected with the business is known as proprietor.

Ø  Discount

When customers are allowed any type of deduction in the prices of goods by the businessman that is called discount. When some discount is allowed in prices of goods on the basis of sales of the items, that is termed as trade discount, but when debtors are allowed some discount in prices of the goods for quick payment, that is termed as cash discount.

Ø  Solvent

A person who has assets with realizable values which exceeds his liabilities is insolvent.

Ø  Insolvent

A person whose liabilities are more than the realizable values of his assets is called an insolvent.

Accounting Equation

As indicated earlier, every business transaction has two aspects. One aspect is debited other aspect is credited. Both the aspects have to be recorded in accounts appropriately. American Accountants have derived the rules of debit and credit through a ‘novel’ medium, i.e., accounting equation. The equation is as follows:

Assets = Equities

The equation is based on the principle that accounting deals with property and rights to property and the sum of the properties owned is equal to the sum of the rights to the properties. The properties owned by a business are called assets and the rights to properties are known as liabilities or equities of the business. Equities can be subdivided into equity of the owners which is known as capital and equity of creditors who represent the debts of the business know as liabilities. These equities may also be called internal equity and external equity. Internal equity represents the owner’s equity in the assets and external represents he outsider’s interest in the asset. Based on the bifurcation of equity, the accounting equation can be restated as follows:

Assets = Liabilities + Capital            (Or)     Capital = Assets – Liabilities            (Or)     Liabilities = Assets – Capital.

he equation is fundamental in the sense that it gives a foundation to the double entry book-keeping system. This equation holds good for all transaction and events and at all periods of time since every transaction and events has two aspects.

Part-2

JOURNAL

Introductions

When the business transactions take place, the first step is to record the same in the books of original entry or subsidiary books or books of prime or journal. Thus journal is a simple book of accounts in which all the business transactions are originally recorded in chronological order and from which they are posted to the ledger accounts at any convenient time. Journalsing refers to the act of recording each transaction in the journal and the form in which it is recorded, is known as a journal entry.

Advantages Of Journal

The following are the inherent advantages of using journal, though the transactions can also be directly recorded in the respective ledger accounts;

1.    As all the transactions are entered in the journal chronologically, a date wise record can easily be maintained;

2.    All the necessary information and the required explanations regarding all transactions can be obtained from the journal; and

3.    Errors can be easily located and prevented by the use of journal or book of prime entry.

The specimen journal is as follows:

Date   Particulars                 L.F.                   Debit              Credit

Rs.                   Rs.

1          2                                  3                      4                      5

The journal has five columns, viz. (1) Date; (2) Particulars; (3) Ledger Folio;

(4) Amount (Debit); and (5) Amount (Credit) and a brief explanation of the transaction by way of narration is given after passing the journal entry.

Date: In each page of the journal at the top of the date column, the year is written and in the next line, month and date of the first entry are written. The year and month need not be repeated until a new page is begun or the month or the year changes. Thus, in this column, the date on which the transaction takes place is alone written.

Particulars: In this column, the details regarding account titles and description are recorded. The name of the account to be debited is entered first at the extreme left of the particulars column next to the date and the abbreviation ‘Dr.’ is written at the right extreme of the same column in the same line. The name of the account to be credited is entered in the next line preceded by the word “To” leaving a few spaces away from the extreme left of the particulars column. In the next line immediately to the account credited, a short about the transaction is given which is known as “Narration”. “Narration” may include particulars required to identify and understand the transaction and should be adequate enough to explain the transaction. It usually starts with the word “Being” which means what it is and is written within parentheses. The use of the word “Being” is completely dispense with, in modern parlance. To indicate the completion of the entry for a transaction, a line is usually drawn all through the particulars column.

Ledger Folio: This column is meant to record the reference of the main book, i.e., ledger and is not filled in when the transactions are recorded in the journal. The page number of the ledger in which the accounts are appearing is indicated in this column, while the debits and credits are posted o the ledger accounts.

Amount (Debit): The amount to be debited along with its unit of measurement at the top of this column on each page is written against the account debited.

Amount (Credit): The amount to be credited along with its unit of measurement at the top of this column on each page is written against the account credited.

Sub-Division Of Journal

When innumerable number of transactions takes place, the journal, as the sole book of the original entry becomes inadequate. Thus, the number and the number and type of journals required are determined by the nature of operations and the volume of transactions in a particular business. There are many types of journals and the following are the important ones:

1.    Sales Day Book- to record all credit sales.

2.    Purchases Day Book- to record all credit purchases.

3.    Cash Book- to record all cash transactions of receipts as well as payments.

4.    Sales Returns Day Book- to record the return of goods sold to customers on credit.

5.    Purchases Returns Day Book- to record the return of goods purchased from suppliers on credit.

6.    Bills Receivable Book- to record the details of all the bills received.

7.    Bills Payable Book- to record the details of all the bills accepted.

8.    Journal Proper-to record all residual transactions which do not find place in any of the aforementioned books of original entry.

Part-3

Ledger

Ledger is a main book of account in which various accounts of personal, real and nominal nature, are opened and maintained. In journal, as all the business transactions are recorded chronologically, it is very difficult to obtain all the transactions pertaining to one head of account together at one place. But, the preparation of different ledger accounts helps to get a consolidated picture of the transactions pertaining to one ledger account at a time. Thus, a ledger account may be defined as a summary statement of all the transactions relating to a person, asset, expense, or income or gain or loss which have taken place during a specified period and shows their net effect ultimately. From the above definition, it is clear that when transactions take place, they are first entered in the journal and subsequently posted to the concerned accounts in the ledger. Posting refers to the process of entering in the ledger the information given in the journal. In the past, the ledgers were kept in bound books. But with the passage of time, they became loose-leaf ones and the advantages of the same lie in the removal of completed accounts, insertion of new accounts and arrangement of accounts in any required manner.

Sub-Division Of Ledger

In a big business, the number of accounts is numerous and it is found necessary to maintain a separate ledger for customers, suppliers and for others. Usually, the following three types of ledgers are maintained in such big business concerns.

1.    Debtors’ Ledger: It contains accounts of all customers to whom goods have been sold on credit. From the Sales Day Book, Sales Returns Book and Cash Book, the entries are made in this ledger. This ledger is also known as sales ledger.

2.    Creditors’ Ledger: It contains accounts of all suppliers from whom goods have been bought on credit. From the Purchases Day Book, Purchases Returns Book and Cash Book, the entries are made in this ledger. This ledger is also known as Purchase Ledger.

3.    General Ledger: It contains all the residual accounts of real and nominal nature. It is also known as Nominal Ledger.

Distinction between journal and ledger

1.    Journal is a book of prime entry, whereas ledger is a book of final entry.

2.    Transactions are recorded daily in the journal, whereas posting in the ledger is made periodically.

3.    In the journal, information about a particular account is not found at one place, whereas in the ledger information about a particular account is found at one place only.

4.    Recording of transactions in the journal is called journalising and recording of transactions in the ledger is called posting.

5.    A journal entry shows both the aspects debit as well as credit but each entry in the ledger shows only one aspect.

6.    Narration is written after each entry in the journal but no narration is given in the ledger.

7.    Vouchers, receipts, debit notes, credit notes etc., from the basic documents form journal entry, whereas journal constitutes basic record for ledger entries.

Subsidiary Books

Introduction

Journal is subdivided into various parts known as subsidiary books or sub-divisions of journal. Each one of the subsidiary books is a special journal and a book of original or prime entry. There are no journal entries when records are made in these books. Recording the transactions in a special journal and then in the ledger accounts is the practical system of accounting which is also referred to as English System. Though the usual type of journal entries are not passed in these sub-divided journals, the double entry principles of accounting are strictly followed.

Kinds Of Subsidiary Books

There are different types of subsidiary books which are commonly used in any

1.    Purchases Book

This book is used to record all credit purchases made by the business concern from its suppliers. This book is also known as ‘Purchases Books’, ‘Purchases Journal’ or ‘Invoice Book’. It contains five columns, viz., Date, Particulars, Ledger Folio, Inward Invoice Number and Amount. Whenever any credit purchase is made, the date on which the transaction has taken place is entered in the ‘Date Column’, the name of the party from whom the purchase has been made the particulars column, the inward invoice number with which the purchase has been made in the ‘inward Invoice Number Column’ and the money value of the purchase in the ‘Amount Column’. The ‘L.F. Column’ is to record the ledger folio number while posting is made.

Posting: The total of purchases book for a specified period is debited to the purchases account in the Ledger. The personal accounts are posted by crediting the individual accounts.

2.    Sales books

This book is used to record all credit sales effected by the business to its customers. This book is also called as ‘Sales Book’, ‘sales Journal’ or ‘Sold Book’. It contains five columns, viz., Date, Particulars, L.F., Outward Invoice Number and Amount. When any credit sales is effected, the date is entered in the ‘Date Column’, the name of the party to whom the sale is made in the ‘Particulars Column’, the invoice number with which the sales have been effected in the ‘Out-ward Invoice Number Column’ and the money value of the sales in the ‘Amount Column’, The LF column is entered while posting is effected.

Posting: The total of the Sales Book for a specified period is credited to the Sales Account in the Ledger. The personal account is posted by debiting the individual accounts.

3.    Purchases Returns Books

This book is used to record all transactions relating to the goods returned to suppliers. This book is also known as ‘Purchases Returns journal’ or ‘Returns Outward Book’, the specimen ruling of a Purchases Returns Book is given below:

4.    Sales Returns Books

This book is used to record all transactions relating to goods returned by customers. This book is also known as ‘Sales Return Journal’ or ‘Returns Inwards Book’, the specimen ruling of sales returns book is given below:

5.    Bills Receivable Book:

This book is used to record all the bills received by the business from its customers. It contains details regarding the name of the acceptor, date of the bill, place of payment, term of the bill, due date and the amount of the bill. The specimen ruing of a Bills Receivable Book is given below:

6.    Bills Receivable Book

While posting, the individual customers’ accounts will be credited and the total of the Bills Receivable Book for a specified period will be debited to the Bills Receivable Account in the Ledger.

7.    Bills Payable Book:

This book is used to record all the bills accepted by the business drawn by its creditors. It contains details regarding the name of the drawer, payee and date of acceptance, due date, place of payment, term and amount of the bill.

8.    Journal Proper

This book is used to record all the residual transactions which cannot find place in any of the subsidiary books. While recording, the entries are made in the journal covering both the aspects of the transaction. The following are some of the examples of transactions which are entered in this book.

1.    Opening entries and closing entries.

2.    Adjusting entries

3.    Transfer entries from one account to another account.

4.    Rectification entries.

5.    Bills of Exchange Entries

6.    Credit Purchase/sale of an asset other than goods.

Cash Book

Cash Book is a sub-division of Journal recording transactions pertaining to cash receipts and payments. Firstly, all cash transactions are recorded in the Cash Book wherefrom they are posted subsequently to the respective ledger accounts. The Cash Book is maintained in the form of a ledger with the required explanation called as narration and hence, it plays a dual role of a journal as well as ledger. All cash receipts are recorded on the debit side and all cash payments are recorded on the credit side. All cash transactions are recorded chronologically in the Cash Book. The Cash Book will always show a debit balance since payments cannot exceed the receipts at any time.

Kinds of Cash Book: From the above it can be observed that the Cash Book serves as a subsidiary books as well as ledger. Depending upon the nature of business and the type of cash transactions, various types of Cash books are used. They are:

1.    Single Column Cash Book

2.    Two Column Cash Book or Cash Book with cash and discount columns.

3.    Three Columnar Cash Book or Cash Book with cash, bank and discount columns.

4.    ‘Bank’ Cash Book or Cash Book with bank and discount columns.

5.    Petty Cash Book.

Basic Document For Subsidiary Books

Inward Invoice:

This is the document sent by the suppliers of goods giving details of goods sent, price, value, discount etc. It is the basis for entries in purchases book.

Outward Invoice:

This is a document sent by the firm to the customers, showing the details of goods supplied, their price and value, discounts etc., it is the basis for writing sales book.

Debit Note:

It is a simple statement sent by a person to another person showing the amount debited to the account of the latter along with a brief explanation. The debit notes are issued by a trader relating to purchase returns in order to put up his claim for abatement of his dues to the other party. Debit notes are serially numbered and are similar to invoices although they are usually printed in red ink.

Credit Note:

It is nothing but a statement sent by one person to another person showing the amount credited to the account of the latter along with a brief explanation. The credit notes are used for sales return in order to intimate related abatement and are similar to invoice although they are usually printed in red ink.

Cash Receipts and Vouchers:

These are the vouchers and receipts for cash received and paid. Entries in cash book are made on the strength of the vouchers and receipts. They are also useful for auditing purpose.

Contra Entries

For any single transaction the same account cannot be debited and credited. But since cash and bank accounts are maintained in the cash book, the debit and credit may be found in the two different accounts in the Cash Book. They are transactions which affect both the sides of the Cash Book. For instance, when cash is deposited into the bank, bank account should be debited and cash account should be credited. Hence, on the debit side of the Cash Book. ‘To Cash’ is written in the particulars column and the amount is entered in the bank column. Similarly, on the credit side of the Cash Book, ‘By Bank’ is written in the particulars column and the amount is entered in the cash column.

When cash is withdrawn from the bank, on the debit side of the Cash Book, ‘To Bank’ is written in the particulars column and the amount is written in the cash column. Likewise, on the credit side of the Cash Book, ‘By Cash’ is written in the particulars column and amount is entered in the bank column. Therefore, those entries which appear on both the sides of the Cash Book are called Contra Entries and they are identified and denoted in the Cash Book itself by writing the letter ‘C’ in the Ledger Folio Columns on either side. For double entry procedure is completed in the cash book itself, no further positing is made in the ledger.

In a three columnar Cash Book, cash and bank columns are balanced as any other ledger account and discount columns are imply totaled. To know the balance of the discount columns, a separate account, viz., discount account is opened in the ledger. While the cash column will always show a debit balance, the bank column may show a credit balance at times. The credit balance in the bank column represents nothing but bank overdraft.

Discounts

Trade discount

When a customer buys goods regularly or buys large quantity or buys for a large amount, the seller is usually inclined to allow a concession in price. He will calculate the total price according to the list of catalogue. But after the total is arrived at, he will make a deduction 5% or 10% depending upon his business policy. This deduction is known as Trade discount.

Cash Discount

An amount which is allowed for the prompt settlement of debt arising out of a sale within a specified time and calculated on a percentage basis is known as cash discount, i.e., it is always associated with actual payment.

Difference Between Trade Discount and Cash Discount

Trade discount

Ø  It is given by the manufacturer or the wholesaler to a retailer and not to others.

Ø  It is allowed on a certain quantity being purchased.

Ø  It is a reduction in the catalogue price of an article.

Ø  It is not usually accounted for in the books since the net amount (i.e. after deducting discount) is shown.

Ø  It is allowed only when there is a sale either cash or credit.

Ø  It is allowed on payment being made before a certain date.

Ø  It is a reduction in the amount due by a debtor.

Ø  This discount must have to be accounted for in the books since it is deducted from the gross selling price.

Ø  It is allowed only when there is cash receipt or cash payment including cheques.

Ø  It varies from customer to customer depending on the time and period of payment.

Ø  It is allowed only on condition. The dues should be paid within the stipulated time. If not, the debtor is not eligible for cash discount.

Cash discount

Ø  It may be allowed by seller to any debtor.

Ø  It is allowed or not allowed according to sales policy followed by a business concern.

Part-4

TRIAL BALANCE

Introduction

According to the dual aspect concept, the total of debit balance must be equal to the credit balance. It is a must that the correctness of posting to the ledger accounts and their balances be verified. This is done by preparing a trail balance.

Meaning

Trial balance is a statement prepared with the balances or total of debits and credits of all the accounts in the ledger to test the arithmetical accuracy of the ledger accounts. As the name indicates it is prepared to check the ledger balances. If the total of the debit and credit amount columns of the trail balance are equal, it is assumed that the posting to the ledger in terms of debit and credit amounts is accurate. The agreement of a trail balance ensure arithmetical accuracy only, A concern can prepare trail balance at any time, but its preparation as on the closing date of an accounting year is compulsory.

Objectives Of Preparing A Trail Balance

1.    It gives the balances of all the accounts of the ledger. The balance of any account can be found from a glance from the trail balance without going through the pages of the ledger.

2.    It is a check on the accuracy of posting. If the trail balance agrees, it proves:

i.              That both the aspects of each transaction are recorded and

ii.             That the books are arithmetically accurate.

3.    It facilitates the preparation of profit and loss account and the balance sheet.

4.    Important conclusions can be derived by comparing the balances of two or more than two years with the help of trail balances of those years.

Features Of Trail Balances

The following are the important features of a trail balances:

1.    A trail balance is prepared as on a specified date.

2.    It contains a list of all ledger account including cash account.

3.    It may be prepared with the balances or totals of Ledger accounts.

4.    Total of the debit and credit amount columns of the trail balance must tally.

5.    It the debit and credit amounts are equal, we assume that ledger accounts are arithmetically accurate.

6.    Difference in the debit and credit columns points out that some mistakes have been committed.

7.    Tallying of trail balance is not a conclusive profit of accuracy of accounts.

Methods Of Preparing Trail Balance

A trail balance refers to a list of the ledger balances as on a particular date. It can be prepared in the following manner:

1.    Total Method

According to this method, debit total and credit total of each account of ledger are recorded in the trail balance.

2.    Balance Method

According to this method, only balance of each account of ledger is recorded in trail balance. Some accounts may have debit balance and the other may have credit balance. All these debit and credit balances are recorded in it. This method is widely used.

Part-5

Manufacturing Account

Introduction

‘Final Statements’ generally refer to two statement prepared by a business concern at the end of every accounting year. They are (I) Income statement and (2) Balance sheet. In case of trading concerns these statements are prepared under the headings ‘Trading and profit and loss account’ and ‘Balance sheet.’ In case of manufacturing concerns these statements are titled ‘Manufacturing, Trading, and Profit and Loss Account’ and ‘Balance Sheet.’ In case of Limited companies they are called ‘Profit and Loss Account’, ‘Profit and Loss appropriation account’ and ‘Balance sheet’.

Meaning Of Manufacturing Account

Manufacturing concerns which convert raw material into finished product is required to prepare manufacturing account and then prepare trading and profit and loss account. This is necessary because they have to ascertain cost of goods manufactured, gross profit and net profit.

Purpose Of Manufacturing Account

The main purpose of manufacturing account is to show:

1.    Cost of goods manufactured; and

2.    Major items of costs such as raw material consumed, productive wages, direct and indirect expenses of production.

Various Items Shown In Manufacturing Account

Debit side items

A.   Raw material consumed- Manufacturing account starts with value of raw materials consumed, i.e., opening stock of raw materials plus Purchases and incidental expenses of purchase less closing stock of raw materials.

B.    Direct wages and expenses- Direct wages and direct expenses are debited to manufacturing account. These are the wages and expenses directly identifiable with the output produced.

C.   Indirect factory expenses- Expenses like factory rent, salaries, lighting, power, heat and fuel, machinery repairs, depreciation and other factory expenses are debited to manufacturing account. Total of Raw materials consumed, direct wages, direct expenses and factory expenses is the total manufacturing cost.

D.   Opening work in progress- Work-in-progress is the semi finished output. Opening work-in-progress is shown on the debit side of manufacturing account. The assumption is that it is completed into finished output during the current accounting period.

E.    Sale of Scrap- Scrap can be raw material scrap or indirect material scrap. It may be reduced from material cost on debit side. Alternatively it can be shown on credit side of manufacturing account, like an income.

Credit side

a.    Closing work-in-progress- It represents the semi-finished output at the end of the accounting period and is credited to manufacturing account.

B.    Sale of scrap- If it is direct material scrap, it can be reduced from raw material on debit side. However in the absence of specific details, the amount from sale of scrap can be credited to manufacturing account. In that case, whether it is direct material scrap or indirect factory material scrap makes no difference.

C.   Cost of Finished goods manufactured- This is the balancing figure in the manufacturing account. It is transferred to trading account.

Note: The closing work-in-progress and sale of scrap may also be reduced on debit side and then credit side shows the cost of goods manufactured alone. That approach makes the above account look like a cost sheet prepared in cost A/c.

Specimen Of Manufacturing Account Is Presented Below

Manufacturing A/c for the year ended…….

Part-6

Trading Account

Introduction

Trading account is prepared for an accounting period to find the trading results or gross margin of the business i.e., the amount of gross profit the concern has made from buying and selling during the accounting period. The difference between the sales and cost of sales is gross profit. For the purpose of computing cost of sales, value of opening stock of finished goods, purchases, direct expenses on purchasing and manufacturing are added up and closing stock of finished goods is reduced. The balance of this account shows gross profit or loss which is transferred to the profit and loss account.

Preparation Of Trading Account

Trading account is a ledger account. It has to be prepared in conformity with double entry principles of debit and credit.

Items shown in trading account:

Debit side

              I.        Opening stock: The stock at the beginning of an accounting period is called opening stock. This is the closing stock as per the last balance sheet. It includes stock of raw materials, work in progress, (where manufacturing account is not separately prepared) and finished goods. Trading account starts with opening stock on the debit side.

             II.        Purchases: The total value of goods purchased after deducting purchase returns is debited to trading a/c. Purchases comprise of cash purchases am credit purchases.

            III.        Direct expenses: Direct expenses are incurred to make the goods sale able. They include wages, carriage and freight on purchases, import duty, customs duty, clearing and forwarding charges manufacturing expenses or factor. Expenses (where manufacturing account is not separately prepared). All direct expenses are extracted from trial balance.

Items shown in trading account :

Credit side:

              I.        Sales: It includes both credit and cash sales. Sales returns are reduced from sales and net sales are shown on the credit side of trading account. The sales and returns are extracted from the trial balance.

             II.        Closing stock: Closing stock is the value of goods remaining at the end of the accounting period. It includes closing stock of raw materials, work progress (where manufacturing account is not separately prepared) and finished stock. The opening stock is ascertained from trial balance but closing stock is not a part of ledger. It is separately valued and given as an adjustment. If it is given in trial balance, it is after adjustment of opening and closing stocks in purchases. If closing stock is given in trial balance it is shown only as current asset in balance sheet. If closing stock is given outside trial balance, it is shown on credit side of trading account and also as current asset in the balance sheet

Closing Entries Relating To Trading Account

The Journal entries given below are passed to transfer the relevant ledger account balances to trading account.

For opening stock, purchases and direct expenses.

Trading A/c                                             Dr       

To Opening Stock A/c

To Purchases (Net) A/c

To Direct expenses A/c

[Being transfer of trading a/c debit side items]

For transfer of sales (after reducing sales returns)

Sales (net) A/c                                       Dr  

To Trading A/c

[Being transfer of sales to Trading A/c]

For transferring gross profit

Trading A/c                                             Dr

To Profit & Loss A/c

[Being transfer of gross profit to P&L A/c]

For Gross Loss

Profit & Loss A/c                                     Dr

To Trading A/c

[Being transfer of gross loss to P&L A/c]

Note: Closing stock is taken into account by an adjustment journal entry along with other adjustments.

A SPECIMEN OF TRADING ACCOUNT IS SHOWN BELOW Trading account for the year ended ……………

Part-7

Profit And Loss Account

Introductions

Profit and loss account is prepared to ascertain the net profit of the business concern for an accounting period

Preparation Of Profit And Loss Account

Profit and loss account starts with gross profit brought down from trading account on the credit side. (If gross loss, on the debit side). All the indirect expenses are debited and all the revenue incomes are credited to the profit and loss account and then net profit or loss is calculated. If incomes or credit is more, than the expenses or debit, the difference is net profit. On the other hand if the expenses or debit side is more, the difference is net loss.

Debit side:

Expenses shown on the debit side of profit and loss account are classified into two categories

Operating expenses and Non-operating expenses

A.   Operating expenses: These expenses are incurred to operate the business efficiently. They are incurred in running the organisation. Operating expenses include administration, selling, distribution, finance, depreciation and maintenance expenses.

B.    Non-operating expenses: These expenses are not directly associate with day today operations of the business concern. They include loss on sale of assets, extraordinary losses, etc.

Credit side

Gross profit is the first item appearing on the credit side of profit and loss account. Other revenue incomes also appear on the credit side of profit and to account. The other incomes are classified as operating incomes and non-operating incomes.

A.   Operating incomes: These incomes are incidental to business and earned from usual business carried on by the concern. Examples: discount received, commission earned, interest received etc.

B.    Non-operating incomes: These incomes are not related to the business carried on by the firm. Examples are profit on sale of fixed assets, refund of tax etc.

For transferring expenses to profit and loss account:   

            Profit and Loss A/c                                       Dr

                        To expenses A/c     

[Being transfer of all P&L A/c debit side items]              

For transfer of incomes to profit and loss account        

            Incomes A/c                                                 Dr

                        To Profit and Loss A/c

            [Being transfer of Incomes to P&L A/c]               

For net profit:            

            P&L A/c                                             Dr

                        To Capital A/ c

            [Being net profit credited to capital]                   

For transfer of Net Loss                   

            Capital A/c                                       Dr

                        To P&L A/c

            [Being net loss transferred to capital]                  

Note: In case of partnership, the profit or loss is divided between partners in their profit sharing ratio and credited or debited to the individual partners. In case of limited companies, Net profit or loss is transferred to the P&L Appropriation A/c for disposal.

The Specimen Of Profit And Loss Account Is Shown Below

Profit and Loss Account

For the year ended 31st March ————–

Particulars                                         Rs.       Particulars                             Rs.

To Gross loss b/d                               xxx       By Gross profit b/d               xxx

To Administration expenses                        By Dividends received        xxx

Salaries                                              xxx       By Interest received xxx

Rent rates & taxes                            xxx       By Discount received          xxx

Printing & Stationery                        xxx       By commission received     xxx

Postage and Telegrams                  xxx       By Rent received                 xxx

Telephone expenses                       xxx       By Profit on sale of assets    xxx

Legal charges                                  xxx       By Sundry revenue receipts xxx

Insurance                                          xxx       By Net loss transferred to    xxx

capital A/c (Bal. Fig)*         

Audit fees                                          xxx                  

Directors fees                                     xxx                  

General expenses                           xxx                  

To Selling & Distribution Expenses                         

Showroom expenses                       xxx                  

Advertising                                        xxx                  

Commission paid to salesmen       xxx                  

Bad debts                                          xxx                  

Provision for doubtful debts                       xxx                  

Godown rent                                     xxx                  

Carriage outward                            xxx                  

Upkeep of delivery vans                 xxx                  

To Depreciation and maintenance                                 

Depreciation                                    xxx                  

Repairs                                               xxx

To Financial expenses

Interest ob borrowings                    xxx

Discount allowed                             xxx

To abnormal losses

Loss on sale of assets                       xxx

To Net profit transferred  to capital           xxx

A/c (bal.fig)

Note: *Either net profit or net loss is the balancing figure in P & L A/c

The purpose and importance of preparing profit and loss account.

To determine the future line of action

To know the net profit or loss of business To calculate different ratios

To compare the actual performance of the business with the desired one.

Part-8

Balance Sheet

Introduction

The Balance sheet comprises of lists of assets, liabilities and capital fund on a given date. It presents the financial position of a concern as revealed by the accounting records. It reflects the assets owned by the concern and the sources of funds used in the acquisition of those assets. In simple language it is prepared in such a way that true financial position is revealed in a form easily readable and more rapidly understood than would be possible from a view of the detailed information contained in the accounting records prepared during the currency of the accounting period. Balance sheet may be called a ‘statement of equality’ in which equality is established by representing values of assets on one side and values of liabilities and owners’ funds on the other side.

 Title

A Balance sheet is called by different names probably due to lack of uniformity in accounting systems. Generally, the following titles are used in respect of balance sheet:

1.    Balance sheet or General Balance sheet;

2.    Statement of Financial position or condition;

3.    Statement of assets and liabilities;

4.    Statement of assets and liabilities and owners’ fund etc.

Of the above, the title ‘Balance sheet” is mostly used. The use of this title implies that data presented in it have been taken from the balances of accounts,

Classification Of Assets And Liabilities

A clear and correct understanding of the basic divisions of the assets and liabilities and the meanings which they signify and the amounts which they represent is very essential for a proper perspective of financial position of a business concern. Assets and liabilities are classified under the following major headings.

Assets:

are properties of business. They are classified on the basis of their nature. Different types of assets are as under:

1.    Fixed assets: Fixed assets are the assets which are acquired and held permanently and used in the business with the objective of making profits. Land and building, Plant and machinery, Furniture and Fixtures are examples of fixed assets.

2.    Current assets: The Assets assets of the business in the form of cash, debtors bank balances, bill receivable and stock are called current assets as they can be realised within an operating cycle of one year to discharge liabilities.

3.    Tangible assets: Tangible assets have definite physical shape or identity and existence; they can be seen, felt and have volume such as land, cash, stock etc. Thus tangible assets can be both fixed assets and current assets.

4.    Intangible assets: The assets which have no physical shape which cannot be seen or felt but have value are called intangible assets. Goodwill, patents, trade marks and licences are examples of intangible assets. They are usually classified under fixed assets.

5.    Fictitious assets: Fictitious assets are not real assets. Past accumulated losses or expenses which are capitalised for the time being, expenses for promotion of organisations (preliminary expenses), discount on issue of shares, debit balance of profit and loss account etc. are the examples of fictitious assets.

6.    Wasting assets: These assets are also called depleting assets. Assets such as mines, Timber forests, quarries etc. which become exhausted in value by way of excavation of the minerals, cutting of wood etc. are known as wasting assets. Such assets are usually natural resources with physical limitations.

7.    Contingent assets: Contingent assets are assets, the existence, value possession of which is based on happening or otherwise of specific events. For example, if a business firm has filed a suit for a particular property now in possession of other persons, the firm will get the property if the suit is decided in its favour. Till the suit is decided, it is a contingent asset.

Liabilities

A liability is an amount which a business firm is ‘liable to pay’ legally. All the amounts which are claims by outsiders on the assets of the business are known as liabilities. They are credit balances in the ledger. Liabilities are classified into bur categories as given below.

1.    Owner’s capital: Capital is the amount contributed by the owners of the business. In addition to initial capital introduced, proprietors may introduce additional capital and withdraw some amounts from business over a period of time. Owner’s capital is also called ‘net worth’. Net worth is the total fund of proprietors on a particulars date. It consists of capital, profits and interest on capital subject to reduction of drawings and interest on drawings.

2.    In case of limited companies, capital refers to capital subscribed by shareholders. Net worth refers to paid up equity capital plus reserves and profits, minus losses.

3.    Long term Liabilities: Liabilities repayable after specific duration of long period of time are called long term liabilities. They do not become due for payment in the ordinary ‘operating cycle’ of business or within a short period of lime. Examples are long term loans and debentures. Long term liabilities may be secured or unsecured, though usually they are secured.

4.    Current liabilities: Liabilities which are repayable during the operating cycle of business, usually within a year, are called short term liabilities or current liabilities. They are paid out of current assets or by the creation of other current liabilities. Examples of current liabilities are trade creditors, bills payable, outstanding expenses, bank overdraft, taxes payable and dividends payable.

5.    Contingent liabilities: Contingent liabilities will result into liabilities only if certain events happen. Examples are:

Bills discounted and endorsed which may be dishonoured, unpaid calls on investments.

Adjustments

On preparing Trading and profit and Loss Account, adjustments re necessary when accrual basis of accounting is followed. The following are the items for which adjustments are usually required.

1.    Closing Stock- This is the stock which remained unsold in the preceding accounting period.

Trading A/c  

Closing stock A/c                Dr.

To Trading A/c

Balance Sheet

By Closing stock      

Closing stock

2.    Outstanding Expenses- Outstanding expenses refer to those expenses which have become due during the accounting period for which the final accounts have been prepared, but have not yet been paid.

Expenses A/c                        Dr

To Outstanding expenses, A/c

3.    Prepaid Expenses- Prepaid expenses are the expenses the benefit of which has not been fully enjoyed before the end of the accounting year. They are expenses paid in advance or unexpired expenses.

Prepaid expense A/c                      Dr

To Expenses A/c

4.    Income Earned but not received (Outstanding or accrued income)- It may often happen that certain items of income such s interest on investments, commission etc. are earned during the current accounting year, but have not been actually received by the end of the same year. Such incomes are known as outstanding or accrued incomes.

Accrued Income A/c                      Dr

To Income A/c

5.    Income received in advance- Sometimes a portion of income received during the current year relate to the future period. Such portion of the income which belong to the next accounting period is income received in advance and is known as unexpired income.

Income A/c              Dr

To Income received in advance A/c

6.    Depreciation- Depreciation is the decreased in the value of an asset due to wear and tear, passage of time, obsolescence etc. It is a business expenses, though it is not paid in cash every year. It is to be debited to profit and loss account and the amount be deducted from the relevant asset in the Balance Sheet.

If depreciation is given in the Trial Balance, it is taken only on the debit side of Profit and Loss Account as its adjustment is over.

Depreciation A/c                 Dr.

To Concerned Assets A/c

7.    Bad Debts- Any irrecoverable portion of sundry debtors is termed as bad debt. Bad debt is a loss to the business. If is given in the Trial Balance, it should be shown on the debit side of Profit and Loss Account. Bad debts given in the adjustment is to be deducted from sundry debtors in the Balance Sheet and the same is debited to the Profit and Loss Account.

Bad debts A/c                      Dr.

To Sundry Debtors A/c

8.    Provision for doubtful debts- It is a provision created to meet any loss, if the debtors fail to pay the whole or part of the debt owed by them. The amount required for doubtful debt is kept by changing the amount to the profit and loss account.

Profit and Loss A/c               Dr

To Provision for doubtful debts A/c

9.    Provision for discount on debtors- Sometimes the goods are sold on credit to customers in one accounting period whereas the payment of the same is received in the next accounting period and discount is to be allowed.

Profit and Loss A/c               Dr.

To Provision for discount on debtors A/c

Fundamentals of Tally

Introduction

Tally is the world’s fastest
and most powerful concurrent Multi-lingual business Accounting and Inventory Management software. Tally, designed exclusively to meet the needs of small and
medium businesses, is a fully integrated, affordable and highly reliable software. Tally is easy to buy, quick to install, and easy to learn and use. Tally is designed to automate and integrate all your business operations, such as sales, finance, purchasing, inventory, and manufacturing. With Tally, accurate, up-to date business information is literally at your fingertips anywhere. The powerful new features and blazing speed and power of Tally combined with enhanced MIS, Multi-lingual, Data Synchronization and Remote capabilities help you simplify all your business processes easily and cost-effectively.

Salient Features of Tally

A leading accounting package: The first version of Tally was released in 1988 and, through continuous development, is now recognized as one of the leading accounting packages across the world, with over a quarter million customers. Tally’s market share is more than 90%.

No accounting codes: Unlike other computerized accounting packages which require numeric codes, Tally pioneered the ‘no accounting codes’ concept. Tally users have the freedom to allocate meaningful names in plain English to their data items in the system.

Complete business solution: Tally provides a comprehensive solution to the accounting and inventory needs of a business. The package comprises financial accounting, book-keeping and inventory accounting. It also has various tools to extract, interpret and present data.

Integrated/ Non-integrated accounting and inventory: With Tally, the user is able to choose between accounting and accounting with inventory. If accounting with inventory is opted for, the user can choose whether it should be integrated or not.

Flexible and easy to use: Tally is very flexible. It mimics the human thought proc- ess, which means that Tally can adapt to any business need. Tally users need not change the way their business is run to adapt to the package.

Speed: Tally provides the capability to generate instant and accurate reports, which assists the management to take timely and correct decisions for the overall productivity and growth of the company.

Power: Tally allows the user to maintain multiple companies and with unlimited levels of classification & grouping capabilities. It also allows drill down facility from report level to transaction level.

Flexibility: Tally provides flexibility to generate instant reports for any given period (month/year) or at any point of time besides providing the facility to toggle between Accounting & Inventory reports of the same company or between companies. 

Concurrent multi-lingual capability: Tally offers you the exclusive capability of maintaining your accounts in any Indian language, viewing them in another language and printing them in yet another Indian language.     

Real time processing: Immediate posting & updating of books of accounts as soon as the transactions are entered, thereby facilitating instant statements & Reports. It also facilities real-time multi-user environment.  

Online Help: The Tally Online Help (Alt+H) provides instant assistance on basic and advanced features or any other relevant topics of Tally.

Tally.NET: is an enabling framework which establishes a connection through which the remote user can access the Client’s data without copying / transferring the data.

Remote Access: Tally provides remote capabilities to access the data from any- where and anytime.

Control Centre: works as an interface between the user and Tally installed at differ- ent sites and enables the user to centrally configure and administer Site/User belonging to an account.

Support Centre: allows a user to directly post his support queries on the functional and technical aspects of the Product.

Functional Features of Tally

BASIC ACCOUNTING

1.         Complete book-keeping
2.         Books, registers and statements of accounts
3.         General ledgers
4.         Accounts receivable and accounts payable
5.         Flexible voucher numbering
6.         Flexible classification of account heads
7.         Panoramic view
8.         Drill-down display
9.         Database reporting
10.         Voucher and cheque printing
11.         Columnar reports
12.         Bank reconciliation

ADVANCED ACCOUNTING

1.         Multiple companies
2.         Multi-currency
3.         Multiple financial years
4.         Comparison of data using multi-columnar reporting.
5.         Memo vouchers
6.         Post-dated vouchers
7.         User-defined voucher types
8.         Sales and purchase extracts
9.         Cash flow statement
10.         Daily balances and transaction values/ Interest calculations
11.         Percentage-based reporting
12.         Ratio analysis
13.         Value Added Tax (VAT)
14.         Service Tax (ST)
15.         Fringe Benefit Tax (FBT)
16.         Tax Deducted at Source (TDS)
17.         Tax Collected at Source (TCS)
18.         Excise
19.         Payroll

BASIC INVENTORY

1.         Stock categories
2.         Stock query by stock group, or stock cate- gory
3.         Multiple godowns
4.         Stock transfers to godowns and branches
5.         Multiple stock valuation methods
6.         Batch-wise/Lot-wise, including expiry date handling
7.         Alternate units of measure and tail units.
8.         Tracking through receipt notes/ delivery notes/ rejections inwards/ rejections out-wards
9.         Additional costs incurred on purchase
10.         Movement/Profitability analysis Party- wise/ Item-wise/ Stock Group-wise
11.         Customizable sales invoices using price lists with multiple prices
12.         Sales and purchase order processing

ADVANCED INVENTORY

1.   Stock items classified as raw materials, work-in-process, finished goods
2.   Bill of Material with auto-adjustment of stocks
3.  Job-working concepts, including sub-con- tracting
4.   Additional cost of manufacturing with notional value and percentage

·        
CENVAT

Support 

Reorder levels

Stock ageing analysis

Batch related stock reports

 Point of Sale (POS)

Excise/VAT/ Central Sales Tax (CST)/ Tax Collected at Source (TCS) related Inventory transactions and reports.

Technology Advantages

·        
Simple and rapid installation: Tally has a
simple, menu-driven installation proce- dure. The user can install the program
files on any drive if the hard disk has partitions. The user can also specify
the name and directory location of the program files. Tally uses minimum hard
disk space in the local drive. Its installation on the local disk takes just a
few seconds.

·        
Unlimited multi-user support: A multi-user version of Tally can be installed on a network, having any number of computers with different operating systems such as Win 95, 98, NT, 2000, XP and Linux.

  Internal backup/ restore: Tally has an in-built, user-friendly ‘backup and restore’ option. It helps the user to take a backup of one or more companies or all companies, in a single directory, in the local hard disk, or in any external media.

·  Data reliability: Tally offers reliable data. It uses a flexi-field, flexi-length, self- indexed, weighted file structure for an extremely compact and fast database. Tally is robust and even if there is a power failure or the computer is incorrectly shut down, data is not lost. Tally uses signalling quality data integrity checks, at regular levels, to ensure the complete reliability of data.

User-defined security levels: Tally offers high levels of security. Users can define multiple levels of security according to their requirements. Every authorised user in the company can have an individual password, with rights to use specific features only. The user with the administrator level password will have full access and can set controls for other users.

· Data security: Tally’s data integrity checks ensure that there are no external changes to the data. Tally also uses a binary encoding format of storage to prevent devious grouping of information.

·Tally audit: The Tally audit feature provides the user with administrator rights and the capability to check the entries made by the authorised users and alter these entries, if necessary. Once the entries are audited, Tally displays the altered entries, if a along with the name of the user, who has altered the entry, and the date and time of the alteration.

Tally Vault: Tally offers a data encryption option called TallyVault. Without the valid TallyVault password, the data cannot be accessed. Tally follows the DES (Data Encryption Standard) encryption method to safeguard the data.

Removal of data into a separate company: Tally allows users to maintain a com- pany for any number of financial years. Once the books of accounts have been completed for the earlier financial years, the user can split the company data into multiple companies as per financial periods required. Tally also has a feature to split company data. The user can specify the date from which the company has to be split and Tally will split the company to form two companies as per periods specified. Once the data has been split, the closing balance of the first period (first company) becomes the opening balance for the next period (second company).

Multi-directory for company
management:
The user can create multiple directories to store data. The data stored in
these directories can be accessed directly in Tally, by specifying the path.

Import/ Export of data: Any transaction can be exported and imported to other software after suitably altering the current structures to accept the Tally data structure. Data can also be imported to Tally by writing a TDL program. The data which is to be exported from Tally can be in XML, HTML or ASCII format.

Tally Synchronization: Synchronization is the process of exchanging Tally data between two or more locations. This process enables a branch office to send its data to the head office, over the Internet or a private network.

Graphical analysis of data: Tally provides graphical analysis of data which helps the user to perform deeper analysis. The user can generate graphical analysis reports such as Sales register, Purchase register, Ledgers, Funds flow, Cash flow, Stock Item registers and so on. This helps the management to quickly judge performance and
be better pre- pared for difficult times.

ODBC (Open Database Connectivity) compliance: It allows other programs to use data from Tally, directly. Thus, any program such as MS-Excel or Oracle, which is ODBC compliant, can use data from Tally. Data connectivity is dynamic, which means that any update in Tally is reflected in real time in other ODBC compliant
software. The user can also extract data from Tally and design his/ her own
report formats in other ODBC compliant software.

Protocol support: Tally provides protocol support for HTTP, HTTPS, FTP, SMTP, ODBC and raw sockets with data interchange formats such as XML, HTML with XML islands, SOAP and related formats. Protocol refers to a mechanism by which information (data) can be put into or taken from Tally. Formats refer to the standard for informa- tion to be generated from Tally or from other applications which can exchange data with Tally.

Direct web browser access: While working on Tally, the user can directly log on to the Tally website, provided he/ she has access to the Internet. The website lists details of all the facilities offered by Tally. The user can also download the latest release ofTally as and when it is available. The Tally website also offers Tally Chat, by which a user can communicate with a Tally representative and get required information.

Ability to preview and publish reports and documents on the Internet: Companies which want to publish reports and price lists on their website can do so directly from Tally.

E-mail Facility: Tally facilitates the mailing of any Tally report or document.

Multilingual capability: Tally is the world’s first accounting and inventory software with multilingual capability. Currently, Tally’s multilingual capability extends to 12 languages which include nine Indian languages (Hindi, Gujarati, Punjabi, Tamil, Telugu, Mar-athi, Kannada, Malayalam and Bengali), Bahasa Melayu and Bahasa Indonesia. Tally enables you to enter data in one language and have it transliterated into different languages. You can generate invoices, purchase orders or delivery
notes in the language of your choice after entering data for the same in any of the nine specified languages. Also, the phonetic keyboard allows you to spell the term phonetically based on how it sounds and Tally displays the data in the language selected after transliteration.

Point of Sale (POS) : POS is an acronym for Point of sale. Point of Sale can be a retail out- let, a check-out counter shop, or any other location where a sales transaction takes place. It is a computerized cash register which adds up the sales totals, calculates the balance to be returned to buyer and automatically adjusts the inventory level to reflect the quantity sold. The equipment required for POS to work effectively are cash registers, card readers, bar-code scanners and so on.

Payroll

Tally Payroll is integrated with accounting and benefits the user by simplifying Payroll processing and accounting. Tally Payroll enables users to set up and implement salary structures, ranging from simple to complex, as per the organization’s requirements. The user can also align and automate payroll processes and directly integrate them with main stream accounting applications. Tally Payroll also supports configurable formats for pay slip printing; flexible salary/wage, attendance, leave and overtime registers; gratuity and expat reports.

Getting Functional with Tally

Tally Start-up

Tally can be started in any of
the following ways:

Click on Start > Programs
> Tally > Tally or double click on the Tally icon on your desktop

The welcome screen Tally –
Power of Simplicity appears while the software loads. You will be ready to
explore Tally, the moment the Tally start up screen appears.

The Tally Start-up Screen
appears as shown below:

Tally
Screen Components

·        
Title bar: Displays the Tally version number.

·        
Horizontal button bar: Selection of
Language key, Keyboard Language and Tally Help.

·        
Close button: Performs the standard Windows
Operating Systems function (Windows 95 onwards), allowing you to minimise Tally
and work on other applications. To restore Tally, click the Tally icon on the
taskbar.

·        
Gateway of Tally: Displays
menus, screens, reports and accepts the choices and options which you select to
view data as required.

·        
Buttons toolbar: Displays buttons which provide
quick interaction with Tally. Only buttons relevant to the current task are
visible.

·        
Calculator Area: Used for Calculator functions.

·        
Info Panel: Displays Version number, License
details, Configuration details.

Mouse/
Keyboard Conventions

While working with Tally, use
the following conventions.

MOUSE/
KEYBOARD CONVENTIONS

·        
Click- Press the left mouse button.

·        
Double-click- Press and release the left
mouse button twice, without moving the mouse pointer off the item.

·        
Choose–     Position
the mouse pointer on the item and click the left mouse button.

·        
Select—       Position
the mouse pointer on the item and double- click the left mouse button.

·        
Press–            Use
the keys on the keyboard in the combination shown.

·        
Fn–      Press
the function key.

·        
Fn+      Press ALT + function key.

·        
Fn–       Press CTRL + function key.

Switching
between Screen Areas

When Tally first loads, the
Gateway of Tally screen displays. To toggle between this screen and the
Calculator/ ODBC server area at the bottom of the screen, press Ctrl+N or
Ctrl+M as indicated on the screen. A green bar highlights the active area of
the screen.

Quitting
Tally

·        
You
can exit the program from any Tally screen, but Tally requires all screens to
be closed before it shuts down.

·        
To
quit working on Tally,

·        
Press
Esc until you see the message Quit? Yes or No ? Press Enter or Y, or click Yes
to quit Tally.

·        
Alternatively,
to exit without confirmation, press Ctrl+Q from Gateway of Tally.

·        
You
can also press Enter while the option Quit is selected from Gateway of Tally.

Creation/
Setting up of Company in Tally

The first step towards
understanding Tally is to create a company in Tally. Create a company using the
Company Creation screen.

Creation
of a Company

Go to Gateway of Tally >
Company Info. > Create Company

The Company Creation screen
displays as shown.

Each field in the Company
Creation screen is explained below. To navigate between the fields, use the
enter key or the tab key or arrow keys or the mouse.

Directory– Tally
assumes that the company is to be created in the data path given in the
Tally.INI file, which is displayed by default. This field is skipped by
default. However, you can change this path, if you want to, by using the
backspace key, so that Tally saves the data to a different directory specified
by you.

·        
Name–         This
specifies the name of the company as it appears in Tally. If you have several
companies to create with similar names, you will have to distinguish between
them to provide a unique name for Tally.

·        
Mailing Name–   The company name given in the Name field automatically appears in
this field. This can be changed according to your requirements. The correct
name of the company for mailing purposes should be entered.

·        
Address– The address of the company (The
mailing name and address details are picked from here for any report such as
balance sheet and statement of accounts).

·        
Statutory
Compliance for Select India from the list of countries.

·        
State– Select the appropriate State from
the list of States.

·        
Pin Code– Enter the PIN code of the specified
address.

·        
Telephone No.-  Enter the telephone number of the company.

·        
E- Mail–       E-mail
address will be used to e-mail documents, reports and data from Tally.

·        
Mobile No.– Enter the mobile number of the
company.

·        
Currency Symbol– This refers to the currency
symbol Tally will use for monetary values. By default, Tally displays Rs.

·        
Maintain– Select the nature of the company
i.e, Accounts only or Accounts with Inventory.

·        
Financial Year From– Specify the
Financial Year (FY) for the company. Tally considers 12 months from the date
you give here as the Financial Year. For example, if you give 1st April 2009,
your FY will be April to March – in this case, ending with 31st March 2010.

·        
Books Beginning From–         The date given for ‘Financial Year
From’ is automatically displayed. However, we can specify the actual date on
which the books of accounts start. In case our accounts are opened mid-way
during the financial year specified, we can enter the required date and start
the books of accounts accordingly.

·        
TallyVault Password– TallyVault
is an enhanced security feature utilised to protect company data in an
encrypted form by means of a Password. The TallyVault password entered ensures
that the data is maintained permanently in an encrypted form without retaining
information of the password used. Data is not accessible without the TallyVault
password. Remember to keep this password private and known only to those who
need to know. If the password is lost, your data cannot be recovered.

·        
Use Security Control– Tally has a
range of security controls, which can define the authority of various users to
access the information and to enter/ alter/delete the vouchers.

Base
Currency Information

Tally needs to know the default
currency for the company and how the amounts should be shown on the screen and
in the reports.

BASE CURRENCY INFORMATION

·        
Base currency symbol–        Pre-set as a default currency — Rs. (as
specified earlier).

·        
Formal name– Complete name for the currency
symbol. By default, this is set to Indian Rupees.

·        
Number of decimal places–          By default, this is set to 2.

·        
Is symbol suffixed to amounts?    By default, this is set to No. For example,
in India, we place the Rs symbol in front of amounts.

·        
Symbol for Decimal Portion– Enter the
decimal portion for the currency mentioned. Enter Paise.

·        
Show amounts in millions? –           Tally caters to currencies where the
different parts of large amounts are called by special names. By default, this
is set to No.

·        
Put a space between amounts and symbol? — By
default, this is set to Yes.

·        
Decimal Places for Printing Amounts in words-     You can specify the number of decimal
places to print the amount in words. This number should be equal to or lesser
than the number specified in Number of Deci- mal places field.

Press Y or Enter to accept the
screen.

Working
with Multiple Companies

For a group of companies, you
can maintain the details of each company separately. You can select the company
to work with and close the company when it is not required. However, you can
also open many companies at the same time and switch between companies without
closing the application.

Exercise
to Create another Company

Before looking at how to view
and amend company details, let us create another company to experiment with.
Name your company as Indus Enterprises, Financial Year as 1 April 2009 &
Book beginning from 1 April 2009 and you may enter the company details as you
like,

To
create Indus Enterprises, follow this procedure:

1.    From the buttons bar select Alt
+ F3: Create Cmp or simply press Alt + F3 to bring up the Company Info. Menu.

2.    Select Create Company from the
menu to bring up the Company Creation screen.

3.    Enter Indus Enterprises in the
Name field and experiment with entering other data of your choice (for example,
the address details).

4.    When you have finished, Press Y
or Enter to accept the screen The Gateway of Tally screen will now appear.

Notice that Indus Enterprises
is highlighted. This indicates that it is the currently selected company from
the list of open companies.

You can now practice selecting,
closing and altering company information.

Practice
Exercise

1.    Select a Company

2.    Shut a Company

3.    Alter a Company

To
Select a Company

1.    Go to the Gateway of Tally >
Alt + F3 > Company Info. > Select Company OR Press F1.

Tally
displays the List of Companies screen. All the companies created are displayed
in an alphabetical order. Select the company name from the list given.

2.    In case two or more companies
are loaded (like National Traders and Indus Enterprises), click on the company
which you need to work on so that the selected company will be highlighted and
will appear on top of the list.

To
Shut a Company

Go to the Gateway of Tally >
Alt + F3 > Company Info. > Shut Company. Select the Company which you
need to shut from the List of Companies. You can also use Alt + F1 to shut a Company
from the Gateway of Tally screen.

To
Alter Company Details

Go to the Gateway of Tally >
Alt + F3 > Company Info. > Alter. Select the company which you need to
alter from the List of Companies and press Enter to view the Company Alteration
screen. Alter the company details as required and accept the screen.

You can also access these
functions, by selecting the appropriate button from the button bar.

Account Group

Capital
Account- This
records the Capital and Reserves of the company. The ledgers that belong to
Capital Accounts are Share Capital, Partners’ Capital A/c, Proprietor’s Capital
Account and so on.

Reserves and
Surplus [Retained Earnings]- This contains ledgers like Capital
Reserve, General Reserve, Reserve for Depreciation and so on.

Current
Assets- Current
Assets record the assets that do not belong either to Bank Accounts or to
Cash-in-Hand sub-groups.

·        
Bank Accounts: Current
account, savings account, short term deposit accounts and so on.

·        
Cash-in hand: Tally
automatically creates Cash A/c in this group. You can open more than one cash
account, if necessary.

Note: An account
under Cash-in-hand group or Bank Accounts/Bank OCC A/c group is printed as a
separate Cash Book in the traditional Cash Book format and does not form part
of the Ledger.

Deposits
(Asset):
Deposits contain Fixed Deposits, Security Deposits or any deposit made by the
company (not received by the company, which is a liability).

Loans &
Advances (Asset):
This records all loans given by the company and advances of a non-trading
nature (example: advance against salaries) or even for purchase of Fixed
Assets. We do not recommend you to open Advances to Suppliers’ account under
this Group. For further details, please refer to the section on Common Errors.

Stock-in-hand:
This
group contains accounts like Raw Materials, Work-in-Progress and Finished
Goods. The balance control depends on whether you have selected Integrated
Account-cum-Inventory option while creating the company. (Refer to Company
creation section for more details) Let us consider these options:

Integrated
Accounts-cum-Inventory: This option has a significant effect on the
Balance Sheet and Profit & Loss Account. If set to Yes, it brings the
stock/inventory balance figures from the inventory records and provides a drill
down to the Stock registers from the Balance Sheet. You are not allowed to
directly change the closing balance of an account under this group. You are
allowed to pass transactions in Inventory records and the account balances are
automatically reflected in the Balance Sheet as Closing Stock.

Non-integrated
Accounts-cum-Inventory: If Integrated Account-cum-Inventory option is set
to No, it ignores the inventory books figures and picks up manually entered
closing stock balances from the ledger account created. This provides the
facility to maintain accounts separately and inventory separately.

You are not
allowed to pass transactions if your accounts that come under this Group. 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 customer accounts refer to common and possible errors in grouping of
accounts section.

Current
Liabilities- Accounts
like Outstanding Liabilities, Statutory Liabilities and other minor liabilities
can be created directly under this group. Sub-groups under Current Liabilities
are Duties and Taxes, Provisions and Sundry Creditors

Duties and
Taxes:
Duties and Taxes contain all tax accounts like VAT, CENVAT, Excise, Sales and
other trade taxes and the total liability (or asset in case of advances paid)
and the break-up of individual items.

Provisions: Accounts like
Provision for Taxation, Provision for Depreciation and so on are recorded under
Provisions.

Sundry
Creditors:
For trade creditors, refer to common and possible errors in grouping of
accounts section.

Investments- Group your
investment accounts like Investment in Shares, Bonds, Govt. securities, long
term Bank deposit accounts and so on. This allows you to view the total
investments made by the company.

Loans (Liability)-
Loans
that a company has borrowed, typically long-terms loans.

·        
Bank OD Accounts [Bank OCC Accounts]:  Tally
provides you with distinct types of Bank Accounts,

·        
Bank OCC A/c: To record the company’s
overdraft accounts with banks. For example, Bill Discounted A/c’s and
Hypothecation A/c’s etc.

Note: An account
under Bank OCC A/c group is printed as a separate Cash Book in the traditional
Cash Book format and does not form part of the Ledger.

·        
Secured Loans: Term loans or other
long/medium term loans, which are obtained against security of some asset.
  does not verify the existence of the security. Typical accounts are
Debentures, Term Loans, and so on.

·        
Unsecured Loans: Loans obtained without any
security. Example: Loans from Directors/partners or outside parties.

Suspense
Account – In
modern accounting, many large corporations use a Suspense Ledger to track the
money paid or recovered, the nature of which is not yet known. The most common
example is money paid for Traveling Advance whose details will be known only
upon submission of the Travelling Allowance bill. Some companies may prefer to
open such accounts under Suspense Account.

Loans and
Advances (Asset) group: The Suspense Account is a Balance Sheet item. Any
expense account even if it has ‘suspense’ in its name, it should be opened
under Revenue group like Indirect Expenses and not under Suspense Account
group.

Miscellaneous
Expenses (Asset)- This
group is typically used for legal disclosure requirements such as Schedule VI
of the Indian Companies Act. It should hold incorporation and pre-operative
expenses. Companies would write off a permissible portion of the account every
year. A balance remains to an extent that cannot be written off in Profit &
Loss Account. Tally does not show loss, carried forward in the Profit &
Loss Account, under this group. The Profit & Loss Account balance is
displayed separately in the Balance Sheet.

Branch/Divisions-
This
maintains ledger accounts of all your company’s branches, divisions,
affiliates, sister concerns, subsidiaries and so on. 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 any other party account. If you wish to maintain the books of a
branch/division on your computer, you must open a separate company. (Tally
allows maintenance of multiple company accounts).

Sales Account-
You
can classify your sales accounts based on Tax slabs or type of sales. This also
becomes a simple mechanism for preparation of Tax returns.

For example,

·        
Domestic
Sales

·        
Export
Sales

·        
Now
under Domestic Sales open the following ledgers:

·        
Sales
(10%)

·        
Sales
(5%)

·        
Sales
(exempt)

You can even
open an account as 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).

Note: Do not create
customer accounts under this group. For more details, refer to common and
possible errors in grouping of accounts section.

Purchase
Account- This
is similar to sales accounts, except for the type of transactions.

Direct Income
[Income Direct]- These
are Non-trade income accounts that affect Gross Profit. All trade income
accounts fall under Sales Accounts. You may also use this group for accounts
like Servicing, Contract Charges that follow sales of equipment.

For a
professional services company, you may not use Sales Account group at all.
Instead, open accounts like Professional Fees under this group.

Indirect
Income [Income Indirect]- These are miscellaneous non-sale income accounts.
Example: Rent Received and Interest Received.

Direct
Expenses [Expenses Direct]- These are Manufacturing or direct
trading expenses. These accounts determine the Gross Profit of the company.

Indirect
Expenses [Expenses Indirect]- All administrative, selling or
non-direct expenses.

Profit &
Loss Account is a reserved primary account in Tally. You can use this account
to pass adjustment entries through journal vouchers. For example, transfer of
profit or loss account to Capital or Reserve account.

Common and
Possible Errors in Grouping and Account Classification

Debtor/Creditor classification– Accounts of
parties with whom your company is trading should be opened under any of the
following groups (or sub-groups under them):

·        
Sundry
Debtors

·        
Sundry
Creditors

·        
Branch/Divisions

Sales and
Purchase account groups are meant for revenue accounts and are reflected in the
Profit & Loss Account. If you open party accounts under these groups, it
becomes difficult to pass sales or purchase voucher transactions.

For example,
in a sales voucher transaction entry, you must debit an account, which can be
sundry debtor, branch/division or even a sundry creditor. Moreover, other
facilities like bill-wise allocation and tracking will not be available unless
the accounts belong to one of these groups.

Opening two
accounts of the same party- Tally classifies debtors, creditors
and branch/divisions for convenience. This helps you in the process of keeping
the accounts of a particular group together during display and analysis. Thus,
you can pass both sales and purchase entries for a party account placed under
Sundry Debtors. Use the classification depending on the most natural group for
the party.

For example,
parties from whom you buy frequently can be placed under Sundry Creditors, as
that is the natural place to look for their account. Tally does not restrict
the accounts from having obverse balances. Thus, a Sundry Debtor can have a
credit balance depending on the state of his account.

Therefore, you
need not open two accounts for the same party – one under Sundry Debtors and
another under Sundry Creditors. Tally restricts opening of two identical ledger
accounts. In such cases, you may decide to circumvent by marking one account as
“A & Co – S/Dr” and another “A & Co – S/Cr”. This
will allow you to have two accounts of the same party under two groups, but you
will lose the advantage of analysing net position at a single instance. It is
always better to maintain a single account to obtain best benefits.

Expenditure
items are entered under Liabilities group. For example, the expenditure item
Rates & Taxes under the group Duties and Taxes.

The group
Duties and Taxes is specifically meant to handle taxation liabilities of your
company. Rates & Taxes and other statutory expenses should be placed under
Indirect Expenses.

Simply
adhering to the reserved groups may be sufficient for many organizations. For
greater diversity, Tally allows you to create your own groups, either as
sub-groups or primary groups. Groups can be sub-classified to practically an
unlimited level, giving you a virtual accounting tree. At the lowest level, of
course, would be the ledger account.

Note: While it is
necessary to assign every ledger to a group/sub-group, it is not essential to
have your own sub-classification of accounts; you may simply use the reserved
groups for grouping your ledger accounts.

Pre-Defined
Groups- There
are twenty eight pre-defined groups in Tally. These groups are a part of the
chart of accounts for most organizations. For example, Sales Accounts is a
pre-defined group. All sales ledgers can be classified under this group.

Out of the twenty-eight
pre-defined groups, fifteen are primary groups and thirteen are sub-groups. The
user can create any number of primary groups and sub-groups.

Out
of the fifteen primary groups, nine primary groups appear in the balance sheets
that are capital in nature and six primary groups appear under Profit &
Loss account which are revenue in nature.

The
sub-groups that form a part of the balance sheet are:

Note: Primary groups cannot
be deleted.

Voucher Entry in Tally

Lesson
Objectives

On completion
of this lesson, you will be able to

·        
Describe
the purpose of the Tally Accounting Vouchers

·        
Create
and alter Accounting Vouchers

·        
Use
vouchers to enter Accounting transactions

·        
Describe
the use of Non-Accounting Vouchers

·        
Describe
the purpose of the Tally Inventory vouchers

·        
Create
and alter Inventory Vouchers

·        
Using
vouchers to enter Inventory transactions

In accounting
terms, a voucher is a document containing the details of a financial
transaction. For example, a purchase invoice, a sales receipt, a petty cash
docket, a bank interest statement, and so on. For every such transaction made,
a voucher is used to enter the details into the ledgers to update the financial
position of the company. This feature of Tally will be used most often.

Tally follows the Golden Rule
of Accounting :

Real
Accounts

·        
Debit  What Comes in                  

·        
Credit What Goes out                  

Personal
Accounts

·        
Debit  The Receiver

·        
Credit The Giver

Nominal
Accounts

·        
Debit
Expenses and Losses

·        
Credit
           Incomes and Gains

Accounting
Vouchers

Tally is
pre-programmed with a variety of accounting vouchers, each designed to perform
a different job. The standard Accounting Vouchers are:

·        
Contra
Voucher (F4)

·        
Payment
Voucher (F5)

·        
Receipt
Voucher (F6)

·        
Journal
Voucher (F7)

·        
Sales
Voucher /Invoice (F8)

·        
Credit
Note Voucher (CTRL+ F8)

·        
Purchase
Voucher (F9)

·        
Debit
Note Voucher (CTRL+ F9)

·        
Reversing
Journals (F10)

·        
Memo
voucher (CTRL+ F10)

·        
Optional
Voucher: All the available vouchers in Tally (except non-accounting vouchers)
can be marked optional, if required.

·        
Post-dated
voucher: All the available vouchers in Tally can be marked post-dated, if
required.

You can alter
these vouchers to suit your company, and also create new ones. Read ahead to
understand the function of each voucher type. The following exercises are
sample enteries for understanding Voucher entry in Tally, do not make these
entries.

Contra
Voucher (F4)

Use a Contra
Voucher to record the entry. Setup:

·        
In
Voucher entry mode, press F12: Contra Configuration and set the following to
Yes:

·        
Skip
the Date field in Create Mode (faster entry!)

·        
Use
Cr/Dr instead of To/By during entry

·        
Warn
on Negative Cash Balance

·        
Show
Ledger Current Balances

·        
Show
Balances as on Voucher Date

Payment
Voucher (F5)

Use a Payment
Voucher to record the entry.

Go to the
Gateway of Tally > Accounting Vouchers > F5: Payment.

Payment in
Single Entry Mode

In Voucher
entry mode, use F12: Payment Configuration and set Use Single Entry mode for
Pymt/Rcpt/Contra to Yes.

The advantage
of a single-entry mode is that you can select multiple debits or credits
depending on the type of entry. Similarly, the transactions can be recorded in
single entry mode even in Receipt and Contra vouchers.

Warn on Negative Cash Balance

Tally displays
a warning if the cash balance is NIL when Warn on Negative Cash Balance is set
to Yes in the F12: Payment Configuration. For example, a cash ledger account
has no balance. A payment of Rs. 4,500 towards Telephone expenses is to be
made. In the process of making the payment, Tally displays a warning at the
time of accepting the entry.

In addition to
the warning, Tally also displays the negative balance amount in Red.

Receipt
Voucher (F6)

Use a Receipt
Voucher to record the entry.

Ensure in F12:
Payment Configuration, Use Single Entry mode for Pymt/Rcpt/Contra is set to No.

Go to the
Gateway of Tally > Accounting Vouchers > F6: Receipt.

Journal
Voucher (F7)

Use the Journal
Voucher to adjust the two accounts.

Go to the
Gateway of Tally > Accounting Vouchers > F7: Journal.

Sales
Voucher (F8)

Use a Sales
Voucher for making this entry.

Go to the
Gateway of Tally > Accounting Vouchers > F8: Sales.

Credit
Note Voucher (Ctrl + F8)

This voucher
type is made available when the option Use Debit/Credit Note to is set to Yes
in the

F11: Features
(F1: Accounting features).

Use a Credit
note to record this entry.

Go to the
Gateway of Tally > Accounting Vouchers > F8: Credit Note.

Purchase
Voucher (F9)

A company buys
computer parts on credit.

Use a Purchase
Voucher to record this entry.

Go to the
Gateway of Tally > Accounting Vouchers > F9: Purchase.

Debit
Note Voucher (Ctrl + F9)

This voucher
type is made available when the option Use Debit/Credit Notes is set to Yes in
the

F11: Features
(F1: Accounting Features).

Use a Debit
Note to record this entry.

Go to the
Gateway of Tally > Accounting Vouchers > F9: Debit Note.

Reversing
Journal Voucher (F10)

Reversing
Journals are special journals that are automatically reversed after the date of
the journal. They exist only for a day and are effective on the date of the
reversing journal. This voucher type is available only if the feature Use
Reversing Journals & Optional Vouchers is set to Yes in the F11: Features
(F1: Accounting Features).

Memo
Voucher (Ctrl + F10)

Memo Voucher
is a non-accounting voucher and the entries made using it will not affect your
accounts. In other words, Tally does not post these entries to ledgers but
stores them in a separate Memo Register. You can alter and convert a Memo
voucher into a regular voucher when you decide to bring the entry into your
books.

Memo vouchers
are used for the following purposes:

1.    Making
suspense payments-
For example, the company gives an employee cash to buy office supplies, the
exact nature and cost of which are unknown. You could have entered a voucher
stating petty cash advance, a voucher to record the actual expenditure details
when they are known, and another voucher to record the return of surplus cash.
However, a simpler way is to enter a memo voucher when the cash is advanced,
and then turn it into a Payment voucher for the actual amount spent, when
known.

2.    Vouchers not
verified at the time of entry- Sometimes it so happens that you do
not understand the details of a voucher you are entering. In such cases, enter
it as a Memo voucher and amend it when you get the details.

3.    Items given on
approval-
Usually, entries are made into the books only after a sales transaction is
completed. Items given on approval, can be tracked by using a Memo voucher. It
can either be converted into a proper Sales voucher or be deleted depending on
the outcome.

Optional
Voucher-

This is
another non-accounting voucher which is available only if the feature Use
Reversing Journals & Optional Vouchers is set to Yes in the F11: Features
(F1: Accounting Features). It differs from the Memo voucher in two respects:

·        
It
is not a voucher type, since all the other voucher types can be marked as
Optional during a voucher entry.

·        
You
have the option to bring this voucher into your accounts temporarily and see
its effect on financial reports. Any voucher type (except non-accounting
voucher) can be designated as an Optional voucher.

Post-dated
Vouchers

Post-dated
Vouchers are ignored by Tally until the date in question. This is useful for
entering transactions that take place on a regular basis. For example, if you
pay for something by instalments, you can set-up the payments in advance, and Tally
will only enter them in the ledgers as and when they fall due. A voucher is
marked as Post-dated while creating or altering it.

Creating
a New Voucher Type

National
Traders wants to record bank and petty cash payments differently and needs two
new voucher types to replace the pre-defined Payment voucher. In order to do
this:

Create a Bank
Payment voucher

Go to the
Gateway of Tally > Accounts Info. > Voucher Types > Create.

1.    Name: Bank Payment

2.    Type of
Voucher:
Payment (Specify the default Tally voucher, whose functions the new voucher
should copy).

3.    Abbr.: Bank Pymt
(Specify the abbreviation to denote this new voucher in reports)

4.    Method of
Voucher
Numbering: Automatic

You can
choose one of the following methods for numbering from the pop-up:

Automatic     For Tally to do it for you.

Manual          You do it. You can also specify if you
wish to prevent duplicates.

None              To disable numbering for this
voucher type.

5.    Use Advance
Configuration:
No

6.    Use EFFECTIVE
Dates for Vouchers:
No

7.    Make
‘Optional’ as default: No (This is to set the voucher type as an Optional
voucher, by default)

8.    Use Common
Narration: Yes

9.    Narrations for
each entry: No

10. Print after
saving Voucher:
No

11. Name of Class: Skip.

Displaying
and Altering a Voucher Type

Observe the
menu, you will notice that you can also display and alter voucher types.
Selecting these options brings up a List of Voucher Types, from which you can
select the one you want to view or work on. Apart from the heading, the Voucher
Type Display/Alter screens are identical to the Creation screen.

Inventory
Vouchers

Tally
inventory vouchers perform the same function in the inventory system as
accounting vouchers do. They are the means by which you enter transactions
relating to the Inventory. The vouchers record transactions relating to the
issue and receipt of stock, the transfer of stock between godowns, and physical
stock adjustments. The following inventory vouchers are available in Tally:

·        
Purchase
Order (Alt+F4)

·        
Sales
Order (Alt+F5)

·        
Rejections
Out (Alt+F6)

·        
Rejections
In (Ctrl+ F6)

·        
Stock
Journal (Alt+F7)

·        
Delivery
Note (Alt+F8)

·        
Receipt
Note (Alt+F9)

·        
Physical
Stock (Alt+F10)

 Purchase Order

A Purchase
order entry has to be made in the books of the company to assist them in checking
whether the goods have been received or not. The Purchase Order number can be
used as a reference.

For example,
the company wishes to place an order with the supplier for some goods.

Purchase Order

Description-              Records placing an order for stock
items to suppliers.

Details recorded–     Supplier’s Ledger account, Name and address,
Order details, name of stock item, Due on, Godown, Quantity, Rate, Amount,
Narration.

Sales
Order

A Sales Order
entry has to be made to record this. The Sales Order number can be used as a
reference. For example, a customer places an order with the company for
purchasing some goods.

Sales Order

Description-             Records order details for stock
items received from customers.

Details recorded-     Customer’s Ledger account, Name and address,
Order details, name of stock item, Due on, Godown, Quantity, Rate, Amount,
Narration.

Rejections
Out

A Rejections
Out entry is passed to record the rejected goods. This is a pure inventory
voucher. For example: We have purchased some goods and have rejected a part of
it.

Rejections Out (Purchase
Returns)

Description+             Records rejected stock details
returned to suppliers.

Details recorded–     Ledger Account, Suppliers name and address,
stock item, Tracking details, Order details, Godown, Quantity, Rate, Amount,
Narration.

Rejections
In

A Rejections
In entry is passed to record the rejected goods. The Rejections In entry is a
pure inventory voucher. For example a customer has rejected goods that was sold
earlier.

Rejections In (Sales Returns)

Description-              Records rejected stock details
received from customers

Details recorded-    Ledger account, Customer’s name and address,
stock item, tracking details, order details, Godown, Quantity, Rate, Amount,
Narration.

Stock
Journal

To record the
consumption of goods there is no need for entries on both sides of the voucher.
Such entries can be entered in a stock journal voucher. For example: the
company transfers items of stock from the warehouse to the shop.

Stock Journal

Description+             Essentially records the transfer of
stock from one Godown to another.

Details recorded-    Names of from and to godowns, name of stock
item, quantity, rate, amount, narration.

Delivery
Note

Goods that are
being delivered to a customer are recorded in a Delivery Note voucher.

Delivery Note

Description-              Records delivery of new stock to
customers

Details recorded–     Reference, ledger account, supplier’s (if
supplementary details are set to yes in F12: Delivery Note Configuration) then,
name and address, Order & dispatch details, name of stock item, Tracking
details, Order details, Godown, Quantity, Rate(optional), Amount(optional),
narration.

Receipt
Note

Goods that are
received from the supplier are recorded in a Receipt Note (Goods Receipt Note –
GRN) voucher.

Receipt Note

Description–              Records receipt of new stock from
suppliers

Details recorded–     Reference, ledger account, (If
supplementary details are set to yes in F12: Receipt Note Configuration) then,
Order details, Supplier’s name and address, name of stock item, Tracking
details, Order details, Godown, Quantity, Rate (optional), Amount (optional),
narration.

Physical
Stock Voucher

Tally
considers the stock available based on the entry made in a physical stock
voucher. For example, on conducting a stock-check, the company finds a
discrepancy between the actual stock and the recorded stock figure.

Physical Stock Voucher

Description+             Records the physical stock count as
the new stock balance

Details recorded–     Name of stock item, Godown, Physical stock
quantity.

Pure
Inventory Transactions

Pure inventory
Transactions (vouchers) are those that do not affect financial records. They
affect only the stocks. There will be a rise or fall in the stock when such
vouchers are entered.

The different
pure inventory vouchers are:

·        
Rejections
Out (Alt+F6)

·        
Rejections
In (Ctrl+F6)

·        
Stock
Journal (Alt+F7)

·        
Delivery
Note (Alt+F8)

·        
Receipt
Note (Alt+F9)

·        
Physical
Stock (Alt+F10)

Setup:

·        
To
enable Delivery Note and Receipt Note, set Yes to Use Tracking Numbers and Use Rejection
Notes in F11: Features (F2: Inventory Features).

·        
Go
to the Gateway of Tally > F12: Configuration > Invoice/Orders Entry – Set
Com- plete Accounting Allocations in Order/Delivery Note to Yes.

·        
Make
sure that Inventory Values are affected? is set to Yes in all ledger accounts
under the groups Sales Accounts and Purchase Accounts.

An entry made
in a purchase voucher can update the stocks. It is not necessary to make a
separate entry in a Goods Receipt Note. This holds true for the goods delivered
and recorded in the Sales Voucher itself.

We shall now
learn how to enter pure inventory vouchers.

Invoicing

Tally has an
in-built system to create and print sales invoices. You will now record sales
and purchase invoice details, adjust accounting and inventory balances.

To enable the
option of invoicing, set Yes to Allow Invoicing, Enter Purchases in Invoice
Format and Separate Discount Column in invoices in F11: Features (Accounting
Features/ Inventory Features).

·        
Ensure
that the Inventory values are affected? is set to Yes in Purchases Ledger.

·        
Ensure
that the Inventory values are affected? is set to Yes in Parts Sales, Software
Sales and Computer Sales.

Make the
following entry of Sales in Voucher Mode.

Go to the
Gateway of Tally > Accounting Vouchers > F8: Sales.

·        
Ensure
the button above the Post-Dated option reads As Invoice. This button enables
you to toggle between the voucher and invoice format for data entry. The button
visible is the format NOT in use.

·        
Enter
the following data as on 1-7-2009 to record the sale of 2 Nos of USB Pen Drives
64 MB to Supreme Computers. (at the standard price) and update the accounting
and stock records:

Item
Invoice and Account Invoice

Tally gives
you an option called Account Invoice where you can select the ledgers instead
of the stock items. An Item Invoice on the other hand, allows you to select
stock items instead of ledgers.

Businesses
that require an invoice raised with the item details, can select the Item
Invoice option. Businesses that want to raise invoices for services rendered,
can do so by selecting the Account Invoice.

At this point,
it is understood that you already know how to enter an Item Invoice, by
selecting items and entering their quantity, rate, discount, etc.

Walk-through
to create an Item Invoice

1.    Ensure that
you are at the Gateway of Tally of Indus Enterprises.

2.    Ensure Allow
Invoicing option in F11: Features (F1: Acounting Features) is set to Yes.

3.    Go to the
Gateway of Tally > Accounting Vouchers > F8: Sales.

4.    The invoice
screen must display the columns – Name of Item, Quantity, Rate, per, Amount,
etc.

5.    Party’s A/c
Name: Customer One (create one, if it is not displayed in the list of ledgers).

6.    Press Enter
till you reach the ‘Name of Item’ field and press the spacebar to view the List
of Stock Items.

7.    The different
stock items with their balances are displayed.

Walk-through
to create an Account Invoice

Go to the
Gateway of Tally > Accounting Vouchers > F8: Sales.

1.    The invoice
screen must display the following columns: Name of Item, Quantity, Rate, per
and Amount.

2.    Click on the
Acct Invoice button. You will notice that Tally now displays the columns as

3.    Particulars,
Rate, per and Amount.

4.    Select the
Party’s A/c Name as Customer One.

5.    Press Enter
till you reach the Particulars field. Press the Space Bar and Tally displays
the List of Ledgers.

6.    Select the
Consulting Fees (create one if it is not displayed under Direct Income).

7.    Specify the
amount as Rs. xxxxx and press Enter.

Shortcut
Keys

List of Function Keys