accounting with tally

Module 4 FINANCIAL ACCOUNTING July – 2010 / BLY

ADCPM TALLY 9.0 Page - 1

~ ~ ~ INDEX ~ ~ ~

TOPIC PAGE

WHAT IS ACCOUNTING? ........................................................ ..................... 02

CHARACTERISTICS OF ACCOUNTING ………………........ ..................... 02

BRANCHES OF ACCOUNTING ………………………........... ..................... 02 ~ 03

BASIC TERMS IN ACCOUNTING ………………………........ ..................... 03 ~ 06

RULES OF DEBIT & CREDIT ……………………………..... ..................... 06 ~ 07

ACCOUNTS …………………………………………………... ..................... 07 ~ 08

ACCOUNTING CYCLE ……………………………………..... ..................... 08 ~ 09

MODES OF ACCOUNTING ………………………………..... ..................... 09 ~ 10

BOOKS OF ORIGINAL ENTRY …………………………….... ..................... 10 ~ 11

WHAT IS TALLY? …………………………………………...... ..................... 11

COMPANY CREATION …………………………………….... ..................... 11 ~ 12

SAVING, ALTERING & DELETING COMPANY ………......... ..................... 12

GATEWAY OF TALLY ……………………………………....... ..................... 12 ~ 13

ACCOUNTS INFO ………………………………………….... ..................... 13

LEDERS, GROUPS & JOURNALS ………………………....... ..................... 13 ~ 15

FUNCTION KEYS FOR THE VOUCHER ENTRY ………....... ..................... 15 ~ 17

SOME IMPORTANT TERMS ……………………………….... ..................... 21 ~ 25

INVENTORY INFO ………………………………………….... ..................... 25

VALUE ADDED TAX ……………………………………….... ..................... 26 ~ 27

EXERCISES ON TALLY ...………………………………….... ..................... 27 ~ 44

SERVICE TAX ……………..………………………………..... ..................... 44

TDS ………………………………………………………….... ..................... 45

FBT …………………………..……………………………….. ..................... 45

PAYROLL ACCOUNTING ………………………………….... ..................... 46



WHAT is ACCOUNTING?

Accounting is the systematic recorded presentation of the financial activities of the business. Every business has profit motive, it has transactions of financial nature such as: purchasing goods, receiving goods, incurring expenses & receiving income etc. These transactions are financial in nature & affect the profit of the business. Transactions are classified as: assets, liabilities, Capital, revenue & expenses. Income statements are prepared to ascertain profit or loss of the business. The position statement is prepared to access the value of assets & liabilities of the business. Various statements are prepared & ratios are collated to measure the actual performance of the business. Comparison of the actual performance is compared with the previous performance or desired performance & effective plan for future is made.

Accounting is an art of identify, classify, recording, summarizing and interpreting business transactions of financial nature.

Characteristics of Accounting:

1. Reliability: The Reliability of accounting information is the degree of correspondence between the information conveyed about the transactions and the information displayed. Reliable information should be free from errors and biases. It should faithfully represent what it is meant to.

2. Relevance: To be relevant, information must be available on time. It must help in prediction and feedback and it must influence the decisions of users by confirming or correcting their past evaluations.

3. Understandability: Decision makers should be able to interpret accounting information in the sense as it is prepared and conveyed to them. A message is said to be effectively communicated when it is interpreted by the receiver in the same sense in which the sender has sent it.

4. Comparability: Users of financial reports should be able to compare various

aspects of an entity over different periods and also with other entities.

Branches of Accounting:

Economic development and technological advancement have resulted in an increase in the scale of operations of business, leading to the advent of the company form of organization. As management functions become complex, the importance of accounting increases. Some special accounting branches which are developed now days are explained below:

Financial Accounting: The purpose of financial accounting is keep to a record of all financial transactions so that:

The profit earned or loss sustained by the business during an accounting period can be worked out.

The financial position of the business at the end of the accounting period can be ascertained.

The financial information required by the management and other interested parties can be provided.

Cost Accounting: The purpose of cost accounting is to analyze the expenditure to ascertain the cost of various products manufactured by the company and fix the price of the final product. It also helps in controlling the



costs and providing necessary costing information to management to enable decision making.

Management Accounting: The purpose of management accounting is to assist the management in taking rational policy decisions. It also helps to evaluate the impact of past management decisions and actions.

Basic Terms in Accounting:

Entity: Entity has a definite individual existence. Business entity is an identifiable business enterprise such as Super Bazaar and so on. An accounting system is always devised for a specific business entity.

Transaction: transaction is an event involving some value between two or more entities. It can be a purchase of goods, receipt of money, payment to a creditor, incurring expenses and so on. It can be either a cash transaction or a credit transaction.

Assets: The valuable things owned by the business are called assets. Assets are the economic resource of an enterprise, which can be expressed in the monitory terms.

Assets are the following types:

Fixed Assets: These assets are accrued for long-term use in the business. They are not meant for sale. These assets increase the profit earning capacity of the business.

Example: land, building, furniture, vehicle etc.

Floating Assets: Floating assets also known as circulating, fluctuating, or current assets, which change these values constantly.

Example: Cash-in-hand, Cash-at-Bank etc.

Fictitious Assets: These are those assets, which do not have physical form they do not have any real value. These assets are the revenue expenditure of Capital nature, which are also termed as the first revenue expenditure.

Intangible Assets: These assets are which are not normally purchase & sold in the open market. For Example: Goodwill & Patience etc.

Liquid Assets: Liquidity refers to count ability in cash. Liquid asset are those assets, which can be converted into cash at short notice.

Example: Cash in hand, Cash at Bank, debtors, bills receivable etc.

Capital: It is that part of bill, which is used for further production. The Capital consists of all current assets & fixed assets. Cash in hand, Cash at Bank, Building, Plant & Machinery, Furniture etc. are the Capital of the business. Capital should not necessary to be in cash.

Formula:

Working Assets = Current Assets - Current Liability

Liability or Equality: Liabilities are the obligation or debts by the enterprise in future in the form of money or goods. It is the profiteers & creditors clam against the assets of the business.

Goods: Articles purchase for sale by the business or for use in the manufacture of certain other goods as raw material are known as goods.



Example: Furniture will be goods for the firm dealing in furniture but it will be

assets for the firm dealing in stationery.

Purchase: Its return business the firm has to either purchase business goods for sell or purchase raw material for the manufacture of the articles being sold by the firm.

Example: Purchase of copies, pencil, files etc. costing Rs 20,000 is termed as purchase in the business. Purchase of Assets is not the purchase in accounting terminology, as these Assets are not meant for sale.

Sale: The ultimate end of the goods purchased or manufactured by the business is their sale. It includes both cash & credit sales. In accounting terminology sales means the sale of goods, never the sale of assets. The maintenance of proper & complete record of sale is necessary because the profit or loss is associated with the amount of sale.

Purchase Return or Return Outward: It is that part of the purchases of goods, which is returned to the seller. This return may be due to unnecessary, excessive, & defective supply of goods. It may also result, if the supplier violets terms & condition of the order & agreement. Hence, in order to calculate net purchase, purchase return is deducted from purchases. Purchase return also known as return outwards because it is return of goods outside the business.

Sales Return or Return Inward: It is that part of sales of goods, which actually returns to us by purchasers. This return may also be due to expressive, unnecessary, or defective supply of goods or violation of terms & agreement. It is also known as return inward. To calculate net sales, sale return is deducted from sales.

Stock: The goods available with the business for sale on a particular date are termed as stock. It increases, decreases, or keeps on changing. In accounting, we use the term stock widely as opening stock or closing stock. Therefore, it comes under the current assets.

Revenue: In accounting, Revenue means the amount realized or receivable from the sale of goods. Amount received from sale of assets or borrowing loan is not revenue. Revenue is also used to receive the amount of rent, commission, & Discount received etc. Such receipt should be revenue receipts Revenue is concerned with receipt or receivable in the day-to-day working of the business. Income is calculated by deducting expenses from revenue.

Expense: Generally income is the foremost objective of every business. The firm has to use certain goods & services to produce articles, sold by it. Payment for these goods & services is called expense. Cost of raw material for the manufacture is goods or the cost of goods purchased for sale, expenses incurred in manufacturing or acquired goods such as: wages, carriage, freight, & amount spent for selling & Discount attributing goods such as salaries, rent, advertising, insurance etc are known as expenses.

Expenses are of two types:

Direct Expense: are those expense which are related with the factory.



The examples of Direct expenses are:

Freight charges

Carried charges

Wages

Installation of Machinery

Indirect Expense: Are related with the office.

The examples of indirect expenses are:

Rent Paid

Salary Paid

Discount Paid

Commission Paid.

Debtor ¼nsunkj½: The term debtors, represents the persons or parties who

have purchased goods on credit from us & have not paid for the goods sold to them.

For example: If goods worth ` 20,000 has been sold to Mahesh on credit, he will continue to remain the debtor of the business till he does not pay the full payment.

Creditor ¼ysunkj½: In addition, to cash purchases the firm has to make credit

purchase also the sellers of goods on credit to the firm are known as creditor for goods. Creditors are the liability of the business. They will continue to remain the creditors of the firm so for the full payment is not made to them.

Creditors may also be known as creditors for expense In case certain expense Such as salaries, rent, repairs etc. remain unpaid during the accounting period. It will be termed as outstanding expense

Proprietor: An individual or a group of persons who undertake the risk of the business are known as proprietors. They invest their firms into the business as Capital. In case of profit, proprietor‟s Capital increases. In case of loss, the proprietor‟s Capital decreases.

Drawings: Amount or goods withdrawn by the proprietor for his private or personal use is termed as drawing. The cost of using business assets for private or domestic use is also called drawing.

For example: Use of business Car for domestic use.

Solvent: Solvent are those persons and firms who are capable of meeting their liabilities out of their own resources.

Insolvent: All business firms who have been suffering losses for the last many years and are not even capable of meeting their liabilities out of their assets are financially unsound.

Profit: Profit is the excess of revenues of a period over its related expenses during an accounting year. Profit increases the investments of the owners.

Gain: Gain is a profit that arises from events or transactions which are incidental to business such as sale of fixed assets, appreciation in the value of an asset.

Loss: The excess of expenses of a period over its related revenue is termed as loss. It also decreases the owner equity.



It refers to money/money‟s worth lost without receiving any benefit in return.

Discount: Discount is the deduction in the price of goods on sale. It is offered in two ways. Offering a deduction of an agreed percentage on the list of price at the time of the sale is one way of giving discount. Such a discount is called “Trade discount”. It is generally offered by manufactures to wholesalers and by wholesaler to retailer.

After selling the goods on credit basis, debtors may be given a certain deduction in the amount due it they pay the amount within the stipulated period or earlier. This deduction is given at the time of payment on the amount payable. Thus, it is called “Cash discount”. Cash discount is an incentive that encourages debtors to make prompt payments.

Voucher: The documentary evidence in support of a transaction is known as Voucher. For example, when you buy goods for cash you get a cash memo. When you buy goods on credit, you get an invoice.

Rules of Debit & Credit

Every accounting transaction involves assets, liabilities and Capital individually or collectively. There is a change in the value of assets, liabilities, Capital, due to the business transaction of financial nature. We use the term debit & credit in order to show the changes in the value of these basic accounting terms i.e. Assets, liabilities, & Capital.

Debit means decrease in proprietor‟s equity,

Credit means increase in proprietor‟s equity.

Conventional Approach of Assets:

Every business owns and possesses assets. The business makes use of these assets for earning income. The increase or decrease in the sense must be recorded systematically so that true financial position of the business may be assessed.

Example: Cash in Hand, Cash at Bank, Stock of Goods, Building, Plant, Machinery, Furniture, Debtors, etc.

Rules of Debit & Credit

Debit increase in the assets

Credit decrease in the assets

It means when the assets is increasing then it should be debited and when is decreasing then it should be credited.

Expenses & Losses:

Debit increase in expenses & losses

Credit decrease in expenses & losses

Liability:

Debit decrease in the Liability

Credit increase in the Liability

Capital:

Debit decrease in the Capital

Credit increase in the Capital

Revenue & Profit:



Debit decrease in revenue & Profit

Credit increase in revenue & Profit

ACCOUNTS:

Accounts are classified as personal account and impersonal account.

Personal Account: The account which related to an individual firm or company

or group of persons, are called personal account.

Personal accounts are further classified into:

Natural Personal Account: It represents human beings such as Ram a/c, Shyam a/c etc.

Artificial Personal Account: Persons do not have Physical Contrasting as human being but they works as Personal Account these a/c are related to firms, Company, Industry, factory etc.

Example: Ram and son‟s a/c, Sharma and brother‟s a/c, Elfin Computer Education a/c, etc. represent Personal a/c; A Particular persons or group of persons.

Representative Personal Account: This represents a particular person or group of persons such as outstanding wages a/c. Here instead of using the name of the person whose wages is pending, we used the term outstanding wages account other examples are outstanding salary a/c prepaid wages a/c etc.

Example: If the salaries for the month of December are not paid to the employees than the amount payable of these employees will be added under one common title that is salary outstanding a/c. Hence, salary outstanding a/c represents the a/c of all persons to whom salaries have to pay. Therefore, this term is known as representative personal a/c other examples are prepaid expense (Current Assets).

Rule of Debit & Credit in case of Personal a/c:

Personal a/c either receive something or give something in a business, when goods are sold to them or amount pay to them, they are the receiver. In the someway, personal a/c are given, when goods are purchased from them or amount is received from them.

Hence for personal a/c the rule of debit & credit

Debit the receiver, Credit the giver

Example: Goods sold to Ram. Ram a/c receive the goods therefore it is debited

and the sale is credited.



Key Date Particular L.F. No. Debit Credit

F8 1/4/2010 Ram a/c 250000

To Sale 250000

Example: Goods purchase from Shyam. Here the giver is Shyam so the Shyam a/c is credited and the goods are received, therefore the purchase a/c is debited.


F7 1/4/2010 Purchase a/c Dr. 250000

To Shyam 250000

Impersonal Account: All those a/c, which are not personal a/c, are known as impersonal a/c. These accounts may be related to Assets, Losses, Expenses, Income, & Gain. Impersonal a/c may be classified as:

Real Account: This a/c is related to the property, in other words real a/c are generally those a/c, which are concerned with the things, which really exist. All those things, which can be seen, touched & have physical construction, shape form & size are Real a/c. Real a/c are also concerned with intangible asset, Goodwill, Patience, Trademark.

Example: Cash a/c, Building a/c, Plant a/c, Furniture a/c, Machinery a/c.

Rule of Debit & Credit in Case of Real a/c: Real a/c is related to lifeless properties, they are either purchased or sold, it means they either come into the business or go outside the business. Hence, the rule is:

Debit what come in

Credit what goes out

Nominal Account: This a/c is just reverse to the real a/c. Real a/c general have existence but nominal a/c do not have any existence, that is these a/c do not have any form, shape & physical construction. These accounts are related to Income, Expenditure, Gain, and Losses.

Example: Wage a/c, Salaries a/c, Rent a/c, Interest a/c, Discount count a/c,

Advertisement a/c etc.

Rule of Debit & Credit in Case of Nominal a/c: Nominal a/c is related to

expenses or losses & income or gains. Hence the rule is

Debit all expenses or losses

Credit all income or gain

Accounting Cycle:

The term Accounting Cycle refers to the sequence of accounting procedures followed in recording, classifying and summarizing business transactions. It starts with identification of business transaction and ends with the adjustment entries for period and outstanding expenses.

The process of accounting is given below:

Recording: The first step of accounting is to identify business transactions and maintain them in appropriate books of accounts in a systematic manner. Original recording must be done in a book called “Journal”.

Summarizing: The next step is summarizing. Summarizing is the process of presenting the classified data in a manner understandable to the user. It involves the preparation of profit and loss account and balance sheet.



Analysis and Interpretation: The results of financial statement like profit and loss account and balance sheet are analyzed in such way that the users can make a meaningful conclusion about the financial position of the business.

Classifying: It is the process of grouping of entries of similar nature in one

place. The classification is done in a book called “ledger”.

Communication: The accounting information is to communicated in a proper

form to the persons interested in appropriate time.

Mode of Accounting:

Journals and Ledgers:

Journal is a book of original entry in which transaction is first recorded in the order in which they occur. The process of recording transactions in a journal is turned as journalizing and the transactions entered in the journal are called journal entries.

Posting:

Posting is the process of transferring entries from journal to the ledger. In other words it is the grouping of all the transaction in respect of one particular account at one place for further accounting process.

Accounting Period:

A period of time, for which a financial statement is created, is called an Accounting Period.

Trial Balance:

The trial balance is a statement showing the balances of all ledger accounts. It is prepared to know the arithmetical accuracy of ledger accounts. If total of debit balance is equal to the total of credit balances. It is presumed that there is no mistake accounting and balancing. The format of Trial Balance is as follows.

Financial Statement:

A financial statement is a periodic report prepared from the accounting records of a company. Financial statement includes the profit and loss statement, balance sheet and cash flow statement. Financial statements are usually complied on a quarterly basis or annual basis.

For reporting convenience, the profit and loss account is divided into:

Trading Account: A trading Account is prepared to arrive at the gross profit earned by the organization over a specified period. This helps the organization to arrive at the cost of its core activity and calculate the direct profit from its operations.

Profit and Loss Account: The profit and loss account gives the net earned by the company after considering expenses incurred over a period. This helps the company monitor and control the costs incurred and improve the efficiency. In other words, the profit and Loss statement shows the performance of the company in terms of profits or losses over a specified period. The Profit and Loss statement can be classified into:

Gross Profit: Gross profit is arrived at after considering the core activities of the company. It is expressed as:

Gross Profit = Net Sales - Cost of Sales

Net Profit: Net profit is arrived after considering the other administrative



costs incurred for the period. It is expressed as:

Net Profit = (Gross Profit + other Income)

- (Selling and Administrative Expenses + Taxes

+ Depreciation + Interest + Other Expenses)

Balance Sheet: Balance Sheet is a statement that summaries the assets and liabilities of a business. The excess of assets over liabilities is the net worth of a business. The balance sheet provides information that helps in assessing a company‟s:

Long term financial strength

Efficient day to day working capital management

Asset portfolio

Sustainable long term performance

The balance of all the real personal and nominal accounts are transferred from trial balance sheet and grouped under the major heads of assets and liabilities. The balance sheet is complete when the net profit and loss is transferred from the Profit and Loss account.

Books of Original Entry:

Cash Book: The cash book is an accounting book which records cash receipts and disbursements. It is opened with a cash or bank balance at the beginning of the period.

Day Book: Day Book shows list of vouchers in chronological order. At Gateway of Tally select Display; select Day Book to get list of all vouchers in day book for the current date.

Bank Book: Bank Book shows date wise list of transaction through bank account with opening and closing balance at the end of the period.

Journal Book: Journal Book shows the date wise list of journal vouchers. Journal book shows in journal register. Select a month to get list of all journal vouchers or the select month. Click F2 period and set the period for which you like to get the journal book.

Ledger Book: Ledger book shows the transaction of a particular account in

chronological sequence, with opening & closing balance for specified period.

Sales Book: In this book amount realized from the sale of goods. Sales may be cash sales and credit sales.

Purchase Book: In this book the total amount of goods purchased by a business concern for cash or credit for the purpose of sale or use in business is known as purchase book.

Sales Return Book: In this book that part of sales of goods, which are actually returns to us by purchasers. This return may also due to unnecessary or defective supply of goods or violation of terms and agreement. It is also known as Return Inward.

Purchase Return Book: In this book that part of the purchase of goods, this is returned to the seller. This return due to unnecessary, excessive or defective supply of goods. It may also result if the supplier violets terms and conditions of the order and agreement.



WHAT is TALLY?

Tally is the most popular financial accounting software among the various financial accounting software. There are various versions of this software in the market but Tally9.0 and Tally ERP9.0 are the latest and popular version.

Tally 9.0 helps to business owners to manage their business easily. Tally is software by which accounts are compute in a flicker, entries are done very faster and the balance sheet not only made but also printed, when required.

To start Tally, press Start button Program Tally or double click on icon with name Tally present on the desktop.

COMPANY CREATION:

To start maintenance of accounts in Tally, first you have to create a Company in Tally.

At company Info menu (on installing Tally, first you get Company Info menu. Later on click F3 Company info button to get Company Info menu, select Create Company to get company Creation Screen.

Gateway of Tally Company Info Create Company Company Creation

Company Creation screen is divided in two main sections.

Company Particulars: At top part, Company Information is to be entered as

under:

Directory: Tally default data Drive & Path is displayed where Tally data would be stored (to keep data at different Directory, press up arrow, and



enter the Drive & Path of the folder to keep data files for the Company). Tally skips this field.

Name: Enter the name for the company.

Mailing Name: Normally it should be same as Name. You may enter

different mailing Name as you like to print in external reports.

Address: Enter the postal address for the company. You may enter address

in several lines. Press Enter at last blank line.

Statutory Compliance for: Select the country from the list.

State: Select State from the list.

Pin Code: Specify the Pin Code of the specified Address.

Telephone Number: Enter Telephone Number.

E-mail Address: Enter the E-mail address for the company.

Currency Symbol: ` is displayed here.

Maintain: Select Accounts only (to maintain Accounts only).

Financial Year From: Enter Beginning date of Financial Year.

Books Beginning From: Normally it is same of Financial Year From, unless

you start accounts from middle of Financial year.

Base Currency Information:

At bottom, the various about Base Currency for India ` (Rs.) is displayed. You

need not change it.

Saving the Company Profile:

Click „Yes‟ to save the information of company profile (click „No‟ to modify any data) or press CTRL+ A to save the Company profile directly.

Altering the Company Profile:

At Gateway, click F3: Company Info menu. Select Alter. Select the Company Name from the list to get Company Alteration Screen (similar to Company creation screen. Modify the company details.

Deleting the Company:

At Company Alteration screen, press ALT+D and click yes to confirm deletion. The company data would be deleted and you will not get back to company.

Gateway of Tally:

1. Masters

a. Account Info

b. Inventory Info

2. Transaction

a. Accounting Voucher b. Inventory Voucher

3. Import

a. Import of Data

4. Reports

a. Balance Sheet b. Profit / Loss a/c



c. Stock summary d.

e.

5. Ratio Analysis

a. Display b. Multi Accounts Printing

6. Quit.

Account Info:

After creation the list of the company is displayed. If you want to work on the company created by you then select the company and enter. Then the Gateway of Tally menu will be displayed as given before in which the first option is the Accounts Info.

Ledger:

A ledger is the most important book in an organization. It may be in the form of bound register or cards or separate sheet. Ledger is defined as a location of all the accounts debited or credited in journal. It contains a summarized record of all the transactions of the period.

To create ledgers, at Gateway of Tally, select Accounting Info to get Menu. At Accounts Info menu, select Ledger to get Ledger menu. It should be noted that Tally automatically creates two ledger accounts cash under the cash-in-hand and profit & loss account under direct primary account. Now you must create all other account. There are no restrictions in ledger creation expect that you cannot create another profit & loss account.




F6 1/1/2010 Cash a/c Dr. 250000

To Capital 250000


F9 1/1/2010 Purchase a/c Dr 3000

To Mohan 3000

Display the Ledger:

You can see the entire ledger which you have create under some groups. To display the ledgers you have to go:

Gateway of Tally Account Info Ledger Display

Alter a Ledger:

If you want to change the ledger from the list and enter the new, you have to click Gateway of Tally Account Info Ledger Alter. Now the list of the ledger will be displayed, from here you can easily change or enter the ledger.

Delete a Ledger:

If you want to delete a ledger from the list of ledgers. You can do this from the Alter key. To delete the ledger you have to press ALT + D. You do not delete the accounts that have transaction. So if you want to delete an account, which has transaction, you must first delete all its voucher entries.

Groups:

All the ledger account can be classified into various groups based on their functions. Depending upon the group in which you place the ledger, it performs that function

“There are 28 predefined groups available in Tally. Out of which 15 groups are primary and 13 groups are subgroups.”

To insert Voucher entry, you will have to create Ledger. Ledger should come under particular Groups, which are already defined in the Tally Software. Some groups are shown below:

Bank a/c Bank Occ a/c Bank Odd a/c

Capital a/c Cash in Hand Current Assets

Current Liabilities Deposits(Assets) Direct Expenses

Direct Incomes Duties & taxes Fixed Assets

Indirect Expenses Indirect Incomes Investment

Loan & Advances Loan (liability) Provisions

Purchase a/c Reserve & Surplus Sales a/c

Secured loan Stock in Hand Sundry Creditors

Sundry Debtors Suspense a/c Unsecured Loans

Retained a Name

JOURNAL

The word general has been derived from the French word “Jour”. Journal is a book of prime record for small firms.



These firms record their business transactions in the Journal & post them to the concerned Ledger a/c. Business transaction of financial nature are studied & classified as asset, liabilities, Capital, revenue, & expenses accounts are debited or credited in the Journal according to the rule of debit and credit applicable to the specific a/c.

Question: First, Create a Company & Create the following Ledger under their

Corresponding Groups-

Name of Ledger Name of Group

Sale Sale A/C

Purchase Purchase A/C

Ravi (Debtor) Sundry Debtor

Mohan (Creditor) Sundry Creditor

Rent Paid Indirect Expense

Commission Received Indirect Expense

Mahaveer (Debtor) Sundry Debtor

Salary Paid Indirect Income

Wages Direct Expense

Furniture Fixed Asset

Freight Charges Direct Expense.

Tally is an accounting software, which is use to create balance sheet of a company. To create a balance sheet first of all, you have to create your company for the particular financial year. After this, create Ledgers under particular groups, with the help of the group entries and Vouchers. If your Voucher entry is correct then the balance sheet is automatically created & the left inside of balance sheet.

Note: Function keys for the Voucher entry

Voucher Key Used For

F1 Select Company

F2 Change Date

F3 Select Company (Taxation)

Contra Voucher F4 Cash Deposit and Withdraw (Bank)

Payment Voucher F5 Cash Payment

Receipt Voucher F6 Cash Received

Journal Voucher F7 without Cash Entry

Sale Voucher F8 Credit Sale

Purchase Voucher F9 Credit Purchase

Journal Voucher F10 Reversing

Alt + F1 Shut Company

Alt + F2 Change the Period

Alt + F3 Display Company Information

CTRL + F8 To select the Credit Note voucher

CTRL + F9 To select the Debit Note voucher



Key Used for Description

ALT + 2 To Duplicate a voucher Creates a voucher similar to the one where you positioned the cursor.

ALT +A To Add a voucher

Adds a voucher after the one where you positioned the cursor.

ALT + D To delete a voucher

To delete a master

To delete a column in any columnar report

At Voucher and Master (Single) alteration screens. Masters can be deleted subject to conditions, as explained in the manual.

All the reports screen which can be viewed in columnar format.

ALT + E To export the report in ASCII, HTML OR XML format

At all reports screens in TALLY

ALT + I To insert a voucher

To toggle between Item and Accounting invoice

Inserts a voucher before the one where you positioned the cursor.

ALT + L To select the Language Configuration

At almost all screens in TALLY.

ALT + K To select the Keyboard Configuration


ALT + O To upload the report at your website

At all reports screens in TALLY.

ALT + N To view the report in automatic columns

At all the reports where columns can be added

ALT + P To print the report At all reports screens in TALLY.

ALT + R To remove a line in a report At all reports screens in TALLY.

ALT + S To bring back a line you removed using ALT + R

At all reports screens in TALLY.

ALT + U To retrieve the last line which is deleted using Alt + R

At all reports screens in Tally

ALT+ X To cancel a voucher in Day Book/List of Vouchers

At all voucher screens in TALLY

ALT + R To Register Tally At almost all screens in TALLY.

CTRL +

ENTER

To alter a master while making an entry or viewing a report

At voucher entry and alteration screens / At all reports

CTRL + B To select the Budget At Groups / Ledgers / Voucher Types / Currencies (Accounts Info) creation and alteration screen

CTRL + E To select the Currencies At Groups / Ledgers / Voucher Types / Currencies (Accounts Info) creation and alteration screen



Key Used for Description

CTRL + G To select the Group At Groups / Ledgers / Voucher Types / Currencies (Accounts Info) creation and alteration screen

CTRL + I To select the Stock Items At Stock Group / Categories / items / Voucher Types / Units of Measure (Inventory Info)

CTRL + L To select the Ledger/To mark a Voucher as Optional

At Groups / Ledgers / Voucher Types / Currencies (Accounts Info) creation and alteration screen

CTRL + R To repeat narration in the same voucher type

At creation / alteration of voucher screen

CTRL + S Allows you to alter Stock Items master

At Stock voucher Report and Godown Voucher Report

CTRL + U To select the Units At Stock Groups / Stock Categories / Stock Items.

CTRL + V To select the Voucher Types

To toggle between Invoice and Voucher

At Groups / Ledgers / Voucher types

Page Up Display previous voucher during voucher entry/alter

At voucher entry and alteration screens

Page Down

Display next voucher during voucher entry/alter

At voucher entry and alteration screens

ENTER To accept you type into a field.

To get a report with further details of an item in a report.

You have to use this key at most areas in TALLY.

ESC To remove typed value from a field / To come out of a screen To reject a voucher or master.


Question:

Name of Ledger Name of Group

Advertisement Indirect Expense

Bad Debts Indirect Expense

Bank Account Bank a/c

Bank Charges Indirect Expense

Capital Capital a/c

Carriage Direct Expense

Cash at Bank Current Assets

Cash in Hand Current Assets

Charity Indirect Expense

Closing Stock Current Assets



Coal & Gas Direct Expense

Commission Given Indirect Expense

Commission Received Indirect Income

Creditor Sundry Creditor

Debtor Sundry Debtor

Depreciation Indirect Expense

Discount Count Given Indirect Expense

Discount Count Received Indirect Income

Drawing Capital a/c

Electricity Charges Indirect Expense

Factory Rent Direct Expense


Goodwill Fixed Asset

Goods Current Assets

Installation Direct Expense

Insurance (Factory) Direct Expense

Interest on Bank over Draft Indirect Expense

Interest of Capital Indirect Expense

Investment Fixed Assets

Land & Building Fixed Assets

Loan Current Liability

Machinery Fixed Assets

Power Lighting Direct Expense

Printing& Stationery Indirect Expense

Purchase Purchase a/c

Purchase Return Purchase a/c

Rent Indirect Expense

Repair (Office) Indirect Expense

Sales Sale a/c

Sale Return Sale a/c

Salary Indirect Expense


Only Cash and Profit & Loss a/c Ledgers are already created in Tally.

Quest:

Create a Company with name xyz create are following Ledger.

Capital Capital a/c


Land Fixed Asset

Goodwill Fixed Asset

Advertisement Indirect Expense



Debtor Sundry Debtor

Salary Indirect Expense


Freight Charges Direct Expense

Sale Sale a/c

Purchase Purchase a/c

Commission Received Indirect Income

Rent Indirect Expense

Discount count Indirect Expense

Sale Return Sale a/c

Purchase return Purchase a/c

Printing stationery Indirect Expense

Explanation of certain Journal Entry

Transaction 1: Started or commenced business with ` 20000/-


F6 1/1/2010 Cash 20000

To Capital 20000

Explanation: Business has receipt cash as Capital. Cash is an asset. This transaction is increasing the cash. Therefore cash a/c should be debited because the rule of debit & credit is: Debit the increase & Credit the decrease”.

In each general entry the transaction, involve minimum two a/c. In this transaction two a/c are: Cash a/c & Capital a/c. Capital a/c should be credited because the rule is “Debit what comes in & Credit what goes out” There is also one rule “Debit the receiver & Credit the giver” Hence Cash is the receiver & Capital a/c is the giver.

Transaction 2: Goods purchased for ` 5000/- Cash purchases for ` 5000/-

Goods purchased from Mohan for cash ` 5000/-


F5 1/4/2010 Purchase a/c Dr. 5000

To Cash 5000

Explanation: In this transaction of cash purchase of goods cash will decrease & credited because the cash is an asset all the assets are credited when there is decrease in them. The other a/c involves in the transaction is goods a/c that is the purchase a/c. The transaction will increase the goods & does debit.

Transaction 3: Goods purchase from Mohan ` 3000/- Goods purchase from

Mohan on credit ` 3000/-


F9 1/4/2010 Purchase a/c Dr. 3000

To Mohan 3000



Explanation: In the case of purchases goods will increase so the purchase a/c is to be debited. The payment for goods has not being made to Mohan. Therefore, it is still the liability of the business. Hence, Mohan is the sundry creditor of the firm. Mohan a/c as the liability of the business will be credited because liability a/c is credited when there is an increase in the liability.

Transaction 4: Cash sale for ` 7000/- Goods sold for cash ` 7000/- Goods sold

to Ajay for cash ` 7000/-


F6 1/4/2010 Cash a/c Dr. 7000

To Sale 7000

Explanation: In this transaction the two a/c are cash a/c & goods a/c both of these a/c are assets so they will be debited for increase & credited for decrease. Hence, cash a/c is debited & the sale a/c is credited.

Transaction 5: Goods sold to Mohan ` 4000/- Goods sold to Mohan on credit ` 4000/-


F8 1/4/2010 Mohan a/c Dr. 4000

To Sale 4000

Explanation: It is credit sale, it will increase debtor, an assets. Mohan a/c will be debited as assets. Sale of goods will decrease an asset; therefore, the sale a/c is credited.

Transaction 6: Furniture Purchase ` 3000/-


F5 1/4/2010 Furniture a/c Dr. 3000

To Cash 3000

Transaction 7: Machinery sold for ` 12000/-


F6 1/4/2010 Cash a/c Dr. 12000

To Machinery 12000

Transaction 8: Salary Paid for ` 3200/-


F5 1/4/2010 Salary a/c Dr. 32000

To Cash 32000

Explanation: Salary paid to employees is an expense of the business, according to the rule of debit & credit expense are debited for increase & credited for decrease. As salary is an expense increasing therefore salaries a/c is debited the other a/c is cash a/c, which is an asset, & its decreasing therefore cash a/c is credited.

Transaction 9: Rent receipt ` 2000/-




F6 1/4/2010 Cash a/c Dr. 2000

To Rent 2000

Explanation: Cash a/c is increasing therefore it is debited the other a/c is rent a/c which is income for business rent a/c will be credited because income a/c are credited for increase & debited for decrease.

Transaction 10: Amount receipt from Mohan ` 1000/- & Discount count allowed

10%


F6 1/4/2010 Cash a/c Dr. 900

Discount a/c 100

To Mohan 1000

Explanation: The transaction involves cash a/c (asset), Discount count a/c (Indirect expense) & Mohan‟s a/c (Sundry debtor). Cash is increasing so cash a/c will be debited. Discount count is an expense & increasing so it will also be debited Mohan a/c is decreasing so it will be credited.

Transaction 11: Amount paid to Shyam ` 2000/- & allowed ` 20/-.


F5 1/4/2010 Shyam a/c Dr. 2000

To Cash 1980

To Discount 20

Explanation: Payment has been made to Shyam (S. Creditors) is liability so payment to them will reduce liability of the firm. Hence, the creditor‟s a/c that is the Sham‟s a/c will be debited as per rule of the liability, the debit increase in the liability. Cash a/c will be credited because it is decreasing; Discount count a/c is the revenue a/c for which the rule is Debit decrease & Credit increase. Hence, Discount count a/c will be credited.

Some Important Terms:

Cash Discount: This Discount count is allowed to the customer for making prompt (Cash) payment. In other words, cash Discount count is allowed only if the customer makes the payment with in a fixed period. Such Discount count motivates the customer to make the payment at the earliest. As the Discount count is allowed at the time of making payment, so the entry for cash Discount count is recorded along with the entry for the payment.

Discount Paid is a Ledger under indirect expense group & the discount received group under indirect income. Cash Discount count is of two types for the business.

1. Discount count Received (Incase the business is purchase goods)

2. Discount count Paid (Incase the business is sealing its goods)

Bad Debts: When the goods are sold to a customer on credit & if the amount becomes irrecoverable due to his insolvency or some other reason, the amount



not recovered is called bad debts. For recording it, bad debts a/c is debited & the customer a/c is credited.

Example: Ravi who owed us ` 10000/- is declared insolvent & 30 p in a rupee is

received from his estate the Journal entry will be.


F6 1/4/2010 Cash a/c 3000

Bad debts 7000

To Ravi 10000

Being Ravi is declared as an insolvent so received 30 p in a rupee.

Bad Debt Recover: Sometimes it so happens that the bad debts previously written off are subsequently recovered. In such cases the Journal entry will be.


F6 1/4/2010 Cash a/c 7000

To Bad debts recover 7000

Outstanding Expenses: It is quite common for a business enterprise to be lift with some expenses which are fat to be paid at the end of the accounting fear due to one reason or the other. Such expenses are termed as outstanding expenses. These are the expenses, which should have been paid during the current year but which have not been paid.

Example: If an employee has paid salary at the rate of ` 1000/- per month & if up to 31 Dec, only 11 month salary amounting to ` 11000/- has been paid to

him, ` 1000/- will be outstanding salary. The general entry will be.


F7 1/4/2010 Salary a/c 1000

To Outstanding Salary 1000

Outstanding salary a/c is a liability; it has been credited, because, it is a representative personal a/c, representing the employees to whom salaries have to be paid.

Trade Discount count: The Discount count allowed by sells to its customer at a fixed percentage on the listed price of goods is termed as trade Discount count no separate entry is passed for the trade Discount count as it is deducted from the cash memo or invoice of the goods.

Example: If a Trader sales goods of the list price of ` 10000/- at 20% trade

Discount count for cash of the entry will be as:


F6 1/4/2010 Cash a/c 8000

To Sale 8000

Drawing: Amount or goods withdrawal by the proprietor for his private or personal use is termed as drawing, business assets for private or domestic use is also drawing, use of business card for domestic use or use of business premises for residential purpose is also drawing.



Drawing should be created as a Ledger under the group Capital that means liability of the business. A certain example of drawing is as under:

1. Amount drawn by proprietor for personal use,

2. Goods taken by the proprietor for domestic use,

3. Purpose pocket transistor for proprietor‟s some,

4. Using business vehicles for domestic use,

5. Using business premises for residential purpose,

The Journal entry for Amount withdrawn by the proprietor for personal, domestic, or private use,


F5 1/4/2010 Drawing a/c 5000

To Cash 5000

Explanation: In this transaction, Capital will reduce with the amount drawn, so drawing a/c will be debited as the rule goes debit the decrease of liability & credit the increase of liability. Cash is an asset & it is decreasing, so it is credited.

Transaction: Goods taken by the proprietor for personal use.


F7 1/4/2010 Drawing a/c 1000

To Purchase 1000

Prepaid Expenses: There are certain expenses which are related to the next year but have been paid during the current year in advance. These are called prepaid expenses; the benefit of such expense will be received during the next accounting year.

Example: The insurance premium amounting to ` 1200/- is paid on 1.4.93 for 1-

year entry on 1.4.93 will be.


F5 1/4/2010 Insurance Premium 1200

To Cash 1200

When the books will be closed on 31.12.93, insurance premium for three months that is from 1.1.94 to 31.3.94 will be treated as prepaid insurance & the following entry will be passed for it on 31.12.93


F5 1/4/2010 Prepaid Insurance 300

To Insurance Premium 300

The prepaid expense a/c is an asset, it has been debited because it is a representative personal a/c & represents those personal to whom payment has been made in advance.

Depreciation: It is the permanent & containing decrease is the value of an asset. Depreciation is a nominal a/c, which presence a loss & should be debited the asset (of which the depreciation count) will be credited because it cost is decreasing. It is treated as expense. Depreciation account is a Ledger under the



group indirect expense. An account of “wear & tear” & passage of time. Depreciation on furniture ` 2000/- the Journal entry will be.


F7 1/4/2010 Depreciation 2000

To Furniture 2000

Interest on Capital: In order to ascertain the true efficiency of the Business, it is a normal practice to charge business with interest on proprietor‟s Capital. Profit left after charging the amount of such interest are the real profits earned by the business. Such interest is a loss from the point of view of the business & therefore according to the rule of nominal a/c, interest a/c is debited in the Journal entry. The amount of such interest is the gain from the point of view of the proprietor. His Capital is increase by the amount of interest therefore the Capital a/c is credited in the Journal entry.

Example: Provide 12% interest on Capital amounting to ` 100000/-.


F7 1/4/2010 Interest on Capital 12000

To Capital 12000

Interest on Drawing: If the firm allows interest on Capital, it should also charged interest on drawing made by the proprietor, such interest is an expense for the proprietor and again to the business. Hence the entry will made by debiting the drawings a/c and crediting the interest a/c. The Journal entry will be:


F7 1/4/2010 Drawing 1000

To Interest on Drawing 1000

Some Important Transaction

1. Drawing in Goods: Sometime the proprietor with draw goods from the

business for his personal use.


F7 1/4/2010 Drawing 100

To Purchase 100

2. Goods given away as Charity: Charity is an expense of the business & the charity a/c will be debited Goods are going out of the business at cost price hence purchased (asset) is reduced hence it is credited the Journal entry will be.


F7 1/4/2010 Charity 1000

To Purchase 1000

3. Goods Discount Distributed as Free Sample: The Journal entry will be:


F7 1/4/2010 Free Sample 1000

To Purchase 1000



4. Loss of Goods by Theft or Loss of Goods by Fire: The Journal entry is:


F7 1/4/2010 Loss by Theft 1000

To Purchase 1000

Or


F7 1/4/2010 Loss by Fire 1000

To Purchase 1000

5. The Debtor (*) Returned Goods Sold to him: The Journal entry will be:


F7 1/4/2010 Sale Return 1000

To X 1000

6. Proprietor Return the Goods to Sushil: The Journal entry will be:


F7 1/4/2010 Purchase Return 1000

To Sushil 1000

Some Important Option:

1. If you want to delete Voucher entry Go to balance sheet go to the Voucher & then press Alt + D

2. To change the date period: type anywhere Alt + F2

3. Company creation: Alt + F3

Inventory Information

The different steps to do inventory are:

1. Create a company with the feature accounts with inventory.

2. Go to Accounting Vouchers F11 F2 (inventory) and in the option separate discount column on invoices click Yes and exit from the accounting Vouchers.

3. Insert inventory information

a. First of all, create group if any.

Example: Electric or household under primary.

b. Then insert units.

Example: Pieces, Meter, Kg., etc.

c. Then insert items information with their opening balance.

4. Now create Ledgers.

5. Now enter the accounting Vouchers.

a. If the discount is given per invoice that is called all the items single discount percentage allowed then this entry will be done using these function keys.

F5 Cash Purchase

F6 Cash Sales



F8 Credit Sales

F9 Credit Purchase

b. If the discount is given per item then the Voucher entry is done only by F8 or F9.

F8 Cash & Credit Sale

F9 Cash & Credit Purchase

In Cash Sale & Purchase, party account should be cash.

Stock Groups: Stock items can be grouped together under Stock Groups to reflect their classification based on some commonality. Grouping would enable easy location and reporting of stock items in statements. Hence, items of a particular brand can be grouped together so that you can extract stock of all items of their brand. To create stock group:

Gateway of Tally Inventory Info Stock Groups.

Stock Categories: Stock Categories offers particular classification of items. To create the Stock Category:

Gateway of Tally Inventory Info Stock Items.

Stock Items: Stock items are the primary entity. You can use stock items while recording their receipts and issues. This is lowest level of the information about your inventory. Each item that is required to be accounted should be created as stock. In fact you have to create a stock ledger for each item and Tally calls this account “Stock Item”.

VAT (Value Added Tax)

Vat is a consumption tax which is enforced at each stage of production based on the value added to the product at that stage. Vat was launch on April 1, 2005 at the rate of 12.5%.

Vat is multi point sales tax with set off for tax paid on purchases. It is basically a tax on the value addition on the product. The burden of tax is ultimately born by the consumers of goods.

Now, all the States are drafting their separate Value Added Tax Act and as per the present position, every States will have a separate VAT Act with different provision not corresponding with each other. It can be stated that the proposed VAT Act is the primary stage of VAT. It is proposed that there would be two taxes rate slabs on which tax would be enforced. The first one would be 4% and would cover all essential items. The second one is 10% and all luxury items would be covered. In addition special rate slabs are also proposed which are 1% for bullion and jewellery, 20% for Non Essential Goods and exemption to certain goods like agricultural produce etc. Petroleum products are not included in VAT.

VAT is a system of indirect taxation. It is the Tax paid by the producers, manufactures, users, retailers or many other dealers who add value to the goods and that is ultimately passed on to the consumers. The essence of VAT is in providing set off for input tax and this is applied through the concept of input credit. This input credit in relation to any period means setting off the amount of input tax by a registered dealer against the amount of his output tax.

If you want to use VAT facilities, then create balance sheet using VAT feature. The steps are:



1. Create a company with accounting with inventory feature.

2. Go to accounting Vouchers F11 F3 select all the entries containing VAT word. Select Yes. Then it further asks for the state. Then select for U.P., and then give “regular” and then enter the “financial year”.

Example: 01-04-2009.

3. Now create the Ledgers.

a. Create Ledger with name VAT under the group duties & taxes, type of duties others.

b. Create a purchase Ledger. Used in VAT return Yes purchase % will be 12.5% (for U.P.).

c. Create the sale Ledger used in VAT return Yes and sale % will be 4% (for U.P.).

4. Then enter Voucher entries

a. All the entries related with cash sale & credit sale will be done using Function key F8 and all the entries for credit purchase & cash purchase Voucher entry will be done using F9.

b. In case of cash purchase and credit purchase. First of all, give all the item information. If you have enter all the item information then press enter twice and then select VAT 12.5%, the VAT amount will be calculated automatically.

c. In case of cash, sale and credit sale give all the entries then press enter twice and then select VAT 4%. The VAT amount will be calculated automatically.

Quest:

1. Business started with cash ` 250000/-

2. Purchase goods for cash ` 25000/-

3. Purchase from Ajay ` 7000/-

4. Purchase furniture for cash 5000/-

5. Sold goods to Manish ` 30000/-

6. Purchase goods from Ravi for cash ` 5500/-

7. Purchase goods from Ravi ` 3500/-

8. Sold goods to Suresh for cash ` 2000/-

9. Bought Machinery for cash ` 11000/-

10. Rent paid ` 900/-

11. Salary paid ` 1200/-


F6 1/4/2010 Cash 250000

To Capital 250000

F5 Purchase 25000

To Cash 25000

F9 Purchase 7000

To Ajay 7000



F5 Furniture 5000

To Cash 5000

F8 Manish 5500

To Sale 5500

F6 Cash 3500

To Sale 3500

F5 Purchase 2000

To Ravi 2000

F5 Machinery 11000

To Cash 11000

F5 Rent 9000

To Cash 9000

F5 Salary 1200

To Cash 1200

Quest:

1. Business started by Deepak for Cash ` 500000/-

2. Purchase goods for cash ` 50000/-

3. Purchase furniture for cash ` 45000/-

4. Purchase Machinery for cash ` 80000/-

5. Purchase goods from Suraj ` 200000/-

6. Paid to Suraj half amount by cash half amount by cheque,

7. Salary to Akhilesh ` 2000/-

8. Sold goods to Man Mohan ` 80000/-

9. Sold machinery ` 50000/- for cash

10. Rent receipt ` 2000/-

11. Goods given as charity ` 7,500/-


F6 1/4/2010 Cash 500000

To Capital 500000

F5 Purchase 50000

To Cash 50000

F5 Furniture 45000

To Cash 45000

F5 Machinery 80000

To Cash 80000

F9 Purchase 200000

To Suraj 200000



F5 Suraj 200000

To Cash 100000

To Bank 100000

F5 Salary 2000

To Cash 2000

F8 Man Mohan 80000

To Sale 80000

F6 Cash 50000

To Machinery 50000

F6 Cash 2000

To Rent Receive. 2000

F7 Purchase 7500

To Charity 7500

Quest:

Delhi Furniture Mart

1. Started business with cash ` 50000/-

2. Deposited into the Bank ` 9000/-

3. Purchased machinery for ` 5000/-

4. Paid instillation charges of machinery ` 100/-

5. Purchase timber from Nuveen of the list of

6. ` 2000/- he allowed 10% trade Discount count

7. Furniture costing ` 500/- was used in furnishing the office.

8. Sold furniture to Naresh of the list price of ` 1000/- & allowed him 5%

trade Discount count

9. Received a check from Naresh for ` 950/-

10. Paid wages ` 350/- & Rent ` 200/-


F6 1/4/2010 Cash 50000

To Capital 50000

F4 Bank 9000

To Cash 9000

F5 Machinery 5000

To Cash 5000

F5 Installation 100

To Cash 100

F9 Purchase 1800

To Naveen 1800

F7 Furniture 500



To Purchase 500

F8 Naresh 950

To Sale 950

F6 Naresh 950

To Bank 950

F5 Wage 350

To Cash 350

F5 Rent 200

To Cash 200

1. Started business with cash ` 10000/- & goods ` 5000/-

2. Paid into current a/c ` 4000/-

3. Sold goods to Mohan ` 2000/-

4. Goods purchase from Shyam ` 3000/-

5. Purchase goods for Ram of ` 10000/- & he allowed 10% trade Discount count

6. Amount receipt from Mohan & Discount count allows 5%

7. Amount paid to Shyam & Discount count allows is 10% by him.

8. Rent paid ` 12000/-.

9. Furniture costing ` 500/- purchased for office use.

10. Salary paid ` 3000/-


F6 1/4/2010 Cash 10000

Goods 5000

To Capital 15000

F4 Cash 4000

To Bank 4000

F8 Mohan 2000

To Sale 2000

F9 Purchase 3000

To Shyam 3000

F9 Cash 900

To Ram 900

F6 Cash 1900

Discount Paid 100

To Mohan 2000

F5 Shy am 3000

To Cash 2700

To Discount Received 300

F5 Rent 1200



To cash 1200

F5 Furniture 500

To Cash 500

F5 Salary 3000

To Cash 3000

Quest:

1. The Company is starting creating the a/c for next financial year & the closing a/c of previous year is

Assets: Cash ` 15000/-

Bank balance ` 5000/-

Stock ` 40000/-

Furniture ` 3600/-

Debtors: ` 24000/- (X ` 6000/-, Y ` 8000/- Z ` 10000/-)

Liabilities: Bank loan ` 10000/-

Creditors: ` 12500/- (Ajay ` 5000/-, Vijay ` 7500/-)

Following transactions to place during Jan 1994:

2. Bought goods from Kailash for ` 20000/- at a trade Discount count of 10%

& Cash Discount count of 20% paid 60% amount immediately.

3. LD goods to X for ` 9000/-

4. Receipt ` 14800/- from X in full settlement of his a/c

5. Cash deposited into the Bank ` 10000/-

6. Cheque received from Y for ` 7850/- in full settlement of his a/c

7. Received a cheque from Z ` 2000/-

8. Cheque received from Z deposited into the Bank.

9. Amount due to Ajay paid by cheque.

10. Old newspaper sold ` 50/-

Old furniture sold ` 750/-

11. Purchase goods from Gopal & paid by cheque ` 8000/-

12. Sold goods to buy for cash & allowed Discount count 5% ` 2000/-

13. Paid salary to Motilal by cheque ` 2000/-

14. Received Rent ` 1500/-


F6 1/4/2010 Cash 15000

Bank a/c 5000

Stock 40000

Furniture 3600

X 6000

Y 8000

Z 10000



To Bank loan 10000

To Ajay 5000

To Vijay 7500

To Capital 65100

F5 Purchase 18000

To Cash 10584

To Discount Recd 216

To Kailash 7200

F8 X 9000

To Sale 9000

F6 Cash 14800

Discount Paid 200

To X 15000

F4 Bank 10000

To Cash 10000

F6 Cash 7850

Discount Paid 150

To Y 8000

F6 Cash 2000

To Z 2000

F4 Bank 2000

To Z 2000

F5 Ajay 5000

To Bank 5000

F6 Cash 50

To Mice income 50

F6 Cash 750

To furniture 750

F5 Purchase 8000

To Bank 8000

F6 Cash 1900

Discount paid 100

To Sale 2000

F5 Salary 2000

To Bank 2000

F6 Cash 1500

To Rent 1500

Quest:



Following Transactions shows the position of Harish as on 01.01.04

1. Cash-in-hand ` 10000/-

Cash-at-Bank ` 16800/-

Furniture ` 8000/-

Stock ` 50000/-

Debtor - Ram ` 8000/-

Suresh ` 2000/-

Shyam ` 12000/-

Creditor - Anil ` 4000/-

Sunil ` 5000/-

2. Received a cheque from Ram in full settlement of his a/c after deducting 5% Discount count and deposited the above cheque into the Bank,

3. Goods purchase for 20000/- at 10% trade Discount count & 5% cash Discount count payment is done by cheque.

4. Received a cheque from Shyam for ` 3860/- & Discount count allowed to

him ` 240/- cheque deposited into the Bank on the same day.

5. Suresh become insolvent & 40p in a rupee could be received from his estate.

6. Cash paid to Anil after deducting 2% cash Discount count.

7. Received ` 2000/- from Subhash, which was written off as bad debts in

the previous year

8. Old furniture sold for ` 800/-

9. Salaries paid ` 10000/-

10. Salaries due to clerk ` 5000/-

11. Out of the Rent paid this year, ` 1000/- is related to the next year.

12. Commission received ` 800/-.


F6 1/4/2010 Cash 10000

Bank 16800

Furniture 8000

Stock 50000

Ram 8000

Suresh 2000

Shyam 12000

To Anil 4000

To Sunil 5000

To Capital 97800

F6 Cash 7600

Discount paid 400

To Ram 8000



F4 Bank 7600

To Cash 7600

F5 Purchase 18000

To cash 17100

To Discount received 900

F6 Bank 3860

Discount paid 240

To Shy am 4100

F6 Cash 800

Bad debt 1200

To Suresh 2000

F5 Anil 4000

To cash 3920

To Discount recd 80

F6 Cash 2000

To Bad debt rec. 2000

F6 Cash 800

To furniture 800

F5 Salary 10000

To Cash 10000

F7 Salary 5000

To outstanding 5000

F5 Prepaid Rent 1000

To cash 1000

F6 Commission 800

To Cash 800

Quest:

1. Started business with ` 500000/- & paid from the Bank ` 400000/- & furniture of amount ` 5000/-

2. Purchase goods for ` 140000/- in all, out of which half the goods were on

credit from Mr. Sudhir.

3. Purchased building for ` 200000/- by cheque & paid registration charges ` 24000/-, which were paid in cash.

4. Sold goods to Arun for ` 200000/- Arun paid ¼ amounts in cash.

5. A cheque of ` 148000/- is receipt from Arun in full settlement & the

cheque is immediately deposited into the Bank.

6. Provide 10% depreciation on furniture costing ` 5000/-.

7. Provide 8% interest on Capital amounting to ` 500000/-.

8. Paid office expense ` 500/- from personal cash & stationery expenses



` 180/- from office cash.

9. Paid for office cleaning ` 200/-

10. Received a sum of ` 2500/- being rent for a position of the building let out

11. Paid for advertisement in the Hindustan Times ` 2000/-


F6 1/4/2010 Cash 100000

Bank 400000

Furniture 5000

To Capital 505000

F5 Purchase 140000

To Cash 70000

To Sudhir 70000

F5 Building 200000

To Bank 200000

F5 Registration 24000

To Cash 24000

F6 Cash 50000

Arun 150000

To Sale 200000

F6 Bank 14800

Discount paid 200

To Arun 15000

F7 Depreciation 500

To furniture 500

F7 Interest on Capital 4000

To Capital 4000

F5 Office exp 500

To Cash 500

F5 Stationery 180

To cash 180

F5 Office cleaning 200

To Cash 200

F6 Cash 2500

To Rent paid 2500

F5 Advertisement 2000

To Cash 2000

Quest:

1. Shyam Sundar started business with cash ` 7500/-



Goods ` 35000/-

Furniture ` 5000/-

2. Sold goods to Bhushan of the list price of ` 10000/- at a trade Discount

count of 10% Bhushan return goods worth ` 1000/-

3. Received from Bhushan ` 8000/- in full settlement of his a/c

4. Purchase furniture for ` 6000/-.

5. Purchase goods from Naveen for ` 25000/- less trade Discount count 12%

Returned goods to Naveen goods of the list price of ` 2000/-

6. Cleared the a/c of Naveen by paying cash under the Discount count of 5%

7. Sold goods to Ajay ` 10000/- & Vijay ` 16000/-

8. Received cash from Ajay ` 9800/- in full settlement of his a/c

9. Paid insurance premium of ` 750/-

10. Paid for Shyam sunder life insurance premium ` 1200/-

11. Purchase goods for 8000/- for cash trade Discount count 10% & cash Discount count of 2%

12. Received cash for Vijay at the cash Discount count of 5% in full settlement of his a/c

13. Paid Rent ` 800/-, Advertisement ` 1000/-, Salary ` 4000/-.

14. Received commission ` 500/-

15. Old costing ` 4000/- of which a sale price ` 5000/- destroyed by fire.

16. Salaries paid ` 4000/- Due ` 1000/-

17. Goods costing ` 800/- taken by the proprietor for personal use


F6 1/4/2010 Cash 75000

Goods 35000

Furniture 5000

To Capital 115000

F8 Bhushan 9000

To Sale 9000

F7 Sale return 1000

To Bhushan 1000

F6 Cash 8000

To Bhushan 8000

F5 Furniture 6000

To Cash 6000

F9 Purchase 22000

To Naveen 22000

F7 Purchase return 2040

To Naveen 2040



F5 Naveen 20900

To cash 20900

F8 Ajay 10000

To Sale 10000

F8 Vijay 16000

To sale 16000

F6 Cash 9800

Discount paid 200

To Ajay 10000

F5 Insurance premium 750

To Cash 750

F5 Drawing 1200

To Cash 1200

F5 Purchase 7200

To Cash 7056

To Discount Received 144

F6 Cash 15200

Discount Paid 800

To Vijay 16000

F5 Rent 800

To Cash 800

F5 Advertisement 1000

To Cash 1000

F5 Salary 4000

To Cash 4000

F6 Cash 500

To Commission rec. 500

F5 Salary 4000

To Cash 4000

F7 Salary 1000

To Outstanding 1000

F7 Drawing 800

To Purchase 800

Quest:

Following balances appeared in the books of Radhika Traders as on 01.01.94

1. Assets: Cash ` 8000/-

Bank ` 7000/-

Stock ` 30000/-

Debtors: Mohan ` 10000/-



Mohan ` 12000/-

Danish ` 14000/-

Furniture ` 5000/-

Building ` 25000/-

Liabilities: Creditors: X ` 5000/-

Y ` 6000/-

2. Bought goods of the list price of ` 6000/- from Khanna Brothers less 15% trade Discount count & 2% cash Discount count & paid 40% price at the same time.

3. Received a draft from Mohan in full settlement & deposited it into the Bank ` 9750/-

4. Purchase goods from Suresh on list price of ` 8000/- at 20% trade

Discount count & paid him by cheque.

5. Sold goods & Received a cheque of ` 25000/-

6. Deposited the above cheque into the Bank

7. Mohan deposited in our Bank a/c ` 4000/-

8. Paid income tax ` 5600/-

9. Received a cheque from Mohan & send to the Bank ` 7800/- Discount

count allowed 20%

10. With draw from the Bank for office ` 2000/- & for private, use ` 4000/-.

11. Send a cheque to X in full settlement of his a/c ` 4900/-.

12. Cheque of Mohan returned by the Bank as discount hounded.

13. Danish was declared insolvent & a payment of 60 p in a rupee received from his estate.

14. Bank allowed interest ` 350/-.

15. Paid for Rent by cheque ` 1500/-

16. Paid for travelling expense by cheque ` 500/-

17. Purchase goods for ` 5000/- for cash & paid ` 50/- carriage on these goods.

18. Give as charity cash ` 500/- & goods ` 2000/-.

19. Provide 10% depreciation on furniture costing ` 5000/-.


F6 1/4/2010 Cash 8000

Bank 7000

Stock 30000

Mohan 10000

Mohan 12000

Danish 14000

Furniture 5000

Building 25000

To X 5000



To Y 6000

To Capital 100000

F5 Purchase 5100

To Cash 1999.2

To Discount Recd 40.8

To Khans 3060

F6 Bank 9750

Discount paid 250

To Mohan 10000

F5 Purchase 6400

To Bank 6400

F6 Cash 25000

To Sale 25000

F4 Cash 25000

To Bank 25000

F6 Bank 4000

To Mohan 4000

F5 Drawing 5600

To Cash 5600

F6 Bank 7800

Discount Paid 200

To Mohan 80000

F5 Office 2000

Drawing 4000

To Bank 6000

F5 X 5000

To Cash 4900

To Discount received 100

F5 Mohan 4000

To Bank 4000

F6 Cash 8400

Bad debt 5600

To Danish 14000

F6 Bank 350

To Interest 350

F5 Rent 1500

To Bank 1500

F5 Travel expense 500



To Bank 500

F5 Purchase 5000

To Cash 5000

F5 Carriage 50

To Cash 50

F5 Charity 2500

To Purchase 2000

To cash 500

F7 Deprecation 500

To furniture 500

Quest:

Following was the position of Harish as on 1.4.94

1. Cash in hand ` 10000/-

Cash at the Bank ` 16800/-

Building ` 50000/-

Furniture ` 8000/-

Stock ` 50000/-

Debit Ram ` 8000/-, Shyam ` 12000/-

Creditor: Anil ` 4000/-, Sunil ` 5000/-

2. Withdraw from the Bank for office ` 2000/- & for private use ` 500/-

3. Paid for furniture repair ` to Bahadur Singh ` 100/-

4. Sold goods to Ramesh of the list price of 10000/- at a trade Discount count of 10%

5. Ramesh returned goods ` 1000/-

6. Received a cheque from Ramesh after deducting 2% cash Discount count, cheque was deposited into Bank.

7. Bank charge ` 100/- for the Bank charges

8. Paid income tax ` 4500/-

9. Received cash from Ram in full settlement of his account ` 7600/-

10. Furniture purchase for cash ` 2000/-

11. Goods costing ` 2000/- of which the sale price is ` 2500/- given away as charity.

12. Bought machinery for ` 20000/- & carriage paid on it ` 400/-

13. Shyam is declared as insolvent & Received 40p/Rupee from his estate,

14. Goods stolen of amount ` 4000/-

15. Harish borrowed ` 100000/- from Nitin

16. Purchased ` 100/-

17. Salary unpaid ` 2000/- & Rent due to landlord ` 3000/-

18. Provide interest on Capital ` 50000/- at the rate of 5%



19. Paid fire insurance premium on building by cheque ` 1000/- & Harish life

insurance premium by cheque ` 800/-

20. Provide 10% depreciation costing ` 8000/-

21. Charge interest on drawing ` 800/-


F6 1/4/2010 Cash 10000

Bank 16800

Building 50000

Furniture 8000

Stock 50000

Ram 8000

Shyam 12000

To Anil 4000

To Sunil 12000

To Capital 138800

F5 Office 2000

Drawing 500

To Bank 2500

F5 Furniture 100

To cash 100

F8 Ramesh 9000

To sale 9000

F7 Sale return 1000

To Ramesh 1000

F6 Bank 8820

To Ramesh 8820

F5 Drawing 4500

To cash 4500

F6 Cash 7600

Discount Paid 400

To Ram 8000

F5 Furniture 2000

To Cash 2000

F7 Charity 2000

To purchase 2000

F5 Machinery 20000

To cash 20000

F5 Carriage 400



To cash 400

F6 Cash 4800

Bad debt 7200

To Shyam 12000

F7 Loss by theft 4000

To Purchase 4000

Cash 100000

To Nitin Loan 100000

F5 Purchase 100

To Cash 100

F7 Salary 2000

To outstanding 2000

F7 Rent 3000

To outstanding 3000

F7 Interest on Capital

To Capital

F5 Insurance of building 1000

To Bank 1000

F5 Drawing 800

To Bank 800

F7 Depreciation 800

To furniture 800

F7 Capital 800

To interest on drawing 800

Quest:

1. Business started with cash ` 20000/-

Building ` 100000/-

Furniture ` 10000/-

Capital ` 300000/-

Stock: Stationery:

a. Sharpener 10 Pieces @ ` 2/-

b. Eraser 90 pieces @ ` 50/-

c. Pencil 200 pieces @ ` 1/-

d. Box 100 pieces @ ` 10/-

Home product:

a. A.C. 5 pieces @ ` 18000/-

b. Fridge 18 pieces @ ` 7000/-

c. Cooler 15 pieces @ ` 3000/-

2. Purchase goods from Bhanu for cash & Discount count allowed 10%



Sharpener 20 pieces ` 2.50

Eraser 40 pieces @ ` 75/-

Pencil 50 pieces @ ` 1.25

Fridge 10 pieces @ ` 7500/-

Cooler 12 pieces @ ` 2500/-

3. Purchase goods from Raja

A.C. 5 pieces @ ` 19000/-


Cooler 20 pieces @ ` 4000/-

4. Sold goods to Rajesh for cash

A.C. 7 pieces @ ` 25000/- Discount 5%

Fridge 15 pieces @ ` 12000/- Discount 8%

Cooler 20 pieces @ ` 8000/- Discount 10%

Pencil 200 pieces @ ` 3/-

Eraser 120 pieces @ ` 2/-

Box 80 pieces @ ` 15/-

5. Sold goods to Ram

Pencil 50 pieces @ ` 3/-

Box 20 pieces @ ` 20/-

Sharpener 20 pieces @ ` 3/-

A.C. 2 pieces @ ` 30000/-


6. Interest on drawing ` 3000/-

7. Commission Received ` 10000/-


F6 1/4/2010 Cash 20000

Building 100000

Furniture 10000

To Capital 130000

F5 Purchase 105142.50

To Cash 94628.25

To Dies received 10514.25

F9 Purchase 295000

To Raja 295000

F8 Cash 477890

39150

To Sale 517040

F8 Ram 210610

To Sale 210610

F7 Drawing 3000



To Interest on Drawing 3000

F6 Cash 10000

To Commission received 10000

SERVICE TAX

Service tax is a form of indirect tax enforced on some specified services, called “taxable services”. Service tax cannot be charged on any service which is not come under the list of taxable services. Service tax is charged on the value paid for any taxable service. It is included in the gross amount charged by the service provider. Service tax comes into existence on 1 July 1994. At present, the service tax is charged @ 10%, which was reduced from 12% on Feb. 24, 2009. Service tax is indirect tax on Service provided. Service tax is paid by buyer of service to seller of service, who in turn, deposits the tax with government.

Some Taxable Services which are come under the Service tax:

Port Telex Architects

Stockbroker Internet Café Photography

Convention Telegraph Facsimile

Sound Recording Broadcasting Cargo Handling

Event Management Dredging Services Cleaning Services

Packaging Services Cable Operators Airport Services

Video-Tape Production Franchise Services Beauty Parlors

Fashion Designer Rail Travel Agents Telephone/Cell Phone

General Insurance Advertising Agencies Courier Agencies

Consulting Engineers Dry Cleaning Services Custom House Agents

Steamer Agents Air Travel Agents Tour Operators

Management Consultants Mandap Keepers Interior Decorators

Education Cess:

To give a boost to primary education in the country, on July 2004 Finance Minister proposed to charge an Education Cess of 2% on Income tax, Corporation tax, Excise and Customs duties and Service tax. The education Cess is charged only on the total payable tax, not on the total income.

To Calculate the Service Tax:

1. Press F11 > F3 Service tax option > yes

2. Gateway of Tally > Account info > create single ledger.

3. Gateway of Tally > Inventory info > Create Group & item

4. Gateway of Tally > Accounting Voucher in F9 & F8.

TAX DEDUCTED AT SOURCE (TDS)

TDS in Tally provides on easy to use interface with complete flexibility. It helps you to handle any intricate case and to the income tax Department.

Tax deducted at source is one of the modes of collecting income tax from the taxpayers. Such collection of tax is affected at the source when income arises or accurse. Hence where any specified type of income arises or accrues to any



one, the Income Tax act enjoins the prayers of such income to deduct a stipulated percentage of such income by way of income tax pay only the balance amount to the receiver of such income.

Features of TDS in Tally:

1. Simple and user friendly.

2. Quick and easy to set up and use.

3. Partial or Full payment of tax deducted

4. Auto and Manual calculation of T.D.S amount.

5. Generated TDS Challan and Exception reports.

6. Complete tracking of each transaction from deduction to payment.

7. Challan management & printing ensures prompt and accurate filing of tax.

8. The Auto allocation feature prevents error-prone data entry and helps to track the transactions faster.

Steps to create the TDS:

1. Create company Alt + F3.

2. Press F11 and F3 and than TDS option > yes.

3. Gateway of Tally > Account info > Ledger > single ledger create.

4. Gateway of Tally > Account Voucher > create journal entry in journal voucher.

FRINGE BENEFIT TAX (FBT)

FBT is a tax, which is charged on bonus or fringe benefits. It is a tax which is provided by an employer to his employee. Fringe benefit means “any consideration for employment provided by way of any privilege, service, facility or amenity provided by the employer to the employee”.

Fringe Benefit tax is to be charged on the employer in respect of fringe benefits provided by the employer to his employees during any financial year.

Features of FBT:

1. Fringe Benefit Tax payable by an employer is in respect of freebie or fringe benefit provided to have been provided by the employer to his employees in addition to the cash salary or wages paid during the year.

2. Fringe Benefit tax is levied in addition to the Income Tax charged. To calculate the FBT:

1. Press F11 > F3 And FBT option > yes

2. Gateway of Tally > Accounting info > create single ledger

3. Gateway of Tally > Accounting info > Voucher Type.

4. Voucher Type > create FBT voucher

5. Gateway of Tally > Accounting Voucher F8.



PAYROLL ACCOUNTING: Payroll assists the users to set up and implement salary structures, ranging from simple to complex, as per the organizations requirements. You can also align and automate payroll processes and directly integrate them with main stream accounting applications. Payroll also supports configurable formats for pay slip printing, flexible salary & wages, attendance, leave and overtime register and gratuity. Features of Tally Payroll:

1. It allows flawless integration with Tally accounts. There are no connections between Payroll and Accounts.

2. It offers Employee groups- unlimited classification and sub-classification of employees.

3. It offers Pay structures- ease of conformity, faster entry and flexibility of non dependence.

4. It offers Pay components- user definable earnings, deductions and others.

5. It is independent of processing period restrictions.

6. It offers a unique Auto-Manual payroll processing facility.

Payroll Info.

Payroll Information option allows you to set up the employee defaults and standard payroll information with common payroll fields used for calculating earning and deductions. Gateway of Tally Payroll Info. Pay Heads: The salary components compose Pay structures which are called Pay Heads. A Pay Head may be an earning which is paid to an employee or a deduction which is recovered from salary. Employee Group: An Employee Group allows you to group employee in a logical manner. The salary structure can be defined at the Employee Group level. Referring to this group as template and changing accordingly will ease building all your employee records on it. Employee: The Employee Creation screen allows you to enter basic set up information that applies to the employees. Enter General Information, Payment Details and Passport & Visa Details. Salary Details: Salary Details is used to define a Pay structure to an Employee or to an Employee Group to speed up the entry of Individual Employee‟s Pay Structure.

To Create the Pay Roll:

1. After company creation press F11 > F3 > F1 for Pay Roll option > yes.

2. Gateway of Tally > Payroll info > create Pay Heads.

3. Create Employees Group.

4. Create Employees.

5. Create Salary Details.

6. Gateway of Tally > Payroll Voucher entry.

7. Gateway of Tally > Display > Payroll Report > Statement of Payroll > Pay Slip/ Pay Sheet.

accounting with tally

Documents

f5 f5 f5

trade discount count

configuration alt

press f11

key f7 date

fringe benefit tax

key f5 date

press alt