Computerized Accounting Using Tally - Erp 9 - Student Guide

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This book is a personal copy of STEFFI MURLEEDHARAN NAIR of NIIT Panvel Centre , issued on 09/05/2020.
No Part of this book may be distributed or transferred to anyone in any form by any means.
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Computerized Accounting
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Using Tally.ERP 9
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___________________
Student Guide
The information contained in this document is current as of the date of publication and subject to change. Because Tally must
respond to changing market conditions, it should not be interpreted to be a commitment on the part of Tally, and Tally cannot
guarantee the accuracy of any information presented after the date of publication. The information provided herein is general,
not according to individual circumstances, and is not intended to substitute for informed professional advice.
This document is for informational purposes only. TALLY MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN
THIS
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DOCUMENT AND SHALL NOT BE LIABLE FOR LOSS OR DAMAGE OF WHATEVER NATURE, ARISING OUT
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OF, OR IN
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CONNECTION WITH THE USE OF OR INABILITY TO USE THE CONTENT OF THIS PUBLICATION, AND/OR
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ANY CONDUCT UNDERTAKEN BY PLACING RELIANCE ON THE CONTENTS OF THIS PUBLICATION.
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including copyrights, rights of translation, etc., are vested exclusively with TALLY SOLUTIONS PRIVATE LIMITED. No
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part of this document may be reproduced, translated, revised, stored in, or introduced into a retrieval system, or transmitted
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document does not give you any licence to these patents, trademarks, copyrights, or other intellectual property.
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© 2017 Tally Solutions Pvt. Ltd. All rights reserved.

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TABLE OF CONTENTS
Chapter No. Chapter Name Page No.
1 Fundamentals of Accounting 1
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2 Journalizing and Posting of Transaction 19
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3 Maintaining Chart of Accounts in Tally.ERP9 70
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4 Fundamentals of Inventory Management 102
5 Stock Keeping Units ED 110

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6 Recording of Day-to-Day Transactions 131

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7 Accounts Receivable and Payable Management 209

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8 Banking 253
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9 Allocation and Tracking of Expenses and Incomes 358

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10 MIS Reports 381

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11 Storage and Classification of Inventory 415

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12 Management of Purchase and Sales Cycle 464
13 Price Levels and Price Lists 508
14 Manufacturing Process 524
TallyPRO- Part I
Chapter 1
Fundamentals of Accounting
Learning Objectives
 The meaning and importance of accounting.
 Commonly used accounting terms.
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 Accounting assumptions, concepts and principles.
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 Types of accounts.
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 Golden rules of accounting.
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 Double entry system of accounting.
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1.1 Introduction
Commercial businesses run with the objective of earning profit, and financial transactions are the
order of the day. It becomes essential for a business owner to keep a record of the business’ income
and expenditure, in order to find answers to numerous questions, a few of which are:
 Is the business earning profits or is it incurring a loss?
 How much do third parties owe the business?
 How much does the business owe to third parties?
 Can the business be expanded?
 Should a specific operation be withdrawn?
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 What is the total value of business assets?
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These answers can be arrived at, by studying the financial information of a business operation.
Thus, accounting is an integral part of any business.
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Accounting is the practice of maintaining precise records of the financial dealings of a business. It
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involves identifying business transactions, recording them, and summarising the same in such a
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way that important financial information can be communicated to the stakeholders of the business.
Accounting is also called as language of business.
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The stakeholders of a typical business concern are:

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 Owners
 Management
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 Employees
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 Investors (existing and potential)

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 Suppliers
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 Customers
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 Lending institutions
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 Government authorities
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1.2 Accounting Terms

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To help you understand accountancy better, a few commonly-used accounting terms are explained
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below:
1. Transaction
A transaction is a business activity that involves the transfer of money or money’s worth
between two accounts.
A transaction can be of two types:
 Cash transaction: A cash transaction is one where money is immediately received

or paid in the form of cash.
 Credit transaction: A credit transaction is one where money is paid later, but the
benefits are enjoyed immediately.
2. Capital
Total amount of money or money worth invested in the business by owner is called capital.
3. Assets:
Anything possessed or owned by an individual or company, which are not for usual selling
or trading purpose and utilised over a period of time are called assets
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4. Liability
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Liability is the amount due for the goods, services or anything taken from party or anyone
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is called as liability of the business
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5. Drawings
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The money withdrawn or taken something of money worth from business for the personal
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use is called drawings. LE
6. Bad debts
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The amount which is unrecoverable from the debtor due to reason like insolvency or
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absconding and company will not be able to realize due amount from the debtor, hence
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the unrealized amount is called bad debts.

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7. Purchases
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A purchase is the amount of goods bought by a business for further use or for reselling.
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Goods purchased with immediate payment of cash are called cash purchases. Goods
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purchased on credit are called credit purchases.

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8. Purchase returns
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Goods that have been purchased but are returned to the seller before consumption due
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to reasons like poor quality and damage are called ‘purchase returns’.
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9. Sales
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Sales refer to the amount of goods sold by a business. Sales made against immediate
payment of cash are called cash sales. Sales on credit, are called credit sales.
10. Sales returns
Goods that have been sold but are returned by the buyer before consumption, due to
reasons like poor quality and damage, are called ‘sales returns’.
11. Debtor
A debtor is a person who receives benefits from the business immediately, but is
obligated to pay for the same in future. For example, a buyer who purchases goods from
the business on credit, becomes a debtor to the business.
12. Creditor
A person who provides benefit without receiving immediate payment for the same, and
who will claim the payment in future, is called a ‘creditor’. For example, when the
business purchases goods on credit from a supplier, the supplier becomes a creditor to
the business.
13. Stock
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Unsold goods, raw material, etc., that lie with the business are collectively known as
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‘stock’.
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14. Revenue
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The earnings of a business through its activities and operations, is called ‘revenue’.
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1.3 Accounting Assumptions, Concepts and
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Principles
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To ensure that the interpretation of financial information derived from accounting is uniform,
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the following assumptions, concepts, and principles have been developed. They form the basis
for accountancy.
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1.3.1 Assumptions
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1. Accounting Entity Assumption

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As per this assumption, a business is considered as a separate unit or entity from its owner.
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That is, the proprietor and his business are treated as two distinct entities. Therefore, the
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transactions of the business are separate from its owner’s personal transactions. All the
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business transactions are recorded in the Books of Accounts from the business’
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perspective.
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Example: A vehicle purchased by the business owner for his personal use, should not be
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recorded in the business’ Books of Accounts.

2. Accounting Period Assumption
The stakeholders of a business use its financial statements and periodical reports to assess
the operational and the financial position of the business concern. Thus, it is essential for
a business to close its accounts at regular intervals. A time span of 365 days or 52 weeks
or 1 year is generally considered as the accounting period.
Note: A year that begins on 1st January and ends on 31st December is a Calendar
Year. For some businesses the calendar year is also the financial year.
For Example: In Bangladesh, the financial year starts from 1 July and ends on next
30 June. In Iran, the financial year starts from 21st March and ends on next 20th
March.
3. Going Concern Assumption: As per this assumption, accounts have to be maintained

with an expectation that the business will exist for a long period. That is, the business will
run with the assumption that it intends to continue, and there will be no need to close
operations in the near future. Example: The cost of a plant or machinery acquired by a
company, will be accounted for across financial year that is, the total cost of acquisition
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will not be reflected in the accounts of the same year as its acquisition; the cost will be
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broken into specific amounts which will be accounted for in subsequent years of the
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business. This is done with the assumption that the business concern will continue to
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operate in the forthcoming year
4. Money Measurement Assumption: According to this assumption, only those business
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transactions that can be measured in terms of money are recorded. Example: The sales
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made by a business during a particular day will be recorded in its books of accounts, as it
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can be expressed in terms of money. However, aspects like employee satisfaction will not
be recorded in the books of accounts, as they cannot be accounted in terms of money.
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1.3.2 Concepts
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1. Accrual Concept
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This concept requires that income or expenditure are recorded when they become
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receivable or payable rather than when they are collected or paid i.e., transactions are
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recorded on the basis of income earned or expense incurred irrespective of actual receipt
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or payment.
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Example: A seller bills the buyer at the time of sale and treats the bill amount as revenue,
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even though the payment may be received later.

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2. Dual Aspect Concept

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This concept states that every financial transaction has two aspects: one where the business
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receives a benefit, and the other where it provides a benefit. Therefore, every transaction
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should be recorded in such a way that its effect is reflected in two places in a business’
books of accounts. This concept forms the basis for the Double Entry System of
Accounting.
Example: When a business buys a machinery, it receives a benefit (the machinery), and
also provides a benefit (pays for the machinery).
3. Full Disclosure Concept
The various stakeholders of a business derive important information from its financial
statements. Hence, this concept explains that the financial records of a business concern
give a true and fair view of the business’ financial position.
4. Historical Cost Concept
This concept states that assets need to be recorded at the price paid for their acquisition,
and not at their current market value. Thus, a business’ financial statement will not indicate
the price at which its assets could be sold for.
Example: If a business has purchased a machinery for ₹ 10,00,000, and its market value
has come down to ₹ 8,00,000 at the time of preparing final accounts, the value will be
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recorded as ₹ 10,00,000.
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5. Matching Concept
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As per this concept, the revenue earned and the cost incurred to earn such revenue, need
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to belong to the same period, and hence they need to be ‘matched’. This will help ascertain
the result of the business operations. This concept serves as the basis for calculating
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accurate profit earned during a period. LE
Example: A business pays ₹1, 00,000 as factory rent. Other expenses incurred for business
operations like salaries and wages paid, maintenance of machinery, etc., amount to ₹ 15,
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00,000. The sales made for the month, amount to ₹ 25, 00,000. The profit of the business
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will be ₹ 9, 00,000, which is the revenue minus expenses.

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6. Revenue Realisation Concept

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According to this concept, revenue is considered as the income earned on the date when
it is received. As per this concept, unearned or unrealised revenue is not taken into account.
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This concept is vital for determining income pertaining to an accounting period. It reduces
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the possibilities of inflating incomes and profits.

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Example: On 25th December 2017, ABC Company received a sales order to supply goods
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worth ₹ 50, 00,000 to M/s. National Traders ABC Company delivered goods worth ₹ 35,
00,000 on 31th December. The remaining supply was delivered on 2nd January 2017. The
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revenue from this transaction for 2017 will be ₹ 35, 00,000 only. The remaining amount
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of ₹ 15, 00,000 should be accounted for in 2017.

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7. Verifiable and Objective Evidence Concept

This concept requires that all financial transactions be supported with documentary
evidence. Such evidence should be easy to verify, and also provide unbiased proof of
transaction.
Example: If a piece of land is purchased by a business, the transaction needs to be
supported by the relevant documents like the Title Deed.
1.3.3 Principles
1. Cost Benefit Principle
This principle states that the cost incurred for applying an accounting principle should be
lesser than the profits derived from doing so.
2. Materiality Principle
As stated earlier in this chapter, financial statements are used by the various stakeholders
to do analysis and arrive at decisions. Hence, all information that is disclosed in financial
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statements, should aid the interested parties in arriving at decisions.
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3. Consistency Principle
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The accounting practices adopted by a business for a year should be applied in the coming
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years too. That is, the accounting practices followed for one financial year should not vary
from those of the previous financial year. Consistency in accounting practices facilitates
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the comparison of financial statements across years and can help draw important
conclusions about a business.
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4. Prudence (Conservatism) Principle
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This principle highlights the uncertainty with which businesses operate. It requires that a
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business make provisions for probable losses, but operate by anticipating profits.
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Conservatism leads accountants to anticipate/disclose losses, but it does not allow a similar
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action for gains.

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1.4 Double Entry System of Accounting

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Every business transaction has a two-fold effect, wherein two accounts are affected in opposite
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directions. Thus, if a complete record were to be made of each such transaction, it is necessary to
debit one account and credit another account. Recording of this two fold effect of every
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transaction is called the Double Entry System of Accounting.

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As explained in the Dual Aspect Concept, every financial transaction has two aspects: one where
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the business receives a benefit, and the other where it provides benefit. Therefore, every
transaction should be recorded in such a way that its effect is reflected in two places in a business
Books of Accounts. The receiving aspect is termed the ‘Debit’ aspect. The giving aspect is termed
the ‘Credit’ aspect. Therefore, every business transaction will have an effect on two accounts; one
will be debited, whereas the other will be credited.
1.5 Types of Accounts
An ‘account’ is a statement of transactions relating to one of the two aspects of a business
transaction. Based on the aspect being recorded, an account can be ‘debited’ or ‘credited.
Accounts are classified based on the three categories of business transactions:

 Transactions involving individuals or other business entities
 Transactions involving assets, goods, cash
 Transactions involving incomes, expenses, losses and gains.
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In effect, there are three types of accounts maintained for transactions:
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 Personal Accounts
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Personal Accounts are relating to individuals, a group of individuals, firms and institutions.
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They are of three types:
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o Natural person's accounts: represents the accounts of real persons the business
deal with. The proprietor's account, the accounts of suppliers and customers are
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some examples of natural person's accounts.
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o Artificial person's accounts: represents the accounts of firms the business deals
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with. The accounts of a limited companies or banks that are not real persons are
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the examples of artificial person's accounts.

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o Representative personal account: If a business has not paid the rent of a number
of shops for the past two months then all the landlords are creditors of the business
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and the amount due to them is recorded under a common head called Rent
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Outstanding Account. This is a representative personal account.

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 Real Accounts
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Real accounts are relating to the property or assets and cash belonging to a business concern.
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They can be of two types:

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o Tangible Real accounts: are accounts of things that can be touched, measured,
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sold or purchased. Examples of tangible real accounts are furniture account, plant
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and machinery account, and cash account.

o Intangible Real accounts: are accounts of things that cannot be touched in the
physical sense but can be measured in terms of money value. Goodwill, trademark,
and patents, copyrights are examples of intangible real accounts
 Nominal Accounts
Nominal accounts relating to the incomes, expenses, losses and gains of a business concern.
Without nominal accounts, it is difficult for the management to find out where the money
was spent. The net result of all the nominal accounts helps the management to find out the
profit earned or loss incurred by the business.
Example: Salary accounts, discount allowed, discount received, etc.
1.6 Golden Rules of Accounting

The Golden Rules of Accounting are guidelines that every accountant should follow while
recording business transactions. The Rules are:
Type of Accounts Golden Rules
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Debit the receiver
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Personal accounts
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Credit the giver
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Debit what comes in
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Real accounts
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Credit what goes out

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Debit all expenses and losses

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Nominal accounts
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Credit all income and gains

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Table 1.1
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Note: The cash basis of accounting is a method wherein revenue is recognised when it is actually received, rather
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than when it is earned. Expenses are booked when they are actually paid, rather than when incurred. This method
is usually not used by businesses and is, therefore, used only in select situations such as for very small businesses.
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Rule for Personal Accounts

In a Personal account, the rule to be followed is, "Debit the receiver; Credit the giver".
The debit balance in a personal account shows that the business has to receive money or money
equivalent, and the credit balance shows that the business owes something.
For example: A sale of iphone 7 for ₹ 80,000 is made to Mr.Praveen, a customer of PG & Co.
who does not make the payment at the time of the sale. In such a case Mr.Praveen is liable to
pay ₹ 80,000 to PG & Co. Hence, in the books of accounts of PG& Co., Mr.Praveen account is
debited since he has received goods.
Similarly, if PG & Co. has purchased from Mr.Praveen, the account of Mr.Praveen will have to
be credited and purchases will be debited.
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Figure 1.1 Personal Account

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Below given table 1.2 is a tabular representation of the accounts and the effect on the accounts.
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Ledger Nature of Golden Rule Debited/Credited Amount (₹)

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Account Accounts Applied

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Mr.Praveen Personal Rule 1 Debited: Received 80,000

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Goods
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Sales Nominal Rule 3 Credited: Goods 80,000

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gone out of the

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business
Table 1.2
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Rule for Real Accounts

In a Real account, the rule to be followed is, "debit what comes in; credit what goes out."
Debiting a real account implies increase in the value of goods, stocks, and any other property in a
business, and crediting a real account decreases in the value of the goods, stocks, and properties
in a business.
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The debit balance in a real account means that the firm owns and has assets, such as goods,
stocks, and properties, and the credit balance shows that the business has negative balance for
these assets.
In practice, there cannot be a credit balance in a real account except when the property has been
sold at a profit.
For example: If PG & Co. bought Machinery for ₹ 1, 25,000 then value of Machinery in the
business increases. Hence, Machinery account is debited, since payment is made in cash the
balance of cash decreases and Cash account is credited.
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Figure 1.2 Real Account

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Below given table 1.3 is a tabular representation of the accounts and the effect on the accounts.
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Machinery Real Rule 2 Debited: Machinery 1,25,000

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has come in the

business
Cash Real Rule 2 Credited: Cash has 1,25,000
gone out of the
business
Table 1.3
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Rule for Nominal Accounts
In a Nominal account, the rule to be followed is, "Debit all expenses and losses; Credit all
incomes and gains."
All debits in a nominal account infer that there has been an expense or the business has made a
loss in a transaction, and a credit in a nominal account denotes that the business has earned
money, income or profit.
A debit balance in nominal account indicates a loss or an expense, and credit balance indicates a
gain or an income.
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For example, PG & Co. pays ₹ 16,000 salaries in cash. Since payment of salaries is an expense
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for the company, Salaries account is debited. Moreover, payment of salaries is made in cash, thus
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the balance of cash decreases and cash account is credited.
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Figure 1.3 Nominal Account

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Given table 1.4 is a tabular representation of the accounts and the effect on the accounts.
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Salaries Nominal Rule 3 Debited: Salary 16,000
expenses for the
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Cash Real Rule 2 Credited: Cash has 16,000
gone out of the
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business through
Bank
Table 1.4
1.7 Source Documents for Accounting

The accounting process begins with identifying and recording the transactions in the books of
accounts. A ‘source document’ serves as an evidence that a business transaction has occurred. A
source document contains details like the date of transaction, goods sold, amount, and party
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involved.
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The following are the most common source documents:
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 Bill/Invoice : When a trader sells goods to a buyer on credit (agreeing to a delayed
payment by the buyer), he provides a “sales invoice” with the details of the name and
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address of the buyer, the name of goods, the amount, terms of payments, etc.
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 Cash Memo: When goods are sold for cash, the seller issues a ‘Cash Memo’ to the
purchaser. The cash memo contains details of quantity of goods sold, rate per unit of goods
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sold, and total value of the sale.
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 Cheque: Cheques’ issued by a buyer become source documents for recording transactions
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in the Books of Accounts of both the buyer and the seller.
 Credit Note: A ‘credit note’ is recorded by the seller, when goods sold by him are returned
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to him by the buyer. It contains details of the goods returned, the buyer’s details, and the
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amount involved.
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A ‘credit note’ is even used by the banking sector The credit note is issued to the account
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holder when a certain amount is credited in his account.

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A ‘credit note’ is also used to increase the value of the previous invoice sent by the supplier
and the credit note will be issued by the customer to the supplier.
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 Debit Note: A ‘debit note’ is recorded by a buyer when goods purchased by them are
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returned to the seller. It contains details of the goods being returned, the seller’s details,
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and the amount involved.

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A ‘debit note’ is also recorded to adjust an under billed invoice. Debit note is issued by the
supplier to the customer.
 Receipt: A trader issues a ‘receipt’ to a buyer, when payment is in the form of cash. It
contains details of date, amount of cash received, and the buyer’s details.
 Voucher: Vouchers’ are prepared by the accountant, and signed by the designated person
in the organization and they contain detailed information regarding the payee, monetary
value of the payment, a description of the transaction, and more.
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Conclusion
This chapter summarises the fundamentals of Accountancy, starting with the Accounting terms,
assumptions, concepts, principles, right up to the double entry system of accounting. It explains
the need and usage of Golden Rules of Accounting in the books of accounting.
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Key Takeaways
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 Accounting is a comprehensive system to collect, analyse and communicate financial
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information.
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Entity is the organisational unit for which accounting records are maintained.
 Double Entry accounting is a system of recording transactions in a way that maintains the
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equality of the accounting equation.
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 The three types of accounts maintained for transactions are real accounts, personal
accounts and nominal accounts.
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Practice Exercises
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1. Rajesh purchased goods from Anup Enterprises and agreed to pay for the same two weeks
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later. In the books of Anup Enterprises, Rajesh will be considered a ______________.

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a. Debtor
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b. Creditor
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c. Proprietor
d. Employee
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2. Accounts have to be maintained with an expectation that the business will exist for a
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long period.’ This falls under which Accounting Assumption?

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a. Accounting Period Assumption

b. Accounting Entity Assumption
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c. Going Concern Assumption

d. None of These
3. Accounts relating to the property or assets and cash belonging to a business concern are
called:
a. Personal Account
b. Real Account
c. Nominal Account
d. Not an Account
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4. Kotak Bank account is an example of a _______________________.
a. Personal Account
b. Real Account
c. Nominal Account
d. Not an Account
5. According to the ‘Golden Rules’ of Accounting, ‘Debit Expenses and Losses’ and ‘Credit
all _______.
a. Giver
b. Incomes and Gains
c. Receiver
d. Revenue
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6. Given below are the three types of accounts and an example of each in a jumbled format.
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1 Personal Account A Furniture and Fittings Account
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2 Real Account B Sumit’s Account
3 Nominal Account C Transportation Charges Account
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Identify the correct account to example match:
a. 1-a, 2-b, 3-c ED
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b. 1-b, 2-a, 3-c
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c. 1-c, 2-c, 3-b

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d. 1-c, 2-b, 3-a

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7. A vehicle purchased by the business owner for his personal use, should be recorded in the
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business’ Books of Accounts.

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a. True
b. False
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8. When a business buys a machinery, it is considered as Dual Aspect Concept.

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a. True
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b. False
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9. Cheque is used as one of the most common source documents in the business.
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a. True
b. False
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10. Debit Notes and Credit Notes cannot be considered as the source documents in business.
a. True
b. False
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Chapter 2
Journalising and Posting of
Transactions
Learning Objectives
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 Classification of transactions according to their nature.
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 Subsidiary books and Control accounts.
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 Trial Balance.
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 Trading and Profit & Loss account.
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 Balance Sheet.
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2.1 Introduction
Commercial businesses run with the objective of earning profit, and financial transactions are the
order of the day. It becomes essential for a business owner to keep a record of the business’ income
and expenditure, in order to find answers to numerous questions, a few of which are:
 Is the business earning profits or is it incurring a loss?
 How much do third parties owe the business?
 How much does the business owe to third parties?
R
 Can the business be expanded?
AI
 Should a specific operation be withdrawn?
N
 What is the total value of business assets?
AN
These answers can be arrived at, by studying the financial information of a business operation.
AR
Thus, accounting is an integral part of any business.
H
Accounting is the practice of maintaining precise records of the financial transactions of a business.
ED
It involves identifying business transactions, recording them, and summarising the same in such a
LE
way that important financial information can be communicated to the stakeholders of the business.
Accounting is also called as language of business.
R
U
IM
The stakeholders of a typical business concern are:


FF
Owners
 Management
TE
 Employees
-S
 Investors (existing and potential)

6
 Suppliers
00
 Customers
00
 Lending institutions
86
 Government authorities
8
11
21
2.2 Recording of Business Transactions

R
A transaction is an event or happening that changes an organisation’s financial position and/or its
earnings. For example, when you sell goods for cash, your cash balance increases and your stock
reduces. Such a transaction involves the reciprocal exchange of two things, receipt of cash and
delivery of stock.
Hence, the transaction involves the aspect of ‘give and take’. Receipt of cash involves the take
aspect and delivery of stock is a give aspect. Thus, business transactions are exchanges of economic
consideration between parties and have two-fold effects that are recorded in at least two accounts.
17
As explained earlier, business transactions are usually evidenced by appropriate documents such
as cash memo, invoice, sales bill, pay-in slip, cheque, salary slip, and so on. A document which
provides evidence of the transactions is called the source document or voucher.
2.2.1 The Accounting Equation

The double entry system of accounting is based on accounting equations where the relationship
between assets, liabilities, and capital can be expressed in the form of equations. The accounting
equation signifies that the assets of a business are always equal to the total of its liabilities and
capital (owner’s equity).
R
AI
The equation reads as follows:
N
Assets = Liabilities + Capital
AN
The above equation can be presented in the following forms.
AR
Assets - Liabilities = Capital
H
ED
Assets - Capital = Liabilities
LE
As the accounting equation depicts the fundamental relationship among the components of the
balance sheet, it is also called the balance sheet equation.
R
U
IM
2.2.2 Recording of Transactions in Books of Original

FF
Entry/Journal
TE
In real accounting systems, transactions recorded in source documents are analysed and recorded
-S
for the first time in a journal, which is also known as the book of original entry. This practice
6
00
provides a complete record of each transaction in one place, apart from linking the debits and
credits for each transaction. After the debits and credits for each transaction are entered in the
00
journal, they are transferred to the individual accounts. The process of recording transactions in
86
the journal is called journalising. Once the journalising process is complete, the journal entry
8
provides a complete and useful description of the event’s effect on the organisation.
11
Journal is a day book or a daily record wherein the transactions are recorded in chronological
21
order, i.e. as and when they take place. The act of recording a transaction in the journal is called
R
journalising.
The format of journal is as shown.
Journal
Date Particulars L.F Dr. Cr.
18
Table 2.1
Date: The date column is meant to record the date on which a particular transaction takes place.
Particulars: In the particulars column the account title to be debited is written in the first line
beginning from the left corner and the word Dr. is written at the end of the column. The account
title to be credited is written in the second line, leaving a margin on the left with a prefix To. Below
the account titles, a brief explanation of the transaction is given which is called narration. After
the narration, a line is drawn in the particulars column which indicates the end of recording the
specific journal entry.
Ledger Folio (L.F): In the Ledger Folio (L.F.) column, the page number of the ledger book on
R
AI
which relevant account appears is recorded.
N
Debit (Dr.): The debit column is meant to record the amount against the account to be debited.
AN
Credit (Cr.): The credit column is meant to record the amount against the account to be credited
AR
H
2.2.2.1 Use of Debit and Credit
ED
Every transaction involves two aspects – give and take. In the double entry system of accounting,
LE
every transaction is recorded in at least two accounts. While recording transactions, the total
R
amount debited and credited must be equal. In accounting, the terms debit (abbreviated as Dr.)
U
and credit (abbreviated as Cr.) indicate whether the transactions are to be recorded on the left or
IM
right of the account.

FF
2.2.2.2 Rules of Debit and Credit

TE
All accounts are divided into five categories for the purpose of recording business transactions.
-S
 Assets
6
00
 Liabilities
00
 Capital
86
 Expenses or losses
8
11
 Incomes or gains
21
Two fundamental rules are followed to record the changes in these accounts.
R
 For recording changes in assets or expenses (losses)

o Debit: Increase in assets, increase in expenses (losses)
o Credit: Decrease in assets, decrease in expenses (losses)
 For recording changes in liabilities, capital, or revenues (gains)
o Debit: Decrease in liabilities, decrease in capital, decrease in revenue (gain)
o Credit: Increase in liabilities, increase in capital, increase in revenues (gains)
The following table summarises the rules applicable to different kinds of accounts.
19
Type of Account Increase Decrease
Asset Debit Credit
Liability Credit Debit
Income/Revenue Credit Debit
Expense/Losses Debit Credit
Capital/Stock Holders’ Equity Credit Debit
Dividends Debit Credit
R
AI
Table 2.2
N
The following illustration will help you to understand the Rules of Debit and Credit.
AN
Illustration 1: Application and recording transactions using Debit and Credit rules.
AR
1. As on 01-04-2017, Karthik commenced the business with ₹ 1,00,000
H
ED
2. As on 10-04-2017, purchased goods from Narayan on credit for ₹ 20,000 LE
3. As on 30-04-2017sold good to ABU Enterprises on credit ₹ 15,000
R
Solution:
U
IM
1. Karthik commenced the business with ₹ 1,00,000

FF
This transaction increases the capital as well as the cash. Increase in assets is debited and
increase in capital is credited. Therefore, record the transaction with debit to cash account
TE
and credit to Karthik’s capital account.

6 -S
00
Journal
00
86

8
01-04-2017 Cash Account Dr. 1,00,000

11
To, Capital Account 1,00,000

21
(Being cash invested by the proprietor)

Table 2.3
R
2. Purchased goods from Narayan on credit for 20,000
Purchased goods from Narayan for ₹ 20,000 on credit. Increase in Revenue is credited
and increase in assets is debited. Therefore, record the transaction with credit to sales
account and debit to ABUEnterprises account.
20
Journal
10-04-2017 Purchase Account Dr. 20,000
To, Narayan Account 20,000

(Being goods purchased from
Narayan on credit)
Table 2.4
R
AI
3. Sold good to ABU Enterprises on credit ₹ 10,000
N
This transaction increases sales (Income) and assets (ABU Enterprises as debtors). The
AN
rule of debit & credit says; increase in asset is debited and increase in revenue is credited.
AR
Therefore record the transaction by debiting the ABU Enterprises and Crediting the Sales
Account.
H
ED
Journal LE
R
30-04-2017 ABU Enterprises Account Dr. 100,000

U
To, Sales Account 100,000

IM
(Being goods sold to ABU Enterprises

FF
on credit)
Table 2.5
TE
2.2.2.3 Recording of Business Transactions in Journal

6 -S
As explained earlier, a journal is a day book or a daily record wherein the transactions are recorded
00
in chronological order, i.e. as and when they take place. The act of recording a transaction in the
00
journal is called journalising.

86
They are two of Journal Entries namely:

8
1. Simple Journal Entry: A journal entry in which one account is debited and one account
11
is credited.
21
R
For Example refer the journal entry given below:

As on 30-04-2017, sold good to Akash Enterprises on credit ₹ 10,000
Journal

30-04-2017 Akash Enterprises Account Dr. 15,000
To, Sales Account 15,000
21
(Being goods sold to Akash
Enterprises on credit)
Table 2.6
In the above journal entry we have debited one account i.e., Akash Enterprises and Credited one
account i.e., Sales Account.
2. Compound Journal Entry: A journal entry in which more than one debit account, more
than one credit account or more than one of both debit and credit accounts are involved
in the transactions on the same date relating to one particular account or one particular
Nature of account is termed as Compound Entry.
R
AI
Instead of recording several Journal entries we can record the transaction which involves
N
more than one debit or credit in a single journal entry called Compound Journal Entry.
AN
For Example refer the journal entry given below:
AR
As on 30-04-2017, made a payment of ₹ 30,000 towards Telephone bill ₹ 10,000,
H
Stationery Expenses ₹ 10,000, and Travelling Expenses ₹ 10,000.
Journal ED
LE
R

U
IM
30-04-2017 Telephone Bill Dr. 10,000

Stationery Expenses Dr 10,000
FF
Travelling Expense Dr 10,000

TE
To, Cash Account 30,000

(Being expenses paid through cash)
6 -S
00
Table 2.7
00
In the above entry we have debited three Accounts (Telephone bill, Stationery Expenses
86
and Travelling Expenses) and credited one Account that is Cash Account. A compound
entry can be recorded in any one of the following manner:
8
11
 Debit multiple accounts and credit one account

21
 Debit multiple accounts and credit multiple accounts

R
 Debit one account and credit multiple accounts
Illustration 2: Journalising and recording of business transactions in journal using simple

and compound entries.
TIM Enterprises furnishes the following information regarding transactions for the month of
April, 2017.
22
Date Transactions
01-04-2017 Business started with cash ₹ 5,00,000
02-04-2017 Goods purchased from Mohan ₹ 40,000
04-04-2017 Stationery purchased for cash ₹ 2,000
05-04-2017 Opened a bank account with UTI Bank by depositing cash of ₹ 50,000
08-04-2017 Goods sold to Riya for ₹ 25,000
10-04-2017 Received a cheque of ₹ 25,000 from Riya
11-04-2017 Sold goods to Shrinidhi ₹ 12,000
15-04-2017 Shrinidhi pays ₹ 12,000 cash
R
16-04-2017 Goods purchased for ₹ 16,000 on credit from Neetu
AI
18-04-2017 Insurance paid by cheque ₹ 8,000
N
19-04-2017 Paid ₹ 4,000 towards rent by cash
AN
20-04-2017 Payment made to Suraj for ₹10,000 and discount received for ₹1,000
30-04-2017 Cash of ₹ 30,000 was received from Sohan and discount allowed for ₹ 3,000
AR
Table 2.8
H
ED
Solution: LE
Books of TIM Enterprises for the month of April
R
U
Date Particulars L.F. Debit Credit

IM
01-04-2017 Cash A/c Dr 5,00,000

FF
To, Capital A/c 5,00,000

(Business started with cash)
TE
-S
02-04-2017 Purchases A/c Dr 40,000

6
To, Mohan A/c 40,000

00
(Goods purchased on credit)

00
86
04-04-2017 Stationery A/c Dr 2,000

8
To, Cash A/c 2,000

11
(Purchase of stationery for cash)

21
R
05-04-2017 UTI Bank A/c Dr 50,000

To, Cash A/c 50,000
(Opened a bank account with UTI Bank)
08-04-2017 Riya A/c Dr 25,000

To, Sales A/c 25,000
(Goods sold to Riya on credit)
10-04-2017 UTI Bank A/c Dr 25,000

To, Riya A/c 25,000
23
(Cheque received from Riya)
11-04-2017 Shrinidhi A/c Dr 12,000

(Sale of goods to Shrinidhi on credit)
15-04-2017 Cash A/c Dr 12,000

To, Shrinidhi A/c 12,000
(Cash received from Shrinidhi)
R
16-04-2017 Purchases A/c Dr 16,000
AI
To, Neetu A/c 16,000
N
(Purchase of goods on credit)
AN
AR
18-04-2017 Insurance premium A/c Dr 8,000
To, UTI Bank A/c 8,000
H
(Insurance premium paid by cheque)
ED
LE
19-04-2017 Rent A/c Dr 4,000
To, Cash A/c 4,000
R
U
(Rent paid)
IM
20-04-2017 Suraj A/c Dr 11,000

FF
To, Cash A/c 10,000

TE
To, Discount Received A/c 1,000

-S
(Payment made to raghav after discount)

6
00
30-04-2017 Cash A/c Dr 27,000

00
Discount Allowed A/c Dr 3,000

To, Sohan’ s A/c 30,000
86
(Cash received from Mohan and discount

8
11
allowed)
21
Total 7,35,000 7,35,000

R
Table 2.9
Note: When there are many transactions recorded in a number of pages in the journal book, then at the end of
each page of the journal book, the amount columns are totalled and carried forward (c/f) to the next page where
such amounts are recorded as brought forward (b/f) balances.
24
2.3 Ledger
Ledger is the principal book of the accounting system and is also called the book of secondary
entry. It is defined as a book of final entry containing all the accounts of a business or all the
accounts of a particular type. In a ledger, the transactions of the same nature are classified and
grouped together at one place in the form of accounts. Ledgers may be in the form of a bound
register, cards, or separate sheets maintained in a loose leaf binder.
2.3.1 Need for Ledger

A well-maintained accounting system plays a significant role in the growth of an organisation. The
R
ledger, as a record of the transactions, assumes great importance in the process. The net result of
AI
all transactions in respect of a particular account on a given date can be ascertained only from the
N
ledger. For example, the organisation can ascertain the amount due from a customer only from
AN
the ledger. Ledgers, thus act as a reference for the transactions of an organisation on any given
date. Accounts are opened in the ledger in a specific order, facilitating easy posting and location.
AR
For example, accounts may be opened in the same order as they appear in the profit and loss
account or balance sheet. An index is also provided in the beginning. Some large organisations
H
ED
allot code numbers for each account for easy identification. LE
The format of a ledger is shown below:
R
Dr. Tittle of the Account Cr.

U
Amount
IM
Date Particulars J.F (₹) Date Particulars J.F Amount (₹)

FF
TE
Table 2.10
-S
The columns contain the following information:

6
00
Title of the account: The name of the item is written at the top as the title of the account. The
00
title of the account ends with the suffix, ‘Account’.

86
Dr./Cr.: Dr.is the debit side of the account, i.e. the left side and Cr. is the credit side of the
account, i.e. the right side.
8
11
Date: Year, month, and date of transactions are posted in chronological order in this column.
21
Particulars: Name of the item with reference to the original book of entry is written on
R
debit/credit side of the account.

Journal Folio (J.F.): It records the page number of the original book of entry on which the
relevant transaction is recorded. This column is filled in at the time of posting.
Amount (₹): It records the amount in numerical figures, corresponding to what has been entered
in the amount column of the original book of entry.
25
2.3.2 Differences between a Journal and a Ledger
Journal and ledger are the most important books in the double entry system of accounting. The
following table highlights the main differences between a journal and a ledger.
Journal Ledger
It is the book of primary entry (original entry). It is the book of secondary entry.
It is the book for chronological record. It is the book for analytical record.
Journal, as a book of source entry, gets greater Ledger gets lesser importance as legal
importance as legal evidence. evidence.
Transaction is the basis of classification of data. Account is the basis of classification of data.
R
The process of recording in the journal is known The process of recording in the ledger is
AI
as journalising. known as posting.
N
In the journal, information relating one In the ledger, the information relating to one
AN
particular account is not found in one place. particular account is found in one place.
Table 2.11
AR
2.3.3 Classification of Ledger Accounts
H
Ledger accounts are classified into five categories. They are:
ED
LE
 Assets
 Liabilities
R
U
 Capital
IM
 Revenues/gains

FF
Expense/losses
TE
All these accounts may further be classified into two groups, namely:
-S
 Permanent accounts (assets, liabilities, and capital accounts)

6
 Temporary accounts (revenue and expense accounts)

00
00
Permanent accounts are balanced and carried forward to the next accounting period. The
86
temporary accounts are closed at the end of the accounting period by transferring them to the
8
trading account and profit and loss account. All permanent accounts appear in the balance sheet.
11
2.3.4 Posting from Journal

21
The process of transferring entries from the books of original entry (journal) to the ledger is called
R
posting. In other words, posting is the process of grouping all the transactions in respect to a
particular account at one place for a meaningful conclusion and to further the accounting process.
Depending on the requirement and convenience of the business, posting from the journal may be
done periodically, i.e. weekly, fortnightly, or monthly.
The process of posting from journal to the ledger involves the following steps.
Step 1: Locate in the ledger, the account to be debited as entered in the journal.
Step 2: Enter the date of transaction in the date column on the debit side.
26
Step 3: In the particulars column, write the name of the account through which it has been debited
in the journal. For example, furniture sold for cash ₹ 17,000. Now, in the cash account on
the debit side in the particulars column, ‘Furniture’ is entered, signifying that cash is
received from the sale of furniture. In the furniture account, in the ledger on the credit side
is the particulars column, the word, cash is recorded. The same procedure is followed for
all the entries recorded in the journal.
Step 4: Enter the page number of the journal in the folio column and in the journal, write the page
number of the ledger on which a particular account appears.
Step 5: Enter the relevant amount in the amount column on the debit side. It may be noted that
R
the same procedure is followed for making the entry on the credit side of that account to
AI
be credited. An account is opened only once in the ledger and all entries relating to a
N
particular account are posted on the debit side or credit side, as the case may be.
AN
AR
Illustration 3: Posting journal transactions into the respective ledgers and transferring
from journal to ledgers.
H
ED
May, 2017. Journalise the transactions and then post them to ledgers
LE
Date Transactions
R
U
01-05-2017 Further Invested in a business with cash of ₹ 4,00,000

IM
03-05-2017 Opened an account in HDFC Bank by depositing ₹ 1,00,000

05-05-2017 Purchased furniture for ₹ 20,000 by paying cash
FF
10-05-2017 Goods purchased from Ranjan Traders for ₹ 50,000

TE
15-05-2017 Sold goods on cash ₹ 25,000

-S
20-05-2017 Paid insurance of ₹ 2,000 by cash

6
22-05-2017 Paid ₹ 3,000 towards rent in cash

00
25-05-2017 Paid ₹ 5,000 as salary to the manager in cash

00
26-05-2017 Sold goods worth ₹ 8,000 to Raghu

86
27-05-2017 Purchased stationery worth ₹ 200 in cash

8
Table 2.12
11
Solution:
21
R
Books of TIM Enterprises for the month of May
Date Particulars L.F. Debit Credit

01-05-2017 Cash A/c Dr 4,00,000
To Capital A/c 4,00,000
(Business started with cash)
03-05-2017 HDFC Bank A/c Dr 1,00,000

To Cash A/c 1,00,000
27
(Cash deposited in bank account)
05-05-2017 Furniture A/c Dr 20,000

To Cash A/c 20,000
(Furniture purchased)
10-05-2017 Purchase A/c Dr 50,000

To Ranjan Traders 50,000
(Goods purchased on credit)
R
15-05-2017 Cash A/c Dr 25,000
AI
To Sales A/c 25,000
N
(Goods sold on cash)
AN
AR
20-05-2017 Insurance A/c Dr 2,000
To Cash A/c 2,000
H
(Insurance premium paid)
ED
LE
22-05-2017 Rent A/c Dr 3,000
To Cash A/c 3,000
R
U
(Rent paid)
IM
25-05-2017 Salary A/c Dr 5,000

FF
To Cash A/c 5,000

TE
(Salary paid)
-S
26-05-2017 Raghu A/c Dr 8,000

6
00
To Sales A/c 8,000

00
(Furniture purchased)
86
27-05-2017 Stationery A/c Dr 200

8
11
To Cash A/c 200

(Stationery Purchased)
21
R
Total 6,13,200 6,13,200

Table 2.13
Posting of entries from journal to ledger accounts
Dr. Cash Account Cr.
28
Amount Amount
Date Particulars J.F (₹) Date Particulars J.F (₹)
01-05-2017 To Capital A/c 4,00,000 03-05-2017 By HDFC Bank A/c 1,00,000
15-05-2017 To Sales 25,000 05-05-2017 By Furniture A/c 20,000
20-05-2017 By Insurance A/c 2,000
22-05-2017 By Rent A/c 3,000
R
25-05-2017 By Salary A/c 5,000
AI
N
27-05-2017 By Stationery A/c 200
AN
31-05-2017 By Balance c/d 2,94,800
AR
4,25,000 4,25,000
H
ED
01-06-2017 To Balance b/d 2,94,800 LE
Table 2.14
R
U
IM
Dr. HDFC Bank Account Cr.

FF
Amount Amount
TE
6 -S
31-05-
00
03-05-2017 To Cash A/c 1,00,000 2017 By Balance c/d 1,00,000

00
Total 1,00,000 Total 1,00,000

8 86
01-06-2017 To Balance b/d 1,00,000

11
Table 2.15
21
R
Dr. Furniture Account Cr.
Amount Amount
31-05-
05-05-2017 To Cash A/c 20,000 2017 By Balance c/d 20,000
29
20,000 20,000
01-06-2017 To Balance b/d 20,000
Table 2.16
Dr. Purchase Account Cr.
Amount Amount
R
AI
N
To Ranjan Traders 31-05-
AN
10-05-2017 A/c 50,000 2017 By Balance c/d 50,000
AR
50,000 50,000
H
01-06-2017 To Balance b/d 50,000
Table 2.17 ED
LE
R
U
Dr. Ranjan Traders Account Cr.

IM
Amount Amount
FF

TE
-S
31-05-2017 To Balance c/d 50,000 10-05-2017 By Purchase A/c 50,000

6
00
50,000 50,000
00
01-06-2017 By Balance b/d 50,000

8 86
Table 2.18
11
21
Dr. Sales Account Cr.

R
Amount Amount
31-05-
2017 To Balance c/d 33,000 15-05-2017 By Cash A/c 25,000
26-05-2017 By Raghu A/c 8,000
33,000 33,000
30
01-06-2017 To Balance b/d 33,000
Table 2.19
Dr. Insurance Account Cr.
Amount Amount
R
AI
31-05-
N
AN
3,000 3,000
AR
01-06-2017 To Balance b/d 3,000
H
Table 2.20
ED
LE
Dr. Rent Account Cr.
R
U
Amount Amount
IM

FF
TE
31-05-
-S

6
00
3,000 3,000
00
01-06-2017 To Balance b/d 3,000

86
Table 2.21
8
11
21
Dr. Salary Account Cr.

R
Amount Amount
31-05-
5,000 5,000
31
01-06-2017 To Balance b/d 5,000
Table 2.22
Dr. Raghu Account Cr.
Amount Amount
R
31-05-
AI
26-05-2017 To Sales A/c 8,000 2017 By Balance c/d 8,000
N
AN
8,000 8,000
AR
01-06-2017 To Balance b/d 8,000
H
Table 2.23
ED
LE
Dr. Stationery Account Cr.
R
U
Amount Amount
IM

FF
TE
31-05-
-S
27-05-2017 To Cash A/c 200 2017 By Balance c/d 200

6
00
200 200
00
01-06-2017 To Balance b/d 200

86
Table 2.24
8
11
2.4 Trial Balance

21
The trial balance is a statement showing the balances or total of debits and credits of all the
R
accounts in the ledger, with a view to verify the arithmetical accuracy of posting to the ledger
accounts. It is an important statement in the accounting process as it shows the final position of
all accounts and helps in preparing the final statements
2.4.1 Methods of Preparation

A trial balance can be prepared using any of the following three methods:
1. Totals method
2. Balances method
32
3. Totals-cum-balances method
 Total Method
In this method, the total of each side in the ledger (debit and credit) is ascertained
separately and shown in the trial balance, in the respective columns. The total of the debit
column should agree with the total of the credit column as the accounts are based on the
double entry system.
 Balances Method
R
Balances method is the most widely used method in practice. In this method, the trial
AI
balance is prepared by showing the balances of all ledger accounts and then totalling the
N
debit and credit columns to ensure that they are correct. The account balances are used
AN
because the balance summarises the net effect of all transactions relating to an account and
AR
helps in preparing financial statements.
H
 Totals-cum-balances Method
ED
This method is a combination of the totals method and balances method. In this method,
LE
four columns are prepared for amount. Two columns are meant for the debit and credit
R
totals of various accounts and the other two are for the debit and credit balances of these
U
accounts.
IM
FF
Format of a Trial Balance

TE
L.F Debit Credit

-S
Particulars
6
Opening Stock xxxx —

00
Sales — xxxx
00
Depreciation xxxx —
86
Commission (Cr.) — xxxx

8
Insurance xxxx —
11
Carriage Inwards xxxx —

21
Furniture xxxx —
Purchases xxxx —
R
Returns Inwards xxxx —

Bills Receivable xxxx —
Debtors xxxx —
Cash in Hand xxxx —
Plant and Machinery xxxx —
Printing Charges xxxx —
Carriage Outwards xxxx —
Capital — xxxx
Creditors — xxxx
33
Bills Payable — xxxx
Bad Debts xxxx —
Petty Cash in Hand xxxx —
Bank Overdraft — xxxx
Wages xxxx —
Discount (Dr.) xxxx —
Salaries xxxx —
Returns Outwards — xxxx
Total xxxx xxxx
Table 2.25
R
AI
Illustration 4: Preparation of Trial Balance
N
Example 1: From the following ledger balances extracted from the books of TIM Enterprises,
AN
prepare the Trial Balance as on 31-03-2017
AR
Particulars Amount (₹) Particulars Amount (₹)
Debtors 12,000 Purchases return 400
H
ED
Creditors 10,000 Sales return 500
Capital 15,000 Buildings 10,000
LE
Drawings 5,200 Rent paid 500
R
Cash balance 300 Furniture 5,000

U
Bank balance 2,100 Sales 30,000

IM
Purchases 20,000 Interest received 200

FF
Table 2.26
TE
Solution:
-S
Trial Balance as on 31st March 2017

6
00
Particulars Debit (₹) Credit (₹)

Debtors 12,000 —
00
Creditors — 10,000
86
Capital — 15,000
8
Drawings 5,200 —
11
Cash balance 300 —

21
Bank balance 2,100 —

R
Purchases 20,000 —
Sales — 30,000
Buildings 10,000 —
Rent paid 500 —
Purchases return — 400
Sales return 500 —
Interest received — 200
Furniture 5,000 —
Total 55,600 55,600
34
Table 2.27
Example 2: From the following ledger balances extracted from the books of Coffee Federation
India Ltd., prepare the Trial Balance as on 31-03-2017
Particulars Amount (₹) Particulars Amount (₹)
Opening Stock 1,250 Printing Charges 481
Sales 11800 Carriage Outwards 200
Depreciation 667 Capital 9228
Commission (Cr.) 211 Creditors 1780
R
AI
Insurance 380 Bills Payable 541
N
Carriage Inwards 300 Bad Debts 180
Furniture 670 Petty Cash in Hand 47
AN
Purchases 8679 Bank Overdraft 4000
AR
Returns Inwards 1659 Wages 1589
Bills Receivable 2730 Discount (Dr.) 328
H
ED
Debtors 1905 Salaries 750
Cash in Hand 895 Returns Outwards 1380
LE
Plant and Machinery 6230
R
Table 2.28
U
IM
FF
Solution:
TE
Trial Balance as on 31st March 2017

-S
Particulars Debit (₹) Credit (₹)

6
Opening Stock 1,250 —

00
Sales — 11,800
00
Depreciation 667 —
86
Commission (Cr.) — 211

Insurance 380 —
8
11
Carriage Inwards 300 —

21
Furniture 670 —
Purchases 8,679 —
R
Returns Inwards 1,659 —

Bills Receivable 2,730 —
Debtors 1,905 —
Cash in Hand 895 —
Plant and Machinery 6,230 —
Printing Charges 481 —
Carriage Outwards 200 —
Capital — 9,228
Creditors — 1,780
35
Bills Payable — 541
Bad Debts 180 —
Petty Cash in Hand 47 —
Bank Overdraft — 4,000
Wages 1,589 —
Discount (Dr.) 328 —
Salaries 750 —
Returns Outwards — 1,380
Total 28,940 28,940
Table 2.29
R
AI
N
2.5 Subsidiary Books & Control Accounts
AN
AR
Business transactions are first recorded in the journal and then posted to ledger accounts.
Small businesses usually record all their transactions in a single journal. In large
H
organisations, the journal is sub-divided into special journals, also known as day books or
subsidiary books.
ED
LE
A special journal facilitates division of labour in accounting work and enables you to record
R
transactions of a similar nature. Business transactions, which are repetitive in nature, can
U
be easily recorded in special journals. For example, all cash transactions may be recorded
IM
in one book, all credit sales transactions in another book, and so on. Transactions that
FF
cannot be recorded in any special journal are recorded in the journal proper.
TE
This section deals with the following special purpose books.

-S
 Cash book
6
 Purchases book
00
 Purchases return (Return outwards) book

00
 Sales book
86
 Sales return (Return inwards) book

8
11
 Journal proper
21
R
2.5.1 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. The entries are balanced on a monthly
basis. Cash book, also known as book of original entry, is maintained by all organisations, big or
small, profit or not-for-profit. It serves the purpose of both journal as well as the ledger (cash)
account. When a cash book is maintained, transactions of cash are not recorded in the journal and
no separate account for cash or bank is required in the ledger
36
2.5.1.1 Single Column Cash Book
The single column cash book records all cash transactions (receipts and payments) of a business
in chronological order. It has only one amount column on each (debit and credit) side.
The format of a Single Column Cash Book is as follows.
Dr. Cr.
R L. Amount V L. Amoun
Date Particulars No F (₹) Date Particulars No F t (₹)
R
AI
Table 2.30
N
Single column cash book consists of two sides.
AN
 Debit side: The left side or the receipt side (used for recording cash receipts).
AR
 Credit side: The right side or the payment side (used for recording cash payments).
H
ED
Each side is further divided into five columns. These columns contain the following information.
LE
 Date column: Records the date on which cash is received or paid.
 Particulars column: Records the name of the person from whom cash is received or to
R
U
whom cash is paid.

IM
 Receipt Number (R. No.) column: Records the serial number of the receipt which is
issued at the time of receipt of cash.
FF
 Voucher Number (V. No.) column: Records the serial number of the voucher which is
TE
received at the time of payment of cash.

-S
 Ledger Folio (L.F.) column: Records the page number of the ledger to which a particular
6
item from the cash book is posted.

00
 Amount (₹) column: Records the amount of cash received or paid.

00
8 86
11
21
Illustration 5: Recording of Transactions in Single Column Cash Book

R
June, 2017. Record the transactions in Single Column Cash Book
Date Transactions
01-06-2017 Business has an opening cash balance of ₹ 50,000
02-06-2017 Received cash ₹ 30,000 from Gaganjeet
03-06-2017 Paid ₹ 3,000 towards insurance premium
04-06-2017 Purchased furniture for cash ₹ 6,000
10-06-2017 Sold goods for cash ₹ 20,000
37
15-06-2017 Purchased goods for cash ₹ 7,500 from Tom
30-06-2017 Deposited cash ₹ 20,000 in bank
Table 2.31
Solution:
The Transactions are recorded in the Single Column Cash Book as shown.
R L. Amount V L. Amount
Date Particulars No F (₹) Date Particulars No F (₹)
R
01-06- To balance 03-06- By Insurance
AI
2017 b/d 50,000 2017 A/c 3,000
N
To
AN
02-06- Gangajeet 04-06- By Furniture
AR
2017 A/c 30,000 2017 A/c 6,000
10-06- To Sales 15-06- By Purchase
H
2017 A/c 20,000 2017 A/c 7,500
30-06-
ED
LE
2017 By Bank A/c 20,000
30-06- By Balance
R
U
2017 c/d 63,500

IM
1,00,000 1,00,000
01-07- By Balance
FF
2017 c/d 63,500

TE
Table 2.32
-S
Posting from Single column cash book

6
00
The left side of a cash book shows the receipts of cash, while the right side shows payments made
in cash. The accounts appearing under debit are credited as cash has been received. Thus, in the
00
above example, the entry ‘Cash received from Gaganjeet’ appears on the debit side of the cash
86
book. Therefore, Gangajeet’s account is credited by writing cash in the particulars column on the
8
credit side. Similarly, all account names appearing on the credit side of the cash book are debited
11
as cash/cheque has been received.

21
Consider how the transactions in the above example are posted to the related ledger accounts
R
Dr. Gangajeet’s Account Cr.

Amount Amount
02-
30-06- 06-
2017 To Balance c/d 30,000 2017 By cash A/c 30,000
30,000 30,000
01-07-
2017 By Balance b/d 30,000
38
Table 2.33

Amount Amount
10-
30-06- 06-
2017 To Balance c/d 20,000 2017 By cash A/c 20,000
20,000 20,000
R
01-07-
AI
2017 By Balance b/d 20,000
N
Table 2.34
AN
AR
Dr. Insurance Account Cr.
H
Amount Amount
Date Particulars J.F (₹)
ED
Date Particulars J.F (₹)
LE
03-06- 30-06-
2017 To Cash A/c 3,000 2017 By Balance b/d 3,000
R
U
3,000 3,000
IM
01-07-
2017 To Balance B/d 3,000
FF
Table 2.35
TE
-S
Dr. Furniture Account Cr.

6
00
Amount Amount
00
04-06- 30-06-
86

8
6,000 6,000
11
01-07-
21

R
Table 2.36

Amount Amount
15-06- 30-06-
7,500 7,500
39
01-07-
Bye Table 2.37
Dr. Bank Account Cr.

Amount Amount
30-06- 30-06-
R
20,000 20,000
AI
01-07-
N
AN
Table 2.38
AR
2.5.1.2 Double Column Cash Book
H
A double column cash book contains two columns of amounts on each side of the cash book. In
ED
many organisations, as far as possible, all receipts and payments are affected through bank.
LE
Cash/cheque is deposited in a bank account by filling a form called the pay-in slip. This slip
contains a counterfoil to be returned to the customer (depositor) with the signature of the cashier
R
as receipt.
U
IM
To withdraw money, banks issue blank cheque books to account holders, Cheques are generally
crossed in practice. The payment of a crossed cheque is effected only through a bank account.
FF
As the number of bank transactions increases, a separate amount column can be maintained in the
TE
cash book to record bank transactions. Using this, you are updated on the position of the bank
-S
account from time to time. Entries of all deposits made to the bank are recorded on the left.
6
Withdrawals/payments through the bank are recorded on the right. Cash deposits and cash
00
withdrawals are recorded both in the bank column and cash column because both aspects of the
00
transaction appear in the cash book itself. The amount of cash deposited in the bank is recorded
86
in the bank column on the left. At the same time, the same amount is entered in the cash column
on the right. The reverse entries are recorded when cash is withdrawn from the bank for use in
8
11
the office. Such entries are called contra entries. In the ledger folio column, the letter C which
indicates contra is written against such entries. This ensures that these entries are not to be posted
21
to any other ledger account.

R
The bank column and the cash column are balanced in a similar way. However, in the bank column,
there can be credit balance as an overdraft may have been availed from the bank. Overdraft
indicates a situation when cash withdrawn from the bank exceeds the deposits in the bank.
In a cash book, particulars of cheques received are entered in the bank column. If a cheque is
deposited in the bank on the day of its receipt, the amount is recorded in the bank column of the
cash book on the receipts side. If it is deposited on another day, it is treated as cash received on
the date of receipt and hence recorded in the cash column on the receipts side. It is recorded in
the bank column on the receipt (Dr.) side and in the cash column on the payment (Cr.) side on
the day of deposit to the bank. This is a contra entry.
40
Sometimes, due to insufficient funds, the bank dishonours cheques deposited. If a cheque received
from a customer is dishonoured, then the bank returns it and debits the firm’s account. On
receiving a returned cheque or intimation from the bank, the firm makes an entry on the credit
side of the cash book by entering the amount of the cheque in the bank column. The name of the
customer is mentioned in the particulars column. This entry restores the position prevailing before
the receipt of the cheque from the customer and its deposit in the bank.
If the bank debits the firm on account of interest, commission, or other charges for bank services,
the entry is made on the credit side in the bank column. If the bank credits the firm’s account,
then the entry is made on the debit side of the cash book in the appropriate column.
R
The format of a Double Column Cash Book is as follows:
AI
R Cash Bank V Cash Bank
N
Date Particulars No L.F (₹) (₹) Date Particulars No L.F (₹) (₹)
AN
AR
Table 2.39
H
ED
Note: In double column cash book, bank column is added. LE
Illustration 6: Recording of cash and bank transactions in Double Column Cash Book.
R
TIM Enterprises furnishes the following information regarding transactions for the month of July,
U
2017. Record the transactions in Double Column Cash Book

IM
Date Transactions
FF
01-07-2017 Business has cash balance of ₹ 25,000 and bank balance of ₹ 50,000
TE
02-07-2017 Purchased goods for ₹ 5,000 and paid by cheque

-S
05-07-2017 Sold goods for cash ₹ 6,000

6
08-07-2017 Purchased machinery worth ₹ 15,000 by cheque

00
10-07-2017 Received cheque for ₹ 10,000 towards the sales made and deposited it in bank
00
15-07-2017 Goods purchased from Sarala on cash for ₹ 8,000

86
18-07-2017 Purchased stationery for ₹ 750 and paid by cheque

20-07-2017 Issued cheque for ₹ 2,000 to Uday Shankar in full settlement of his account
8
11
22-07-2017 Withdrew cash ₹ 4,500 from bank for office use

21
23-07-2017 Paid ₹ 3,000 towards rent by cheque

R
25-07-2017 Paid ₹ 10,000 as salary in cash

28-07-2017 Withdrew ₹ 1,000 from bank for personal use
Table 2.40
Solution:
The Transactions are recorded in the Double Column Cash Book as shown.
L L
Cash Bank Cash Bank
R No
V No
Date Particulars . Date Particulars .

(₹) (₹) (₹) (₹)
F F
41
01- To By
02-07-
07- Balance 25,000 50,000 Purchases 5,000
2017
2017 b/d A/c
05- By
To Sales 08-07-
07- 6,000 Machinery 15,000
A/c 2017
2017 A/c
10- By
07- To Sales 15-07- Purchases
2017 A/c 10,000 2017 A/c 8,000
22- By
R
07- 18-07- Stationery
AI
2017 To Bank C 4,500 2017 A/c 750
N
By Uday
AN
20-07- Shankar
2017 A/c 2,000
AR
22-07- By Cash
H
2017 A/c C 4,500
ED
23-07- By Rent
2017 A/c 3,000
LE
25-07- By Salary
R
2017 A/c 10,000

U
By
IM
28-07- Drawings
FF
2017 A/c 1,000

TE
31-07- By Balance
2017 c/d 17,500 28,750
-S
35,500 60,000 35,500 60,000

6
01- To
00
08- Balance
00
2017 b/d 17,500 28,750

86
Table 2.41
8
Note: Drawing Account for Personal use is not a Contra entry because cash has not been brought into office use.
11
21
R
Posting from Double Column Cash Book

Amount Amount
31-07- 05-07-
2017 To Balance b/d 16,000 2017 By Cash 6,000
10-07-
2017 By Bank 10,000
16,000 16,000
42
01-08-
2017 By Balance c/d 16,000
Table 2.42

Amount Amount
02-07- 31-07-
2017 To Bank 5,000 2017 By Balance b/d 13,000
R
15-07-
AI
2017 To Cash 8000
N
13,000 13,000
AN
01-08-
2017 To Balance b/d 13,000
AR
Table 2.43
H
ED
LE
R
Dr. Machinery Account Cr.

U
Amount Amount
IM

FF
08-07- 31-07-
TE
15,000 15,000
-S
01-08-
6

00
Table 2.44
00
86
Dr. Stationery Account Cr.

8
11
Amount Amount
21

18-07- 31-07-
R
2017 To Bank 750 2017 By Balance b/d 750

750 750
01-08-
2017 To Balance b/d 750
Table 2.45
Dr. Uday Shankar Account Cr.
43
Amount Amount
20-07- 31-07-
2,000 2,000
01-08-
Table 2.46
R
Dr. Rent Account Cr.
AI
Amount Amount
N
AN
23-07- 31-07-
AR
3,000 3,000
H
01-08-
ED
LE
Table 2.47
R
U
IM
Dr. Salary Account Cr.

Amount Amount
FF

TE
25-07- 31-07-
-S
10,000 10,000
6
00
01-08-
00
Table 2.48
8 86
11
Dr. Drawing’s Account

21
Cr.
R
Amount Amount
28-07- 31-07-
2017 To Bank A/c 1,000 2017 By Balance b/d 1,000
1,000 1,000
01-08-
Table 2.49
44
2.5.1.3 Three Column Cash Book
When we receive cash from Debtors, we allow discount to them and when we pay cash to
suppliers, we receive discount from them. To record Discount received and discount allowed
details, Three Column Cash Book is used. When we add Discount Column is added in both the
sides of Double Column Cash Book, It is called as Three Column Cash Book
The format of a Three Column Cash Book is as follows
Particulars
Particulars
Discount
N LDiscount
AReceived
Bank (₹)
Bank (₹)
Cash (₹)
Cash (₹)
Allowed
R No
IR
V No
Date
Date
F
LF
AN
Table 2.50
AR
H
ED
Illustration 7: Recording of cash and bank transactions with discount in Three Column
Cash Book.
LE
R
August, 2017. Record the transactions in Double Column Cash Book.

U
IM
FF
Date Transactions
TE
01-08-2017 Cash at Bank is ₹ 50,000.

01-08-2017 Cash in Hand is ₹ 2, 00,000.
-S
Received Cash from Suraj for ₹ 20,000 against the bill of ₹ 20,500 and discount
6
00
03-08-2017 of ₹ 500 is allowed

Paid ₹ 10,000 to Sun Traders against the bill of ₹ 10,300 and discount of ₹ 300
00
04-08-2017 was received.

86
Received a Cheque from Akash for ₹ 30,000 against the bill of ₹ 31,000 and
8
05-08-2017 discount of ₹ 1,000 is allowed.

11
Paid Cash of ₹ 20,000 to Royal Traders against the bill of ₹ 21,000 and discount
21
09-08-2017 of ₹ 1,000 was received.

R
15-08-2017 Sold goods for cash ₹ 60,000.

20-08-2017 Paid ₹ 3,000 towards rent by cheque.
25-08-2017 Paid ₹ 10,000 as salary in cash.
Received a Cheque from TT Traders for ₹ 20,000 against the bill of ₹ 20,500
30-08-2017 and discount of ₹ 500 is allowed.
Table 2.51
Solution:
The Transactions are recorded in the Three Column Cash Book as shown
45
Particulars
Particulars
Discount
Discount
Received
Bank (₹)
Bank (₹)
Cash (₹)
Cash (₹)
Allowed
R No
V No
Date
Date
L.F
LF
01- To 04- By Sun 300 10,
08- Balance 2,00 50, 08- Traders 00
2017 b/d ,000 000 2017 A/c 0
03- 500 09- By Royal 1,0 20,
08- To Suraj’s 20,0 08- Traders 00 00
2017 A/c 00 2017 A/c 0
R
05- 1,00 20-
AI
08- To Akash 0 30, 08- By Rent 3,0
N
2017 A/c 000 2017 A/c 00
AN
15- 25- 10,
AR
08- To Sales 60,0 08- 00
2017 A/c 0 2017 By Salary 0
H
30- To TT 500 31- 2,4 97,
08- Traders 20, 08-
ED
By Balance 0,0 00
LE
2017 A/c 000 2017 b/d 00 0
2,00 1,0 1,3 2,8 1,0
R
U
0 2,80, 0,0 00 0,0 0,0

IM
000 00 00 00
Table 2.52
FF
2.5.2 Petty Cash Book

TE
Miscellaneous expenses such as conveyance, cartage, postage, telegrams, and so on are common
-S
to every organisation. These are generally repetitive in nature and it would burden the cashier to
6
00
record all these payments in the main cash book. Further, the cash book would become very bulky.
Hence, large organisations usually appoint a petty cashier and maintain a separate cash book to
00
record such transactions. Such a cash book is called a petty cash book.
86
The petty cashier follows the Imprest system. Under this system, a definite sum, say ₹ 1500, is
8
given to the petty cashier at the beginning of a certain period. This amount is called imprest
11
amount. The petty cashier makes all small payments out of this imprest amount. When he has
21
spent a substantial portion of the imprest amount, say ₹1380, he gets a reimbursement from the
R
head cashier. Thus, he again has the full imprest amount. The reimbursement may be made on a
weekly, fortnightly, or monthly basis, depending on the frequency of small payments.
Generally, petty cash books have a number of columns for the amount on the payment side (credit)
besides the first total payment column. Each of the amount columns is allotted for items of specific
payments which are most common. The last amount column is ‘miscellaneous’. Payments for
which a separate column does not exist are recorded in the miscellaneous column. At the end of
the period, all amount columns are totalled. The total payment column shows the total amount
spent and to be reimbursed. On the receipt (debit) side, there is only one amount column. Columns
for the date, voucher number and particulars are common for both receipts and payments.
46
2.5.3 Purchase Book
A purchase book is used to record all credit purchases of goods used in the normal course of
business. Other purchases such as the purchases of office equipment, furniture, and building are
recorded in the journal proper, if purchased on credit, or in the cash book if purchased for cash.
Invoices or bills received from suppliers of goods are the source documents to record entries in
the book. Entries are made with the net amount of the invoice. Details of the invoice such as trade
discount need not be recorded in this book
2.5.4 Purchase Return Book

Goods purchased are sometimes returned to the supplier for reasons such as poor quality, defects
R
AI
and so on. Entries regarding the purchases return of goods are recorded in the purchases return
book.
N
AN
For every return, the trader prepares a debit note (in duplicate) to inform the supplier that his
account has been debited to the extent of the goods returned or for the allowance claimed. The
AR
original is then sent to the supplier to enable him to make the necessary entries in his book. The
source document to record entries in the purchases return journal is generally a debit note. A debit
H
ED
note contains the name of the party (to whom the goods have been returned), details of the goods
returned and the reason for returning the goods. Each debit note has a serial number and date.
LE
2.5.5 Sales Book
R
U
The sales journal is a book maintained to record all credit sales of merchandise. The format of the
IM
sales journal is similar to that of the purchases journal explained earlier. Sales invoices or bills,
issued by the firm to its customers, are the source documents to record entries in the sales journal.
FF
For each sale, two or more copies of a sales invoice are prepared. The book-keeper makes entries
TE
in the sales journal from a copy of the sales invoice. In the sales journal, one additional column
-S
may be added to record sales tax recovered from the customer and to be paid to the government
within the stipulated time. At the end of each month, the amount column is totalled and posted to
6
00
the credit of sales account in the ledger. Posting to the debit side of individual customer accounts
00
may be made daily.

8 86
2.5.6 Sales Return Book

11
21
Sales return book is used to keep a record of the goods returned by customers. The trader prepares
a statement, known as credit note, when goods are taken back from the customers or an allowance
R
is granted to a customer. A credit note informs the customer that his account has been credited
for the goods returned or for the allowance granted.
2.5.7 Journal Proper

The journal proper is a book maintained to record transactions that cannot be recorded in any of
the special journals. It is also known as modern journal or journal residual.
 A journal proper generally records the following entries.
 Opening entries
 Rectifying entries
47
 Transfer entries
 Adjustment entries
 Closing entries
 Entries regarding dishonour of cheques
 Credit purchases and sale of things other than goods
 Entries of goods withdrawn by the owner for personal use
 Loss of goods by fire, theft and so on
 Transactions with respect to consignment and joint ventures
R
AI
2.5.8 Control Accounts
N
Control Account is also termed as Controlling Account, are accounts prepared to keep the general
AN
ledgers like Asset Account (Cash, Accounts Receivable, Inventory) nice and clean.
AR
Control Accounts are the total accounts used for checking the arithmetical accuracy of each ledger
separately; and contains the correct balances which can be used in the Financial Statements.
H
ED
Control Accounts Balance are updated for a particular period; from here the balances are
transferred to Balance Sheet and Profit & Loss account.
LE
R
U
For example; all receivables entered during one day will be accumulated from the subsidiary ledger
IM
and posted as a single summary-level number into the accounts receivable control account. Posting
FF
to all control accounts must be completed before the books are closed at the end of the reporting
TE
period; otherwise, transactions may be trapped in a subsidiary ledger.

-S
If anyone wants to understand the detailed transaction level information for accounts receivable,
they can get the details from subsidiary ledger, since it is not located in the general ledger.
6
00
Control accounts are most commonly used by large establishments, since their transactions are
00
very high in volume. A small business can naturally store all of its transactions in the general ledger,
86
and does not need a subsidiary ledger that is linked to a control account.
8
Note:
11
21
1) Bad debts recovered, cash purchase, cash sales and increase in provision for doubtful debts are not included in
control accounts and do not affect debtors and creditors account.
R
2) ‘Sales ledger control account’ is also known as ‘debtors control account’ and ‘purchases ledger control account’ is
called as ‘creditors control account’.
2.6 Financial Statements

Stakeholders need to know the business’ position at the end of each financial year. Financial
statements serve a significant purpose to users of accounting information, in knowing about the
profitability and the financial position of the organisation.
Financial statements normally include:
48
 Trading and Profit & Loss Account
 Balance Sheet
2.6.1 Trading and Profit & Loss Account

Profit and loss account is an accounting statement that shows an organisation's trading position
over a given period of time, usually the financial year. A profit and loss account has two sections
namely trading account and profit and loss account.
At the option of the organisation (trading or manufacturing), these two accounts may be put
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together in one account or shown separately. However, the usual practice is that a single account
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is prepared with two sections, viz. trading account and profit and loss account.
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AN
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2.6.1.1 Trading Account
A trading account merely indicates the result of buying and selling of goods, i.e. the gross profit
H
or gross loss on trading, without considering administration, selling and financial expenses
incurred in running the business.
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The format of trading account is given below.
R
U
Trading Account for the year ending ….

IM
Particulars Amount Amount Particulars Amount Amount

FF
(₹) (₹) (₹) (₹)

TE
To Opening stock xxxx By Sales xxxx

-S
To Purchases xxxx Less: Sales returns xx xxxx

6
xx
00
Less: Purchase returns By Closing stock

xxxx
00
To Cartage xxxx By Gross loss (Gross

loss transferred to
86
profit and loss

8
11
account)
21
To Carriage inwards xxxx

R
To Freight xxxx
To Import duty xxxx
To Excise duty xxxx
To Octroi xxxx
To Dock dues xxxx
49
To Wages xxxx
To Power xxxx
To Electricity and xxxx

water
To Packaging xxxx
To Gross profit xxxx

(Gross
xxxx xxxx
R
profit transferred to
AI
profit and loss
N
account)
AN
Table 2.53
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Explanation of the items in the above format
Opening stock: It is the first item on the debit side of the trading account. In case of
H
manufacturing business, opening stock includes the stock of raw materials, partly finished goods,
ED
and finished goods at the beginning of the trading period. In case of trading business, it includes
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only the stock of finished goods at the beginning of the trading period.
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Purchases and purchase returns: Purchases refer to finished goods purchased for resale or raw
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materials purchased for manufacture. It includes both cash and credit purchases. Net purchases
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are entered in the outer column by deducting the purchase returns from the total purchases.
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Cartage, carriage inwards, and freight: The details of transportation charges incurred for the
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movement of goods are entered in these fields. They may be inwards or outwards. Carriage,
carriage inwards, and freight incurred on the goods purchased are entered on the debit side of the
-S
trading account. When these expenses are incurred on goods sold, they are entered in the profit
6
and loss account. When it is not stated whether cartage, carriage, and freight are inward or outward,
00
the common practice is to treat them as inwards.

00
Import duty, Excise duty, Octroi: The import duty, excise duty, and octroi paid on the goods
86
purchased are shown on the debit side of the trading account. Such duties paid on goods sold are
8
11
entered in the profit and loss account. If there is no specification as to whether these duties are
paid on purchases or on sales, it is considered to have been paid on purchases.
21
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Dock dues: Dock dues incurred on purchases are entered on the debit side of the trading account
and those incurred on sales are entered in the profit and loss account. If it is not stated whether
they are paid on the purchases or sales, it can be regarded as the dues paid on the purchases.
Wages: Wages incurred while manufacturing goods or making purchased goods ready for sale are
considered direct expenses and entered on the debit side of the trading account. Indirect and non-
manufacturing wages are entered in the profit and loss account. The wages, of which the nature
(direct or indirect) is not mentioned, are treated as direct wages. Certain organisations combine
wages and salaries. They treat them as direct expenses and enter the details on the debit side of the
trading account.
50
Power, fuel, gas, water, heating, lighting, and so on: Fuel, power, gas, and oil used for running
the machines are direct expenses. Water used in the factory is also treated as a direct expense. They
are entered on the debit side of the trading account.
Heating and lighting may be for a factory or an office. Factory heating and lighting are direct
expenses and appear on the debit side of the trading account. Office heating and lighting appear
on the debit side of the profit and loss account. When it is not stated whether the heating and
lighting are for factory or office they are treated as direct expenses.
Packaging materials and charges: Packaging materials and charges incurred to make goods
ready for sale are direct expenses and entered on the debit side of the trading account. Whereas
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such expenses incurred on the finished goods for their safe dispatch to the customer are treated
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as indirect expenses. They appear on the debit side of profit and loss account.
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Other factory expenses: Other factory expenses such as factory rent, factory insurance are direct
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expenses. They appear on the debit side of the trading account.
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Sales and sales returns: Sales is the first item on the credit side of the trading account. Sales
H
include both cash and credit sales. Net sales are entered in the outer column by deducting the sales
ED
returns from the total sales. LE
Sales tax: Sales tax refers to the tax paid by a businessman to the government on the sales made
by him. It can be deducted from sales on the credit side of the trading account. Alternatively, it
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U
can also be treated as a selling expense and entered on the debit side of the profit and loss account.
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Closing stock: Closing stock represents the stock of finished goods in case of a trading business.
FF
Whereas in case of a manufacturing business, it represents the stock of raw materials, partly
finished goods, and finished goods at the end of the trading period. Closing stock generally does
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not appear in the trial balance but it has to be calculated and brought into the books of accounts.
6 -S
00
Illustration 8: Preparation of a Trading Account

00
Prepare the trading account for the year ended 31-03-2017 from the following particulars.
8 86
Particulars Amount (₹)

11
Opening stock 12,000

21
Purchases 60,000
R
Carriage 600
Sales 1,10,000
Sales returns 5,000
Sales tax 2,000
Factory lighting 1,000
Fuel and oil 750
Freight inwards 1,050
51
Octroi 1,200
Import duty 1,800
Marine insurance 2,400
Dock dues 500
Wages 6,000
Water and electricity 650
Factory rent 7,500
Packing materials 1,500
R
Purchase returns 3,000
AI
Cartage 120
N
AN
Customs duty 3,000
Factory insurance 2,500
AR
Closing stock on 31.03.2009 10,500
H
Purchase Returns 3000
Table 2.54
ED
LE
Solution:
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U
Trading Account for the year ending on 31st March, 2017

IM
Amount Amount Amount Amount

FF
Particulars (₹) (₹) Particulars (₹) (₹)

To Opening Stock 12,000 By Sales 1,10,000
TE
To Purchase 60,000 Less Sales Return 5,000

-S
Less Purchase Return 3000 57,000 Less Sales Tax 2,000 1,03,000
6
To Carriage 600 By Closing Stock 10,500

00
To Factory lighting 1,000

00
To Fuel and oil 750

86
To Freight inwards 1,050

8
To Octroi 1,200
11
To Import duty 1,800

21
To Marine insurance 2,400

To Dock dues 500
R
To Wages 6,000
To Water and
650
electricity
To Factory rent 7,500
To Packing materials 1,500
To Purchase returns 3,000
To Cartage 120
To Customs duty 3,000
To Factory insurance 2,500
52
To Gross Profit 10,930
(Transferred to Profit
& Loss Account)
1,13,500 1,13,500
Table 2.55
Illustration 9: Preparation of Trading Account
Prepare the Trading Account for the year ended 31-03-2017 from the following particulars.
R
AI
Opening stock 30,000
N
Purchases 85,000
AN
Sales 1,20,000
Octroi 2,500
AR
Cartage 600
H
Purchase returns 7,800
ED
Sales returns 12,000
Import duty 6,000
LE
Carriage inwards 3,500
R
Dock dues 1,500

U
Excise duty 2,000

IM
Clearing charges 1,200

FF
Factory rent 8,000

TE

-S
Customs duty 1,500

6

00
Gas and oil 1,300

00
Factory lighting 760

86
Closing stock 12,800

8
Table 2.56
11
Solution:
21
R
Trading Account for the year ending on 31st March, 2017

Particulars (₹) (₹) Particulars (₹) (₹)
To Opening Stock 30,000 By Sales 1,20,000
To Purchase 85,000 Less Sales Return 12,000 1,08,000
Less Purchase Return 7,800 77,200 By Opening Stock 12,800
To Octroi 2,500 By Gross Loss 20,190
53
(Transferred to profit
To Cartage 600
and Loss Account)
Import duty 6,000
Carriage inwards 3,500
Dock dues 1,500
Excise duty 2,000
Clearing charges 1,200
R
Factory rent 8,000
AI
N
AN
AR
Customs duty 1,500
H
Gas and oil 1,300

ED
LE
Factory lighting 760
R
U
1,40,990 1,40,990
IM
Table 2.57
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2.6.1.2 Profit & Loss Account

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The profit and loss account helps to ascertain the net profit earned or net loss incurred during a
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particular period. This helps the company in monitoring and controlling the costs incurred and in
6
improving its efficiency. In other words, the profit and loss statement shows the performance of
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the company in terms of profits or losses over a specified period.

00
The Net Profit/Loss is expressed as Total revenue-Total Expenses.

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Net Profit or Loss = Total Revenue - Total Expenses

8
11
The Format of Profit & Loss Account is shown below:

21

Particulars Particulars
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(₹) (₹) (₹) (₹)

To Gross loss By Gross profit
(Transferred from xxxx (Transferred from xxxx
trading account) trading account)
To Salaries xxxx By Rent received xxxx
To Rent, rates and By Commission
xxxx xxxx
taxes received
To Office lighting and
xxxx By Discount earned xxxx
Heating
54
To Insurance xxxx By Bad debts recovered xxxx
To Printing and
xxxx By Interest on drawings xxxx
stationery
To Postage and By Net loss (Transferred
xxxx xxxx
telegrams to capital account)
To Interest paid xxxx
To Discount allowed xxxx
To Bad debts xxxx
To Repairs xxxx
To Depreciation xxxx
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To Commission paid xxxx
AI
To Carriage outwards xxxx
N
To Travelling expenses xxxx
AN
To Interest on capital xxxx
AR
To Net profit xxxx
(Transferred to capital
H
xxxxxx
account) Xxxxxx
Table 2.58
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LE
Explanation of a few important items in the above format
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Office and Maintenance Expenses

U
Salaries: This refers to the salaries paid to office staff.

IM
Rent and taxes: Rent and taxes refers to municipal taxes and the rent paid for the office building.
FF
TE
Insurance: This refers to the premium paid for insuring buildings, machinery, stock, and so on
against risks.
-S
Office lighting and heating: This refers to lighting and heating expenses incurred in providing
6
00
lighting and heating for the office.

00
Printing and stationery: This indicates the printing and stationery expenses incurred in the office.
86
Repairs and renewals: This refers to repair charges incurred for repairing the properties of the
8
business.
11
21
Depreciation: Depreciation refers to the wear and tear, i.e. the reduction in the value of an asset,
resulting out of its use.
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Selling and Distribution Expenses

Carriage outwards or Freight outwards: It refers to the transportation expenses incurred in
carrying the goods to the market for sale.
Bad debts: Bad debts refers to the debts that are considered to be irrecoverable.
Commission paid: This is the commission paid to the salesmen and distributors for their services.
Financial Expenses
55
Discount on sales or Discount allowed: This indicates the cash discount allowed to the debtors
for the prompt payment made by them.
Interest paid: This refers to the interest paid on loans.
Interest on capital: Interest allowed to the proprietor on his capital is entered under interest on
capital.
Incomes
Non-trading incomes: It refers to all incomes other than trading incomes, such as rent received,
commission received, interest received, and so on.
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AI
Interest on drawings: It refers to the interest charged on the amount withdrawn by the proprietor
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from the business for his personal use. It is an income of the business and appears on the credit
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side of profit and loss account.
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Note: Personal expenses such as life insurance premium, income tax, and so on, incurred by the business owner
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should not be included in the profit and loss account. Such expenses are treated as drawings, which has to be deducted
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from the capital. LE
Illustration 10: Preparation of Profit & Loss A/c
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U
From the below given particulars, prepare the profit and loss account for the year ended 31-12-
IM
2017
FF

Gross profit 1,50,000
TE
Salaries 25,000
-S
Commission received 1,800

6
Rent paid 10,000

00
Office lighting 2,500

00
Advertisement 5,600
86
Printing and stationery 3,000

8
Repairs and renewals 4,200

11
General expenses 500

21
Interest on capital 1,800

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Interest on loan 900

Discount allowed 2,000
Insurance premium 1,800
Interest on bank deposits 1,200
Interest on drawings 250
Bad debts 2,200
Carriage outwards 1,200
Travelling outwards 1,850
Rent received from sub-tenant 1,500
Bad debts recovered 700
56
Sundry expenses 550
Discount received 600
Table 2.59
Solution:
Profit & Loss Account for the year ending on 31st December, 2017
Dr. Cr.
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AI
(₹) (₹) (₹) (₹)
N
To Salaries 25,000 By Gross Profit 1,50,000
AN
By Commission
AR
To Rent paid 10,000 1,800
Received
H
By Interest on bank
To Office lighting 2,500 1,200
ED
deposits
To Advertisement 5,600 By Interest on drawings 250
LE
To Printing and By Rent received from
3,000 1,500
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stationery sub-tenant
U
To Repairs and
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4,200 By Bad debts recovered 700

renewals
FF
To General expenses 500 By Discount received 600

By Commission
TE
To Interest on capital 1,800 1,200

Received
-S
To Interest on loan 900

6
To Discount allowed 2,000

00
To Insurance
00
1,800
premium
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To Bad debts 2,200

8
To Carriage outwards 1,200

11
To Travelling
21
outwards 1,850
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To Sundry Expenses 550

To Net Profit 94,150
(Transferred to
Capital Account) 1,57,250 1,57,250
Table 2.60
Illustration 11: Preparation of Profit & Loss A/c
From the given particulars, prepare the profit and loss account for the year ended 31-03-2017
57
Gross loss 25,000
Salaries 13,500
Rent paid 5,600
Advertisement expenses 2,100
General expenses 750
Bad debts 1,100
Printing and stationery 2,150
Repairs and renewals 900
Discount allowed 600
R
Discount received 850
AI
Carriage 300
N
Lighting and heating 1,250
AN
Trade expenses 560
AR
Insurance 2,000
Interest on investments 3,000
H
Depreciation 1,450
Commission Paid
ED 800
LE
Table 2.61
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Solution:
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IM
FF
Profit & Loss Account for the year ending on 31st March, 2017
TE
Dr. Cr.
-S

6
(₹) (₹) (₹) (₹)

00
By Commission
To Gross Loss 25,000 1,950
00
Received
86
(Transferred from
By Discount Received 850
Trading A/c)
8
11
By Interest on
To Salaries 13,500 3,000
21
Investment
To Rent paid 5,600 By Net Loss 52,260
R
To advertisement (Transferred to Capital

2,100
expenses A/c)
To General expenses 750
To Bad debts 1,100
To Printing and
2,150
stationery
To Repairs and
900
renewals
To Discount allowed 600
58
To Carriage 300
To Lighting and
1,250
heating
To Trade expenses 560
To Insurance 2,000
To Depreciation 1,450
To Commission Paid 800
58,060 58,060
Table 2.62
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2.6.2 Balance Sheet
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The Balance Sheet is a statement that summarises the assets and liabilities of a business. The excess
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of assets over liabilities is the net worth of a business. The balance sheet provides information that
AN
helps in assessing:
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 A company’s long-term financial strength and performance

H
A company’s efficiency in day-to-day working capital management
ED
 A company’s asset portfolio
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A key element of the Profit and Loss Account, and one that distinguishes it from the Balance
Sheet, is that the amounts shown on the statement represent transactions over a period of time,
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U
while the items represented on the balance sheet show information as on a specific date.
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All revenue and expense accounts are closed once the profit and loss account is prepared. The
FF
Revenue and Expenses accounts will not have an opening balance for the next accounting period
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2.6.2.1 Types of Assets and Liabilities included in Balance Sheet

6
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Assets are defined as any item of economic value owned by an individual or corporation, provided
it can be measured in terms of money. In other words, assets are the properties owned by an
00
organisation and the debts (i.e. amounts) due to an organisation from other parties. Examples are
86
cash, securities, accounts receivable, inventory, office equipment, and other properties. On a
balance sheet, assets are equal to the sum of liabilities, common stock, preferred stock, and retained
8
11
earnings.
21
From an accounting perspective, assets are divided into the following categories namely current
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assets (cash and other liquid items), long-term assets (real estate, plant, equipment), prepaid and
deferred assets (expenditures for future costs such as insurance, rent, interest), and intangible assets
(trademarks, patents, copyrights, goodwill).
 Current assets, circulating, floating or fluctuating assets: These refer to cash or other
temporary assets which can be converted into cash in a short period. Examples are cash in
hand, cash at bank, bills receivable, and other liquid items.
 Liquid assets: Liquid assets are the current assets which are either in the form of cash or
can be converted into cash immediately without incurring high losses. Examples are cash
in hand, cash at bank, and sundry debtors.
59
 Investments: This refers to the amount invested by the business on government bonds,
on shares and debentures of companies for the purpose of earning interest and dividends.
Investments may be for a short-term or long-term. Short-term investments are grouped
with current assets and long-term investments are shown as a separate item.
 Fixed assets: These are the assets held by a business organisation for its use, and not for
sale. These are relatively permanent in nature. Examples are buildings, furniture, and
machinery.
 Wasting assets: Wasting assets are the fixed assets lost through use or exhausted.
Examples are mines and quarries.
 Intangible assets: Intangible assets are the fixed assets which do not have a physical
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existence, i.e. it cannot be seen or touched, but the possession of which yields benefit to
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the business or the possessor. Examples are copyright, patent, and goodwill.
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 Fictitious assets: Fictitious assets are the debit balances, i.e. expenses and losses, carried
AN
forward from one accounting period to another. These are fictitious and not represented
by any tangible or concrete property. Examples are heavy advertisement expenses not
AR
written off and preliminary expenses.
H
Format of Balance Sheet is shown below:
ED
Balance sheet as on ________________ (e.g. 31st March, 2017)
LE
Liabilities Assets
R
(₹) (₹) (₹) (₹)

U
1. Capital xxxx 1. Fixed Assets

IM
Less: Drawings xxxx Good will xxxx

FF
Less: Net loss xxxx Patents xxxx

Add: Net profit xxxx Copyrights xxxx
TE
Add: Interest on Land &

-S
Capital xxxx Buildings xxxx

6
00
(Capital/Proprietor's Plant &

Fund) xxxx Machinery xxxx
00
2.Long Term
86
Liability Motor Vehicles xxxx

Furniture and
8
11
Long term loan xxxx Fixtures xxxx

Long term deposits xxxx Loose Tools xxxx
21
2. Long term
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3. Current Liability Investments xxxx

Income received in
advance xxxx 3. Current Assets
Short term
Liabilities for expenses xxxx investments xxxx
Outstanding
Sundry Creditors xxxx Incomes xxxx
Bills Payable xxxx Prepaid Expenses xxxx
Bank Overdraft xxxx Closing Stock xxxx
Short-term Loans xxxx Sundry Debtors xxxx
60
Bills Receivables xxxx
Cash at Bank xxxx
Cash in Hand xxxx
xxxx xxxx
Table 2.63
Illustration 12: Preparation of Balance Sheet
Prepare the Balance Sheet as on 31-03-2017, from the below given particulars
R
Capital 60,000
AI
Drawings 3,000
N
Long term loan 40,000
AN
Sundry creditors 16,000
AR
Sundry debtors 30,000
Investments 20,000
H
ED
Bills receivable 5,000
Outstanding rent 1,500
LE
Plant and machinery 18,000
R
Land and building 25,000

U
Goodwill 10,000
IM
Patents 5,000
FF
Bills payable 13,000

TE
Cash in hand 5,600

Cash at bank 10,400
-S
Net profit 12,000

6
00

00
Bank overdraft 5,000

Table 2.64
8 86
Solution:
11
21
Balance sheet as on 31st March, 2017

R
Liabilities (₹) (₹) Assets (₹) (₹)

1. Capital 60,000 1. Fixed Assets
Less: Drawings 3,000 Good will 10,000
Add: Net profit 12,000 69,000 Patents 5,000
2.Long Term Liability Land & Buildings 25,000
Long term loan 40,000 Plant & Machinery 18,000
2. Long term
3. Current Liability Investments 20,000
Sundry Creditors 16,000 3. Current Assets
61
Bills Payable 13,000 Closing Stock 15,500
Bank Overdraft 5,000 Sundry Debtors 30,000
Outstanding Rent 1,500 Bills Receivables 5,000
Cash at Bank 10,400
Cash in Hand 5,600
1,44,500 1,44,500
Table 2.65
Illustration 13: Preparation of Balance Sheet
R
Prepare the Balance Sheet as on 31-12-2017, from the below given particulars
AI
N
AN
Capital 1,20,000
AR
Drawings 6,000
Interest on capital 7,200
H
Net loss 14,200
Building
ED 32,000
LE
Plant and machinery 16,500
Patents and trademarks 6,500
R
Goodwill 7,000
U
Sundry creditors 14,000

IM
Sundry debtors 24,000

FF
Bills receivable 18,000

Cash in hand 8,700
TE
Cash at bank 15,300

-S
Long-term loan 20,000

Deposits (Cr) 15,000
6
00
Bank overdraft 8,000

00
Outstanding salary 6,500

86
Long term investments 10,000

8
Prepaid insurance 750

11
Commission accrued 250

21
Deposits (Dr) 10,500

Table 2.66
R
Solution:
Balance sheet as on 31st March, 2017

Liabilities Assets
(₹) (₹) (₹) (₹)
1. Capital 1,20,000 1. Fixed Assets
62
Less: Drawings 6,000 Good will 7,000
Add: Interest on Patents and
Capital 7,200 Trademarks 6,500
Less: Net Loss 14,200 1,07,000 Land & Buildings 32,000
2.Long Term
Liability Plant & Machinery 16,500
2. Long term
Long term loan 20,000 Investments 10,000
Long term
deposits(Cr.) 15,000 3. Current Assets
3. Current Liability Prepaid Insurance 750
R
Sundry Creditors 14,000 Closing Stock 21,000
AI
Bills Payable 6,500 Sundry Debtors 24,000
N
Bank Overdraft 8,000 Bills Receivables 18,000
AN
Cash at Bank 15,300
AR
Cash in Hand 8,700
Commission Accrued 250
H
Deposits(Cr.) 10,500
ED
LE
1,70,500 1,70,500
Table 2.67
R
U
IM
Conclusion
FF
TE
This chapter summarises the fundamentals of Accountancy, starting with the Accounting terms,
assumptions, principles, right up to the double entry system of accounting. It explains the process
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of recording business transactions in the Books of Original Entry/Journal, posting of the same to
6
00
the Books of Final Entry/Ledger, preparation of a Trial Balance and finally preparation of the key
financial reports like Balance Sheet and Profit & Loss Accounts to know the financial position and
00
performance of a company
8 86
Key Takeaways
11
21
 Journal and ledger are the most important books in the double entry system of accounting.
 Trial Balance is prepared with a view to verify the arithmetical accuracy of posting to the
R
ledger accounts.
 Control Accounts are used for checking the arithmetical accuracy of each ledger separately.
 Profit and loss statement shows the performance of the company in terms of profits or
losses made by it over a specified period.
 Balance Sheet gives an overview of the financial position of a company as on a specific
date.
63
Practice Exercises
1. Which of the following is the correct entry for Advance Payments made to Creditors?
a. Debit Cash/Bank A/c and Credit Creditors A/c
b. Debit Creditors A/c and Credit Cash/Bank A/c
c. Debit Creditors A/c and Credit Liabilities A/c
d. Debit Assets A/c and Credit Cash/Bank A/c
2. Journal is also called a __________________.
R
a. Book of Original Entry
AI
b. Book of Final Entry
N
c. Book of Fixed Entry
AN
d. Book of Complex Entry
3. Neeraj bought a vehicle on credit from Vijay. Which of the following journal entries will
AR
be made for this transaction in Neeraj's books?
H
a. Dr. Vehicle Cr. Cash
ED
b. Dr. Purchases Cr. Vijay
c. Dr. Neeraj Cr. Purchases
LE
d. Dr. Vehicle Cr. Neeraj
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U
4. The ___________is a statement showing the balances or total of debits and credits of all
IM
the accounts in the ledger.

a. Balance Sheet
FF
b. Trial Balance
TE
c. Ratio Analysis
d. Cash Flow Statement
6 -S
5. If Debtors: Creditors, then Profit: ______.

00
a. Gain
00
b. Expense
c. Loss
86
d. Income
8
11
21
6. Given below are the three types of accounts and an example of each in a jumbled format.
R
1 Personal Account A Furniture Account

2 Real Account B Anup’s Account
3 Nominal Account C Telephone Charges Account
Identify the correct account to example match:
a. 1-a, 2-b, 3-c
b. 1-b, 2-a, 3-c
c. 1-c, 2-c, 3-b
d. 1-c, 2-b, 3-a
7. Bad debts recovered, are included in control accounts and affect debtors and creditors
account.
64
a. True
b. False
8. There are 3 methods of preparing Trial Balance. i.e.; Totals method, Balances method,
and Totals-cum-balances method
a. True
b. False
9. Trial Balance is one of the Financial Statements.

a. True
b. False
R
AI
10. Based on his incomes and expenses Mr. Karan, a trader, prepared the following P&L
N
A/c:
AN
AR
Profit and Loss Account for the year ending 31-12-2017
Dr. Cr.
H
Particulars Amount Particulars Amount
(₹)
ED (₹)
LE
To Salaries paid 80,000 By Gross profit (transferred 2,50,000
from Trading A/c)
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To Office rent paid 30,000 By Interest received 6,000

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To Stationary expenses 3,000

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To Printing expenses 2,000

To Discount received 4,000
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To Travelling expenses 26,000

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To Advertisement expenses 36,000

To Net profit (transferred 75,000
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to capital A/c)
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2,56,000 2,56,000
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Based on the above Profit & Loss account, answer the following questions:
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i. Which of the following is a wrong entry posted by Karan?

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a) Salaries paid
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b) Interest received
c) Discount received
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d) Advertisement expenses
ii. What is the Net Profit of Mr. Karan?

a) ₹ 56,000
b) ₹ 75,000
c) ₹ 83,000
d) Insufficient information
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iii. During the year, Karan introduced ₹50,000 as additional capital into the
business. Do you think this information should be reflected in the Profit &
Loss statement?
a) Yes
b) No
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Chapter 3
Maintaining Chart of Accounts in
Tally.ERP9
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Learning Objectives
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 Getting started with computerised accounting
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 Create a company
 Select and shut a company
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 Set companies chart of accounts by creating ledgers and groups
 Display the company chart of accounts ED
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3.1 Introduction
In the previous chapters, Fundamentals of Accounting and Journalising & Posting of
Transactions, introduced you to the principles of accounting, and the entire cycle of accounting,
starting with recording of business transactions to preparing key financial statements.
This chapter will help you understand the application of accounting knowledge in a real-time
business scenario, using a computerised accounting system, Tally.ERP 9.
Maintaining accounts under the manual system of accounting is a tedious and time-consuming
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activity. Under this system, transactions are first recorded in journals, then the entries are posted
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into the respective ledger accounts and then a trial balance is prepared, to verify whether, the ledger
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summaries of all account transactions are accurate. If the totals of the debit and credit side of the
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trial balance are not equal, then to rectify the same, adjusting entries are passed and ledger entries
are corrected. Finally, the transactions data is used to prepare the accounting reports for each
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accounting period. With the increase in scale of business and volume of business transactions, the
difficulties and complexities of maintaining accounts also increases.
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Computerised accounting puts an end to the above tedious and time-consuming process. It
involves the simple cycle of one-time creation of the ledgers, followed by the recording of day-to-
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day transactions. The rest of the accounting process including generation of financial reports is
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automated.
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Among accounting softwares, Tally.ERP 9 stands out for its simplicity and efficiency. It is one of
the fastest and most powerful concurrent multi-lingual Business Accounting and Inventory
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Management softwares available in the market. It is a fully integrated, affordable and highly reliable
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software. Tally.ERP 9 is easy to buy, quick to install, and easy to learn and use. Tally.ERP 9 is
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designed to automate and integrate all business operations, such as sales, finance, purchasing,
inventory, and manufacturing.
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Let us understand how to get started with Tally.ERP 9, before moving on to recording
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transactions.
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3.1.1 Getting Started with Tally.ERP 9
To begin working on Tally.ERP 9, double click the Tally.ERP 9 icon on your system.
Tally.ERP 9 Gateway of Tally screen appears as shown in the figure 3.1:
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Figure 3.1 Gateway of Tally screen

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The key components of the Gateway of Tally screen are as listed below:
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Top Horizontal Button Bar: This panel contains, Option to print, e-mail, import, and upload
data, access help, control centre, and support centre.
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Close Button: This button allows you to exit the current screen. If you are at the Gateway of
Tally, clicking this button allows you to exit the application.
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Vertical Button Bar: All the button options are displayed here. The buttons vary from screen to
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screen.
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Calculator: Mathematical calculation can be done here. Press Ctrl+N to use the Calculator
function.
Information Panel: This displays details of Product, Version, License, and Configuration
Menu: This box contains options to Select Company, Create Company etc.
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3.1.2 Mouse and Keyboard Conventions
While working on Tally.ERP 9, you may use the following keyboard conventions:
Mouse/Keyboard Conventions
Action Particulars
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Fn Press the Function key
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Fn Press Alt+ Function key
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Fn Press Ctrl + Function key
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Table 3.1
Switching between Screen Areas ED
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When Tally.ERP 9 first loads, the Gateway of Tally screen is displayed. To switch between the
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main screen area and calculator at the bottom of the screen, press Ctrl+N or Ctrl+M. Press
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Ctrl+Alt+T to navigate to Product and Features screen, press Ctrl+Alt+L to navigate to the
License and Services detail screen, press Ctrl+Alt+F to navigate to Configuration
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Information screen.
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Quitting Tally
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You can exit the program from any Tally screen, but Tally requires all screens to be closed before
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it shuts down.
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To quit working on Tally:

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 Press Esc until you see the message Quit? Yes or No. Press Y or Enter, or click on Yes
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to quit Tally
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 Alternatively, to Exit without confirmation, press Ctrl+Q from Gateway of Tally

 You can also press Enter or Quit in the Gateway of Tally
Now that you are familiar with Gateway of Tally and keyboard conventions, let us use a business
scenario to illustrate the creation of a company in Tally.ERP 9, before recording business
transactions in its books of account.
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Business Scenario
Nidhi Sales Pvt Ltd., is a dealer in computer hardware. The company maintained its accounts
manually till March 2017. In April 2017, the company installed Tally.ERP 9.
After installation of Tally.ERP 9, the company’s accountant is required to create the company,
‘Nidhi Sales Pvt Ltd.’ in Tally.ERP 9. After company creation, ledgers and groups have to be
created as per the previous year’s balance sheet with their balances to record further transactions.
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3.2 Company Creation
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The first step in working with Tally.ERP 9 is to create a Company. A Company in Tally.ERP 9 is
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a central repository where you can maintain all the financial records of your business, and from
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where you can extract the required financial reports and statements.
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The procedure to create a company is illustrated using the above business scenario.
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Illustration 1: Company creation, selection, alteration and shutting of company in

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Tally.ERP 9
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Go to Gateway of Tally > Company Info. > Create Company.

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The Company Creation screen appears as shown in the figure 3.2:

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Figure 3.2 Company Creation Screen
The fields in the Company Creation screen and the information to be filled in each of them are
explained below.
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To navigate between the fields, use Enter/Tab, or Mouse clicks.
 Directory: The path to the location of Tally.ERP 9 data is displayed here. By default, the
path provided while installing Tally.ERP 9 will be displayed. However, you can press
Backspace and specify the location in which you want the data to be stored.
 Name: Provide a name for the company that is being created. In this example, we are
creating a company named Nidhi Sales Pvt. Ltd.
 Primary Mailing Details: The mailing name and address details are picked from here for
any report such as balance sheet and statements of accounts.
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o Mailing name: The name provided for the company in the Name field is
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automatically displayed here. However, you can change it as per requirements. The
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name specified here will be used for mailing purposes.
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In this example, Nidhi Sales Pvt. Ltd. is retained.
o Address: Fill in the company’s address. Country: Select the country in which the
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company is located. This will allow users to choose the statutory capabilities
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available for that country. In this example, the country selected is India.
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o State: This field appears once India is selected as the country. Select the State in
which the company is located. In this example, Nidhi Sales Pvt Ltd is located in
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Karnataka.
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o Fill in the relevant PIN Code.

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o Fill in the relevant numbers in the Phone No., Mobile No. and Fax No fields.
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o E-mail: Fill in the company’s official E-mail ID here. This will be used while
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E-mailing reports and statements from Tally.ERP 9.

o Website: Fill in the company’s official website address.
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
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Books and Financial Year Details:

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o Financial year begins from: This refers to the twelve-month accounting period
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of the company. For Nidhi Sales Pvt Ltd, the financial year begins on 1-4-2017.
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o Books beginning from: The date provided in the aforesaid field will be
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automatically displayed here. In the example, the date is retained. However, if you
have started with maintaining your books of accounts with Tally.ERP 9 mid-year,
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the required date can be set accordingly.

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 Security Control
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o Tally Vault password (if any): Once you enter a password here, you will need it
to open your company each time. The name of a company that is locked using
Tally Vault will be hidden with the asterisk ‘*’ symbol. You need to provide the
Tally Vault password to open and access the company.
o Use security control? : Setting this option to ‘Yes’ will allow you to define the
access rights for each user who will access your company. This feature is explained
in forthcoming volumes. For Nidhi Sales Pvt Ltd., we shall set this option to No.
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 Base Currency Information:
o Base currency symbol: The base currency symbol will be filled as per the
country selected. For India, it is ₹.
o Formal name: The currency’s formal name will be filled here. In this example,
it is INR (Indian Rupees).
o Suffix symbol to amount?: For some countries, the currency symbol is
specified after the amount. This option can be enabled for such countries, so
that the currency symbol may be printed after the amount. However, Nidhi
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Sales Pvt Ltd., is an Indian company and hence this option is set to No.
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o Add space between amount and symbol?: Tally.ERP 9 will provide a single
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space between the amount and the currency symbol, if this option is set to Yes.
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For e.g.: ₹ 5,000. Notice the space between symbol and the amount
o Show amounts in millions?: If the company’s financial statements need to
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have their values expressed in terms of millions, set this option to Yes.
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o Number of decimal places: By default, the number of decimal places for the
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base currency is set to 2. However, you can have up to 4 decimal places. The
Indian currency has 2 decimal places whereas certain other countries require 3
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decimal places and so on.
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o Word representing amount after decimal: The symbol for amounts

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expressed in decimals will be set by default. For India, it is paise.

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o No. of decimal places for amounts in words: You can specify the number
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of decimal places for printing the amount in words. This number should be
equal to or lesser than the number specified in Number of Decimal Places field.
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For example, if the currency has up to 3 decimal places, the value to be printed
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in words can be restricted to 2 decimal places.

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Note: Base currency information is set to default based on the country selected. In the above Illustration, we have
selected India so the base currency symbol is ₹.
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The Company Creation screen for Nidhi Sales Pvt Ltd., appears as shown in the figure 3.3
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Figure 3.3 Company Creation Screen
The message Accept? Yes or No will be displayed. Press Enter or Y to save the details
After saving the Company Creation screen, The Gateway of Tally screen will appear with the
company’s name displayed on the left pane as shown in the figure 3.4:
The Gateway of Tally screen with loaded company name appears as shown in the figure 3.4:
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Figure 3.4 Gateway of Tally Screen (Company Loaded)

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This indicates that the company is currently open in Tally.ERP 9

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Activity: Create a company - Indus Enterprises by pressing Alt+F3 > Create company > with the financial
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year begins from 1st April, 2017 and books beginning from 1st April, 2017. You may enter company details
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(address, email, etc.) as per your choice.

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On completing the above activity, the Gateway of Tally screen with two companies loaded will
now appear as shown in the figure 3.5:
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The Gateway of Tally screen with two companies loaded appears as shown in the figure 3.5
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Figure 3.5 Gateway of Tally with the New Company — Indus Enterprises
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Observation: Notice that Indus Enterprises is highlighted. This indicates that it is currently the active company
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from the list of loaded companies. To switch between the companies loaded, all you have to do is; click the name of
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the company or press F3 and select the company on which you want to work on.
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3.2.1 Shut a Company

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By shutting a company, you are essentially closing a company. To return to working on Nidhi Sales
Pvt. Ltd., let us close Indus Enterprises.
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To do so,
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1. Go to Gateway of Tally > F3: Company Info. (Alt + F3)

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2. Click Shut Company. Tally.ERP 9 displays the Close Company screen, with the List of
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Companies that are open.

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You can also use Alt + F1 from the Gateway of Tally to get to this screen
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3. Shut the company Indus Enterprises

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3.2.2 Select a Company

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By ‘selecting’ a company, you are essentially opening it in Tally.ERP 9.

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1. Go to Gateway of Tally > F3: Company Info. (Alt+F3)

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2. Click Select Company, or press S. Tally.ERP 9 displays the Select Company screen, with
a List of Companies that are available in the location specified.
You can also press F1 to get to the Select Company screen. Select Nidhi Sales Pvt Ltd.
3.2.3 Alter a Company

By ‘altering’ a company, you are modifying the details which you have provided in the Company
Creation screen.
1. Go to Gateway of Tally > F3: Company Info. (Alt+F3)
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2. Click Alter or press A.
If multiple companies are loaded on Gateway of Tally screen, then Tally.ERP 9 displays the
Select Company screen, with a List of Companies that are available in the location specified.
Select the company which you need to alter and press Enter to view the Company Alteration
screen. Alter the company details as required and accept the screen
3.3 Company Features and Configurations
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Once you have created a company in Tally.ERP 9, the next step would be to setup Tally.ERP 9’s
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Features and Configurations. There are sets of options that help you optimize your usage of
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Tally.ERP 9.
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3.3.1 Company Features: F11
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Features in Tally.ERP 9 are a set of capabilities, provided as options that enable you to maintain
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financial records as per your business needs. The Company Features menu can be accessed by
clicking F11: Features on the vertical button bar. The effect of these options will be reflected only
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in the company for which they are enabled.

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Company Features section in Tally.ERP 9 is divided into the following major categories:
 Accounting Features
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Inventory Features
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Statutory & Taxation

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 TSS Features
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 Add-On Features
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You can press F11 from any screen of Tally.ERP 9 or you may also click the F11: Features button
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available in the button bar, to enable the required features. The features are specific only to the
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company currently in use (for which the said feature is enabled), thereby allowing flexibility of
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independently enabling different features for each of the companies.

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To view the company features screen of Nidhi Sales Pvt Ltd., go to Gateway of Tally > press
F11: Company Features.
The Company Features screen appears as shown in the figure 3.6:
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Figure 3.6 F11: Company Features menu
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There are various settings available under Accounting Features, Inventory Features and
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Statutory & Taxation Features, which facilitate the advance functions during voucher entry.
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3.3.2 Configuration: F12

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Configuration in Tally.ERP 9 are options that help you modify the way a feature works. The
configuration menu can be accessed by clicking F12: Configure on the vertical button bar. The
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options when enabled, will have an effect on all the companies in the data directory.
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In Tally.ERP 9, F12: Configure is provided for Accounting, Inventory and Printing options and
are user-definable as per the business requirements.
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The F12: Configure is applicable to all the companies residing in the Tally.ERP 9 data directory.
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The F12: Configure options vary depending upon the operations, i.e., if you press F12: Configure
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from the voucher entry screen, the respective F12: Configure screen is displayed.
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To view the company features screen of Nidhi Sales Pvt Ltd., go to Gateway of Tally > click
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F12: Configure.
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The Configuration menu appears as shown in the figure 3.7:
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Figure 3.7 F12: Configuration Menu screen
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There are numerous settings available under various menus in the F12: Configure screen, which
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may be configured for any additional information required to be entered during master creations,
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voucher entry and printing.
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Now let us get back to the business scenario and see how the accountant at Nidhi Sales Pvt Ltd.,
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creates a chart of accounts, depicting the hierarchy of ledgers and groups, in Tally.ERP 9 to record
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the company’s business transactions

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3.4 Chart of Accounts

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A Chart of Accounts is a list that describes the accounts that a business uses to record transactions
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in its books of account.

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The purpose is to establish a framework for classifying, recording, and reporting on your business
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transactions and to use as an aid (reference) for looking up accounts when recording transactions.
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Without chart of accounts, a business user would find it very difficult to find a list of all his
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accounts
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Tally.ERP 9 automatically displays a company’s chart of accounts, based on the Ledgers and
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Groups that are created for the company.
3.4.1 Ledger
Ledgers are books in which the monetary transactions of a business are posted in the form of
debits and credits. Ledgers are maintained to keep a record of all the transactions pertaining to
an accounting entity.
Common ledgers that all businesses would maintain are cash, bank, debtors, creditors, expenses,
incomes. Without ledgers, it would be difficult to organize all the transactions pertaining to an
accounting entity.
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In Tally.ERP 9, for a newly created company, there are two pre-defined ledgers available in
Tally.ERP 9:
1. Cash
2. Profit & Loss A/c
To view the pre-defined list of ledgers (for Nidhi Sales Pvt. Ltd.), Go to Gateway of Tally >
Accounts Info. > Ledgers > Display (Multiple Ledgers) > Select All Items.
The Multi Ledger Display screen appears as shown in the figure 3.8:
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Figure 3.8 List of Ledgers

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3.4.2 Group
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Groups are collection of ledgers of the same nature. Account groups are maintained to determine
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the hierarchy of ledger accounts which is helpful in determining and presenting meaningful and
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compliant reports.
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For example, in a business all their customers would be grouped as debtors. This would help them
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in easy classification
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If account groups are not created, it would be difficult to determine the accounting nature of all
the ledgers in books.
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There are 28 pre-defined groups in Tally.ERP 9, which feature in the Chart of Accounts of many
organisations. Out of 28 pre-defined groups, 15 groups are primary groups and 13 are sub-groups.
Among the 15 primary groups, 9 groups are Balance Sheet items and the remaining 6 groups are
Profit & Loss A/c items. You can use these groups to organise the chart of accounts of your
company; you may also create and use group specific to your business transactions. You may also
alter the nomenclature of these 28 groups.
To view the list of the 28 groups, Go to Gateway of Tally > Accounts Info. > Groups >
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Display (Multiple Groups) > Select All Items.
The Multi Group Display screen appears as shown in the figure 3.9:
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Figure 3.9 Multi Group Display screen
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Out of the 15 Primary Groups, the following groups appears in Profit & Loss Account:
1. Sales Accounts
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2. Purchase Accounts
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3. Direct Incomes or Income (Direct)

4. Indirect Incomes or Income (Indirect)
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5. Direct Expenses or Expenses (Direct)

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6. Indirect Expenses or Expenses (Indirect)

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3.5 Ledger Creation

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Since Tally.ERP 9 has only two default ledgers, i.e., Cash and Profit & Loss A/c, creation of
ledgers is necessary for recording transactions that involve other accounts.
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To understand the process of ledger creation, let us create the necessary ledgers for Nidhi Sales
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Pvt. Ltd., based on the Balance Sheet provided in the illustration given in table 3.2
Illustration 2: Creation of ledgers using single and multiple ledger creation and entering
opening balance in ledgers.
Nidhi Sales Pvt. Ltd.

Balance Sheet as on 31st March 2017
Liabilities Amount (₹) Assets Amount (₹)
Capital Account Fixed Assets
 Reserves and Surplus Furniture and Fixtures 2,75,450
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Capital Reserve 1,25,000 Land and Buildings 4,58,950
General Reserve 1,25,000 Manufacturing Equipment 6,86,650
 Proprietors Capital 10,12,000 Plant and Machinery 7,85,320
Account
Loans (Liability) Investments
 Secured Loan 5% Debenture of AG 86,450
Com
Loan From Axis Bank 12,75,000 Bonds to SBI 86,450
Current Liabilities Current Assets
 Sundry Creditors Closing Stock --
Computer Care 35,450  Sundry Debtors
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Systems
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Horizon Enterprises 15,420 Debtors - South
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Silver Plus Computers 50,870 Supreme Computers 35,650
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Profit & Loss Account 10,12,000 Debtors – North
Data Link Technologies 56,980
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Spectrum Computers 75,840
Total 36,50,740 Total 36,50,740
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Table 3.2
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The debtors of the company are classified into the following four Groups:
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 Debtors - North
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 Debtors - South
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 Debtors – East
 Debtors – West
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For illustration purpose, let us create two ledgers based on the details given in the balance sheet
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of Nidhi Sales Pvt Ltd. The ledgers to be created, the opening balance for each and the groups
under the ledgers are to be classified are specified in table 3.3:
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Ledger Opening Balance Group

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Proprietor’s Capital Account ₹ 10,12,000 Capital Account

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Land & Buildings ₹ 4,58,950 Fixed Assets

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Table 3.3
In Tally.ERP 9, ledgers can be created in two ways;
 Single Ledger Creation: Involves creation of a single ledger at a time.

 Multiple Ledger Creation: Involves creation of multiple ledgers at a time.
3.5.1 Single Ledger Creation

For creation of Proprietor’s Capital Account ledger using single ledger creation option,
1. Go to Gateway of Tally > Accounts Info. > Ledgers > Create
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2. Enter Name as Proprietor’s Capital Account
3. Select Capital Account from the List of Groups
4. Enter ₹ 10,12,000 Cr. in the Opening Balance (1-Apr-2017) field
The Ledger Creation screen appears as shown in the figure 3.10:
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Figure 3.10 Ledger Creation screen — Proprietors Capital Account

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5. Accept the screen

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Similarly, to create the Land & Building ledger using single ledger creation option,
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2. Enter Name as Land & Buildings

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3. Select Fixed Assets from the List of Groups

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4. Enter ₹ 4,58,950 Dr. in the Opening Balance (1-Apr-2017) field

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The Ledger Creation screen appears as shown in the figure 3.11

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Figure 3.11 Ledger Creation screen — Land & Buildings
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5. Accept the screen ED
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Note: Tally.ERP 9 displays the total debit and credit opening balances along with the difference in opening balance,
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while the ledgers are being created in the Ledger Creation screen. This helps in knowing the difference amount.
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“This shows for each debit there should be a corresponding credit, if not in Tally. ERP 9, you will
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get the difference amount”.

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3.5.2 Multi Ledger Creation

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Now let us create the following ledgers using the Multi Ledger Creation option
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Ledger Opening Balance Group

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Loan From Axis Bank ₹12,75,000 Secured Loan

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5% Debenture of AG Com. ₹86,450 Investments

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Table 3.4
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1. Go to Gateway of Tally > Accounts Info. > Ledgers > Create (Multiple Ledgers)
The Accounts Info Ledger Menu screen appears as shown in the figure 3.12
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Figure 3.12 Accounts Info Ledger Menu screen
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2. Press Enter on Multiple Ledgers Create
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3. In the Under Group field select All Items
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4. Enter Loan From Axis Bank in the Name of Ledger field under group Secured Loans from
the List of Groups.
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5. Provide Opening Balance ₹12,75,000 Cr
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6. Press Enter
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7. Similarly create a ledger as 5% Debenture of AG Com under group Investments and provide
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opening balance ₹ 86,450 Dr

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Note: If you select Investments in the ‘Under Group’ field, then the ledger will be created under the Investment
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head.
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The Multi Ledger Creation screen appears as shown in the figure 3.13:
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Figure 3.13 Multi Ledger Creation screen
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Now that we have learnt how to create ledgers under Tally.ERP 9’s default pre-defined Groups,
let us move on to understand how to make alterations to ledgers that are already created.
3.5.3 Altering and Display of Ledgers

Immediately after creating any ledger(s) in Tally.ERP 9, you can view the same using single
display option or the multiple display option.
The Display menu in Tally.ERP 9 provides Single Ledger Display and Multiple Ledger Display
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options.
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3.5.3.1 Ledger Alteration
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Illustration 3: Alteration of Ledgers
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In the books of Nidhi Sales Pvt. Ltd. alter the ledger named Loan form Axis Bank to Loan
from IDBI Bank.
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To change the ledger name from Loan form Axis Bank to Loan from IDBI Bank, follow the
steps given below:
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1. Go to Gateway of Tally > Accounts Info > Ledgers
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2. Select Alter from the Single Ledger options

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3. Select Loan from Axis Bank from the List of Ledgers

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4. Change the Name from Loan from Axis Bank to Loan from IDBI Bank
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The single Ledger Alteration screen appears as shown in the figure 3.14
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Figure 3.14 Single Ledger Alteration screen

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If you use Display in Single Ledger now, you will see that the list of ledgers shows Loan from
IDBI Bank instead of Loan from Axis Bank.
You can also Alter ledgers from Gateway of Tally >Accounts Info > Ledgers > Alter
(Multiple Ledgers) option.
3.5.3.2 Single Ledger Display

The display menu in Tally.ERP 9 also provides Single Ledger Display and Multiple Ledger
Display options.
To view groups in single display mode, follow the steps given below:
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1. Go to Gateway of Tally > Accounts Info > Ledgers > Under Single Ledger > Select
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Display
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2. Select SBI Bonds
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The single Ledger Display screen appears as shown in the figure 3.15
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Figure 3.15 Single Ledger Display screen

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3.5.3.3 Multi Ledger Display

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To view groups in multi display mode, follow the steps given below:
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1. Go to Gateway of Tally > Accounts Info > Ledgers > Under Multi Ledgers > Select
Display
2. Select All Items
The multi Group Display screen appears as shown in the figure 3.16
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Figure 3.16 Multiple Ledgers Display screen
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3.5.4 Deleting Ledgers

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To delete a ledger that has no transactions entered, follow the given path:
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1. From Gateway of Tally > Accounts Info. > Ledgers > Under Single Ledger> Select
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Alter > Select Sky Solutions > Press Alt+D to delete

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The Ledger Alteration screen with delete message appears as shown in the figure 3.17
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Figure 3.17 Ledger Alteration screen (Deletion)
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3.6 Group Creation

Group creation is similar to ledger creation in Tally.ERP 9. As with ledgers, there are two ways of
creating Groups:
 Single Group Creation: Involves creation of a single group at a time

 Multiple Group Creation: Involves creation of multiple groups at a time
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Illustration 4: Creation of groups using single and multiple group creation option.
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Let us illustrate creation of Groups by creating the Debtor Groups of Nidhi Sales Pvt. Ltd.
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3.6.1 Single Group Creation
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To create a Group in the books of Nidhi Sales Pvt Ltd., with the details given in the table 3.5,
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using the Single Group Creation option.
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Group to be Created Classification
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Debtors – North Sundry Debtors

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Table 3.5
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1. Go to Gateway of Tally > Accounts Info. > Groups > Create

2. Enter Name as Debtors - North
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3. In the Under field, select Sundry Debtors from the List of Groups
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The Group Creation screen appears as shown in the figure 3.18:

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Figure 3.18 Group Creation screen — Debtors- North
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Note
o We have created Debtors – North under the group Sundry Debtors. This means that the group
Debtors – North is a sub group of Sundry Debtors.
o If it is a new primary group, select Primary (requirement of a new primary group is very rare,
but the option exists).
o Creation of a new Primary Group will not be allowed if the option Provide advanced
information in master is set to No in F12: Configure. You can also create a new Parent Group
by using ALT+C.
4. Group Behaves like a Sub ledger – If this option is set to No, the screen will display all
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the Ledgers grouped under the Group in detailed mode.
5. Nett Debit/Credit Balances for Reporting – Set this option to Yes to display either the
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net debit or credit balance in the report (whichever is higher). If this is set to No, both debit
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and credit balances will be displayed in the report.
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6. Used for Calculation (for example: taxes, discounts) - Set this option to Yes if ledgers
under this group have percentages for discounts/taxes to be used in invoice entry.
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7. Method to allocate when used in purchase invoice - Select the appropriate allocation
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method from the list. This is used to allocate the expense of the Item in the ratio of the
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quantity or value.
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Tally.ERP 9 allows you to create any number of groups under all the default groups. One sub-
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group viz. Debtors - North has now been created under Sundry Debtors.
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3.6.2 Multiple Group Creation

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To create multiple Groups at a time as given in the table 3.6, using the Multiple Group
Creation option
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Group to be Created Classification

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Debtors – South Sundry Debtors

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Debtors – East Sundry Debtors

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Debtors – West Sundry Debtors

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Table 3.6
To create multiple group at one time, follow the steps given below:
1. Go to Gateway of Tally > Accounts Info > Groups > Under Multiple Groups >
Create
2. In the Under Group field select Sundry Debtors (by selecting the group as sundry
debtors, all groups which you create now will automatically fall under the same group i.e.,
Sundry Debtors)
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Note: If you select All Items in the Under Group field, then you will be able to create different account groups,
whose nature are different
3. Under Name of Group enter the name as Debtors-South the Under field will get
captured as Sundry Debtors. (Because we have selected the under group as sundry
debtors).
4. Repeat the process for the other groups (Debtors-East and Debtors-West)
The Multi Group Creation screen appears as shown in the figure 3.19:
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Figure 3.19 Multi Group Creation screen

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Activity: Create the following ledgers using the Multiple Ledger Creation menu.
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Ledgers Sub Group Opening Balance

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Data Link Technologies Debtors – North 56,980 Dr

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Spectrum Computers Debtors – North 75,840 Dr

Supreme Computers Debtors – South 35,650 Dr
TAT Computers Debtors – East --
Miyan Computers Debtors – East --
Sky Solutions Debtors – West --
TRA Computers Debtors – West --
Profit and Loss A/c Profit and Loss A/c 10,12,000 Cr
(Do not create the ledger because it is already
available, alter the ledger to provide the opening
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balance)
Capital Reserve Reserve & Surplus 1,25,000 Cr
General Reserve Reserve & Surplus 1,25,000 Cr
Computer Care System Sundry Creditors 35,450 Cr
Horizon Enterprises Sundry Creditors 15,420 Cr
Silver Plus Computers Sundry Creditors 50,870 Cr
Plant & Machinery Fixed Assets 7,85,320 Dr
Furniture & Fixture Fixed Assets 2,75,450 Dr
Manufacturing Equipment Fixed Assets 6,86,650 Dr
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SBI Bonds Investments 86,450 Dr
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Closing Stock Stock In Hand 3,28,580 Dr
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Cash Cash In Hand 4,58,000 Dr
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(Do not create the ledger because it is already
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available, alter the ledger and provide the
opening balance)
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Kotak Bank A/C Bank Account LE 6,45,000 Dr
Table 3.7
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Note: After completing the above activity, go to Gateway of Tally > Balance Sheet > Press Alt+F1
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to view the balance sheet in detailed mode.

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Check whether your Balance Sheet matches with the screen shot of Balance Sheet given in the
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figure 3.20
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Figure 3.20 Balance Sheet screen

In the above figure, Closing Stock amount under Current Assets group has zero value. Because,
in F11 > F1 Accounting features > Integrate accounts and inventory is set to Yes.
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If the same option Integrate accounts and inventory is set to No, then the Closing Stock
amount ₹ 3, 28,580 given as opening balance appears under Current Assets group.
3.6.3 Altering and Display of Groups

Immediately after creating any group(s) in Tally.ERP 9, you can view the same using single
display option or the multiple display option.
The Display menu in Tally.ERP 9 provides Single Group Display and Multiple Group Display
options.
3.6.3.1 Group Alteration
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You can alter the Groups in Single mode or multiple mode by selecting Alter from the menu to
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change any information. You can change the Name of any reserved group, but its characteristics
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will remain the same.
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Illustration 5: Alteration of Groups
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In the books of Nidhi Sales Pvt. Ltd. alter the group named Debtors-North to Debtors-North
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East
To change the ledger name from Debtors-North to Debtors-North East, follow the steps
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given below:
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1. Go to Gateway of Tally > Accounts Info > Groups

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2. Select Alter from the Single Group options

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3. Select Debtors-North from the List of Groups

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4. Change the Name from Debtors-North to Debtors-North East.

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The single Group Alteration screen appears as shown in the figure 3.21
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Figure 3.21 Single Group Alteration screen
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If you use Display in Single Group now, you will see that the list of groups shows Debtors-
North East instead of Debtors-North.
Activity: Alter the ledger Debtors-North East to Debtors-North and save.
You can also Alter ledgers from Gateway of Tally >Accounts Info > Ledgers > Alter
(Multiple Ledgers) option
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3.6.3.2 Single Group Display
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To view groups in single display mode, follow the steps given below:
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1. Go to Gateway of Tally > Accounts Info > Groups > Under Single Group > Select
Display
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2. Select Bank Accounts
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The single Group Display screen appears as shown in the figure 3.22
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Figure 3.22 Single Group Display screen

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3.6.3.3 Multi Group Display

To view groups in multi display mode, follow the steps given below:
1. Go to Gateway of Tally > Accounts Info > Groups > Under Multiple Groups > Select
Display
2. Select All Items
The multi Group Display screen appears as shown in the figure 3.23
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Figure 3.23 Multi Group Display screen
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3.6.4 Deleting Groups ED
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You can delete a group via the Group Alteration (Single Mode) screen by pressing Alt+D.
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Note:
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o Groups and Ledgers cannot be deleted from the Multi Alteration screen. Hence to delete ledgers
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and groups, use the Single Alteration Menu
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o However, you cannot delete the predefined groups available in Tally.ERP 9, or groups with sub‐

groups or groups containing ledgers. The lowest level must be deleted first.
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To understand the process of deletion of a Group, first let us first create a Group in Nidhi Sales
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Pvt Ltd.
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Activity: Create a Group called Equipment under the Fixed Assets head.
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Now to delete the newly created group called Equipment, follow the steps given below:
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1. Go to Gateway of Tally > Accounts Info > Groups > Under Single Group > Select
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Alter> Select Equipment > Press Alt+D to delete

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The Group Alteration screen with delete message appears as shown in the figure 3.24
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Figure 3.24 Group Alteration screen (Deletion)
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Conclusion
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This introductory chapter on maintaining chart of accounts in Tally.ERP 9, shows you how simple
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it is to create a company and chart of accounts in Tally. This intuitive software comes with 28
predefined Groups and 2 predefined ledgers. Creating ledgers and displaying groups and ledgers
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is a simple one-time process, before transactions are recorded.

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Key Takeaways
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 Chart of Accounts is the listing of ledger accounts of an organisation. It differs from one
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organisation to another.
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 A Ledger is the account head used for recording transactions.

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 A Group is a collection of ledgers.

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 Ledgers need to be classified under groups, and there is no limit to the levels of hierarchy
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for groups that can be created.

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 Tally.ERP 9 has 28 predefined groups.

 Cash and Profit & Loss Account are the predefined ledgers in Tally.ERP 9.
 Default groups available in Tally.ERP 9 cannot be deleted.
 Ledgers and Groups can be deleted using the single alteration menu.
 Creation of ledgers is mandatory for recording transactions in Tally.ERP 9.
Shortcut Keys
Shortcut Key Description
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Alt+D  From single ledger alteration screen.
 To delete the ledger.
Ctrl+L  From group creation screen
 To navigate to ledger creation.
Ctrl+G  From ledger creation screen
 To navigate to group creation
Alt+Z  From multi ledger alteration screen.
 To remove all the opening balances at one go.
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Practice Exercises
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1. Based on the business scenario (Nidhi Sales Pvt Ltd.) discussed in the above chapter,
answer the following question: You cannot delete which of the following groups in Tally.ERP
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9?
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a) Debtors – North
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b) Creditors – South
c) Fixed Assets
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d) Bills – Telephone & Internet
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2. A ________________________ is a list that depicts the accounts that a business uses to

record transactions in its books of accounts.
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a) Chart of Accounts
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b) Ledgers
c) Groups
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d) List of Ledgers
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3. For a company where no ledgers have been created, there are two pre-defined ledgers
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available in Tally.ERP 9. One is Cash and the other is _________________?

a) Profit & Loss Account
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b) Bank Account
c) Fright Charge Account
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d) Discount Account
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4. Which of following ledgers falls under the Current Liability head?
a) Land & Building
b) Goodwill
c) Stationery Expense
d) Payables

5. Which of the following is the first step in recording a business transaction, after Tally.ERP
9 is installed?
a) Company creation
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b) Group creation
c) Ledger creation
d) Transaction recording in journal
6. Match the following Ledgers with their respective Groups.

1 Land & Buildings a Bank Account
2 Telephone Bill b Fixed Assets
3 Loan from Vendor c Indirect Expenses
4 Kotak Bank d Loans & Liability
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a. 1-a, 2-b, 3-c, 4-d
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b. 1-d, 2-b, 3-c, 4-a
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c. 1-b, 2-c, 3-d, 4-a
d. 1-a, 2-d, 3-b, 4-b
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7. Which group will you select for the ledger shown in the figure 3.25?
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Figure 3.25 Ledger Creation Screen

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a) Indirect Expenses
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b) Current liability
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c) Bank Account
d) Fixed Assets
8. I cannot delete predefined groups in Tally.ERP 9.

a) True
b) False
9. I can delete ledgers and groups from the Multi Alteration Menu in Tally.ERP 9.
a) True
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b) False
10. We cannot create a ledger for Capital in Tally.ERP 9.

a) True
b) False

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Chapter 4
Fundamentals of
Inventory Management
Learning Objectives
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
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Meaning of inventory
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Understanding of inventory management
 Terms used in inventory management
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 Understanding of different types of inventory valuation
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4.1 Introduction
Inventory is an asset that is intended to be sold or consumed to produce finished products in the
ordinary course of business. Inventory may not be immediately ready for sale.
In accounting, inventory is typically broken down into three stages, which are:
 Raw materials: Includes materials intended to be consumed for the production of

finished goods.
 Work-in-process: Includes items that are in the midst of the production process, and
which are not yet in a state ready for sale to customers.
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 Finished goods: Includes goods ready for sale to customers. May be termed merchandise
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in a retail environment where items are bought from suppliers in a state ready for sale.
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4.2 Inventory Management
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Inventory Management is the process of keeping the track of goods from manufacturing till it
reaches point of sale and also it involves keeping track of new and returned from entering to exist.
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Hence inventory management is very crucial process for a business.
4.3 Terms Used in Inventory Management

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Following are the few terms used in inventory management.

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Stock Item: It is the physical stock that is kept in the godown or store for sale and it can be
measured in quantity. When we purchase stock item the quantity of stock item increases and while
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making sale quantity of stock item decreases.

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Godown: It is the place/location/warehouse/rack where the stock items or goods are stored.
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SKU: SKU stands for Stock Keeping Units, it is the unique code assigned to a product or services
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for its identification. This code varies from organisation to organisation.

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Safety Stock: It is also called as buffer stock, it is the stock that is kept by business in order to
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avoid the shortfall of goods/stock, in case of uncertainty in manufacturing or supply or demand.

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This also avoids the risk of running out of stock.

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Reorder Level: It is the inventory level at which the company has to place an order for the stock
item. The importance of a reorder level arises from the need to have sufficient stocks to service
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customer orders and at the same time not to have unnecessarily high stocks.
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Price List: It is a list of items maintained by an organisation along with their price details. It is
generally used by organisations which deal in multiple products.
Price Lists are maintained in various structures for different types of buyers (customers), viz.,
Wholesalers, Dealers, Retailers, etc. It is structured based on the classification of buyers and is
referred to at the time of making sales.
Manufacture & Expiry Date: Manufacture date is the date on which the goods are produced.
Expiry date is the date on which the goods are expired, this mean that goods are not in a good
condition to be consumed. Manufacture & Expiry dates will be available in perishable goods like
food, medicines etc.
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Dead Stock: It is a stock which is not sold and lying in godown from long time.
4.4 Inventory Valuation

Important goal of accounting for inventory is to have accurate information about costs and
sales. Stock valuation allows a company to provide a monetary value for stock items lying in their
inventory. This information allows a company to properly evaluate expenses and revenues on their
financial statements so that they can make correct business decisions.
Stock Valuation Methods

The choice of stock valuation methods depends on a number of variables, like the business
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situation and financial goals of the business organisation.
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The cost of goods sold is largely based on the cost assigned to closing stock (Ending inventory).
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Cost of goods sold = Opening stock (Beginning Inventory) + Purchases made during the
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reporting period – Closing Stock (Ending Inventory)
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Note: Similarly, Gross Profit = Net sales – Cost of goods sold
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There are different types of stock valuation methods available for calculating the recorded value
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of closing stock (ending inventory).
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4.4.1 Different Types of Inventory Valuation

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Following are the different types of inventory valuation used by many businesses based on their
situation and financial goals of the business.
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There are different types of stock valuation methods that can be used for accurate stock valuations
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based on the nature of business.

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Different types of stock valuation methods are given below:

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1. Average Cost Method

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2. FIFO (First in, First out)

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3. FIFO Perpetual
4. LIFO Annual (Last-in, First-Out)
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5. LIFO Perpetual
6. HIFO (Highest In, First Out)
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7. Last Purchase Cost

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8. Standard Cost
Let us check in detail explanation of different stock valuation methods.
1. Average Cost Method: It is also called as weighted average cost method, in this method
the stock is valued based on the formula given below:
Average Cost = Total Inward Value for the year/ Total Inward Quantity for the year
In case of Monthly Average Cost Method, the weighted average cost is determined on a
monthly basis instead of annual
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2. FIFO (First In First Out): Under FIFO Periodic System, it is assumed that items
purchased first are sold first under the current financial year (i.e., first lot from the opening
stock of current year).
In case of Perpetual FIFO Method, it is assumed that items purchased first are sold first
across the financial year (i.e., first lot may be from previous year entry).
Hence cost of goods sold is based upon the cost of material received first in the period,
while the cost of inventory is based upon the cost of material received last in the period.
This method is adopted by the business, when the cost of the items are decreasing
(deflation) and this will result in lower taxable income.
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3. LIFO (Last In First Out): Under LIFO Periodic System, it is assumed that items
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purchased last are sold first under the current financial year (i.e., first lot from the opening
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stock of current year)
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In case of Perpetual LIFO Method, it is assumed that items purchased last are sold first
across the financial year (i.e., first lot may be from previous year entry).
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Hence cost of goods sold is based upon the cost of materials received last in the period,
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while the cost of inventory is based upon the cost of material received first in the period.
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This method is adopted by the business when the cost of the items are increasing
(Inflation) and this will result in lower taxable income.
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4. HIFO (Highest In First Out): Under HIFO, the items purchased with the highest cost
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is sold first or removed first. This method is followed by the company who wants to
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decrease the taxable income for a period of time.

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5. Last Purchase Cost: Last purchase cost is Last purchase rate. Cost of goods sold and
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Cost of inventory is based upon the Last purchase rate.

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6. Standard Cost: In this method a standard cost is fixed for all the goods available within
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the business. This method is used when it becomes hectic and time consuming to collect
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actual costs of goods, hence standard costs are used and this cost will be approximately
close to actual cost.
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Note: FIFO is not restricted by GAAP (Generally Accepted Accounting Principles) & IFRS International
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Financial Reporting Standards) but LIFO is restricted by IFRS (accounting standards. In many countries
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IFRS is followed for accounting.
4.5 Inventory Management in Tally.ERP 9

In Tally.ERP 9, we can manage inventory system with ease, we can keep a track of movement of
stock item from manufacturing house till it reach to point of sale. Few inventory features of
Tally.ERP 9 are given below:
1. Inventory Masters: In order to record the inventory related transactions in Tally.ERP 9,
we need to create the inventory masters. The different types of inventory masters are given
below:
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 Stock Group: It is a group where stock items with same nature/characteristics are
grouped under one head called as stock group. For example Television is a stock
group and under this group we can add stock items like LG Television, Videocon
Television, and Philip Television etc. here the brand are different but characteristic
(i.e. Television) is same. So in this case we can create a stock group by name Television.
 Stock Item: It is the inventory of the business which are manufactured or traded. It
is the primary inventory entity and is the lowest level of information on your inventory.
In Tally.ERP 9, one must create the inventory in order to keep the track of the same.
For example we create stock items like LG Television, Videocon Television etc.
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
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Units of Measure: Stock items are measured in units, in Tally.ERP 9, we can create
simple units like Nos, Kg, Pcs etc. and compound units like Box of 12 Nos, Doz of
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12 Nos etc.
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 Godown: It is the location where stock items/goods are stored, few example of
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godowns are storehouse, warehouse and rack etc.,
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2. Batch Wise Details: Batch details are used to identify the movement of inventory in
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batches or lots. Although this is a requirement primarily of the pharmaceutical industry,
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the same can be used by other industries that maintain or manufacture perishable goods.
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We can define the manufacturing and expiry dates for stock item along with batch details.
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3. Price List & Levels: A Price List refers to a list of items maintained by an organisation
along with their price details. It is generally used by organisations which deal in multiple
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products. Price Lists are maintained in various structures for different types of buyers
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(customers), viz., Wholesalers, Dealers, Retailers, etc. It is structured based on the

classification of buyers and is referred to at the time of making sales. Tally.ERP 9 permits
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you to create any number of price lists & price levels, based on the Stock Group and Stock
Category to match the required structure.
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4. Point of Sales (POS): Point of Sale or POS can be a retail outlet, a checkout counter in a
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shop, or any other location where a sale transaction takes place. POS system is a
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computerised cash register which adds up the sales totals, calculates the balance to be
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returned to the buyer and automatically adjusts the inventory levels to reflect the quantity
sold. The equipment required for POS to work effectively are cash registers, card readers,
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bar-code scanners etc.
5. Tracking of Item wise cost Details: In Tally.ERP 9, we can effectively track and
ascertain the procurement cost, landing costs, manufacturing or production cost, order
cost/profit and job cost/profit. This feature is also useful in determining the sales price of
finished goods based on the costs incurred till date and the overall profitability.
6. Order Processing: In Tally.ERP 9, we can keep the track of purchase order processing
and sales order processing. We can maintain the details of inventory which are rejected or
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returned. It also gives us the facility to cancel the unwanted or rejected orders & check the
outstanding reports.
7. Job order processing: In Tally.ERP 9, we can maintain the details of work which is
outsourced. We can keep the track of inventory which is sent out, inventory which is
received and inventory which is yet to be received.
8. Stock Categories: In Tally.ERP 9, we can give a parallel allocation to the stock item by
maintaining stock category details for example if we create stock group as Television, then
parallel grouping in inch (21 inch, 22 inch) can be given to Television. This will lead us to
generate different inventory reports like availability of total Television, availability of total
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21 inch television.
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9. Costing Methods: The choice of stock valuation methods depends on a number of
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variables, like the business situation and financial goals of the business organisation. In
Tally.ERP 9, one can explore the following costing method for stock valuation as per
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business requirement.
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 At Zero Cost
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 Average Cost
 FIFO
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 FIFO Perpetual
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 Last Purchase Cost

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 LIFO Annual
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 LIFO Perpetual
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 Monthly Average Cost

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 Standard Cost
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10. Bill of Materials (BoM): Automatic listing of components while manufacturing a finished
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product is possible through Bill of Materials feature provided in Tally.ERP 9. Apart from
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auto listing, we can add the manufacturing cost like labour change, packing charge etc., to
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finished goods.
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Apart from BoM, we can also maintain or record the complete manufacturing process
details using manufacturing journal voucher. While recording manufacturing process entry
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we can keep the track of by-products and co-products along with scrap details.
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11. Inventory Vouchers: We come across different inventory transactions in our day to day
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business activities like purchase of raw materials, manufacturing of goods, sale of goods,
rejection of goods, transfer of goods etc. All these transactions can be recorded in
predefined inventory vouchers available in Tally.ERP 9.
12. Inventory Reports: In Tally.ERP 9, we can instantly generate inventory reports like stock
summary, physical stock register, transfer analysis, ageing analysis, stock query, batch wise
details etc., with ease. Once the inventory related transactions are recorded in Tally.ERP
9, the reports will get updated instantly.
Note: We have the flexibility to maintain our books of accounts with Accounts with Inventory details as
well as Accounts only details in Tally.ERP 9.
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Conclusion
In this chapter, we have learnt the importance of setting inventory mechanism for any organisation,
understood the different types of inventory valuation and learnt about different inventory features
like inventory master, batch wise details, price level and price list and bill of materials etc., which
helps in setting strong inventory foothold in an organisation.
Practice Exercise
1. ________________ = Opening stock (Beginning Inventory) + Purchases made during
the reporting period – Closing Stock (Ending Inventory).
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a. Cost of goods sold
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b. Cost of goods manufactured
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c. Cost of goods purchased
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d. Cost of goods transferred
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2. FIFO Stands for__________________.
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a. First Out First In
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b. Fast In Fast Out
c. Last In First Out
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d. First In First Out
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3. HIFO stands for____________.

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a. Highest In First Out

b. Highest Out First In
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c. Last High In First Out

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d. Last In Last Out

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4. When the cost of goods are increasing __________valuation method is recommended and
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also will result in lower taxable income.

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a. LIFO
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b. FIFO
c. Zero Cost
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d. Purchase Cost
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5. In ________________ method, a fixed cost is used for all the goods available within the
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business.
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a. Purchase Cost
b. Market Cost
c. LIFO
d. Standard Cost
6. _____________is also called as buffer stock.

a. Dead Stock
b. Raw Stock
c. Finished Stock
d. Safety Stock
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7. Dead Stock is the stock which is __________________.
a. Fast moving stock
b. Unsold stock from long time
c. Stock in high demand
d. Stock yet to be produced
8. A Price List refers to a list of items maintained by an organisation along with their price
details.
a. True
b. False
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9. LIFO stands for Last In Last Out
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a. True
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b. False
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10. Match the following feature with their respective function:
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a LIFO 1 Can define Expiry and Manufacturing
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details
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b Batch wise details 2 Stock valuation method
c Bill of materials 3 Outsourcing
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d Job order processing 4 Auto listing of components
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a. a-1, b-2, c-3, d-4

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b. a-2, b-4, c-1, d-3

c. a-2, b-1, c-4, d-3
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d. a-4, b-1, c-3, d-2

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Chapter 5
Stock Keeping Units
Learning Objectives
 Creation stock groups
 Creation of units of measure
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 Creation of stock items
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 Creation of godowns
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 Defining stock opening balance
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5.1 Introduction
Inventory is an asset that is intended to be sold in the ordinary course of business. Inventory may
not be immediately ready for sale.
In accounting, inventory is determined into three categories, which are:
 Raw materials: Includes materials intended to be consumed in the production of finished

goods.
 Work-in-process: Includes items that are in the midst of the production process, and which
are not yet in a state ready for sale to customers.
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 Finished goods: Includes goods ready for sale to customers. May be termed merchandise
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in a retail environment where items are bought from suppliers in a state ready for sale.
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In Tally.ERP 9 the inventory details are maintained same way as followed in accounting system.
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In Tally.ERP 9, inventories can be classified by ‘Stock Groups’ and ‘Stock Categories’ are used,
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and ‘Stock Items’.
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5.2 Inventory Masters in Tally ERP 9
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Stock Group
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A Stock Group is similar to the groups created for accounting in Tally.ERP 9. Stock Items of
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similar nature, brand, etc. can be classified under a single stock group. For example, the Stock
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Group for ‘Television’ can be the brand, like ‘Sony’, ‘Videocon’, ‘Philips’, etc.
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Units of Measure
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Stock items are purchased and sold on the basis of quantity. The quantity in turn is measured by
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units. In Tally.ERP 9, such goods are quantified using ‘Units of Measurement’. Units of measure
are of two types:
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Simple Units of Measure: are Numbers, Metres, Kilograms, Box and Pieces etc.
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Compound Units of Measure: A Compound Unit is a combination of two simple units. Example:
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1 Box = 12 Pieces.
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Stock Item
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Stock Item refers to goods that is manufactured or traded or can be component or by-product. It
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is the primary inventory entity and is the lowest level of information on your inventory. We have
to create a stock item in Tally.ERP 9 for each inventory item that you want to account for.
Godowns/Locations
A place where stock items are stored is referred to as a ‘Godown’. For example, a warehouse. You
can obtain stock reports for each godown and account for the movement of stock between
Locations/Godowns.
Stock Category
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Stock Category offers a parallel classification of stock items. Like stock groups, classification is
done based on similarity in behaviour.
The advantage of categorizing items is that you can classify the stock items (based on functionality)
together – across different stock groups which enables you to obtain reports on alternatives or
substitutes for a stock item.
To illustrate the creation of inventory masters in Tally.ERP 9, let us use the following business
scenario:
Business Scenario
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Surya Mobiles, Karnataka, are into wholesale and retail business. They deal in different mobile
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brands, within each brand, their stock includes mobile phones with different features. Surya
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Mobiles has demo mobiles of each brand for promoting sales.
The company has branches located in different parts of the country. They also have store-houses
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to store stocks in key cities like Bengaluru and Delhi.
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The stocks are sold in numbers or dozens based on the type of sales, i.e., retails or wholesale. Surya
Mobiles installed Tally.ERP 9 in 2017 to maintain their accounts, and to help them make quick
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decisions regarding stock movement.
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Help the accountant at Surya Mobiles create the Inventory Chart of Accounts.
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5.3 Creating Inventory Masters

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Let us now understand the process of creating required inventory masters by using the information
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given in the following illustrations, which are based on the above Business Scenario of Surya
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Mobiles.
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Activity: In order to set up inventory details in Tally.ERP 9, create the following company.
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Company Name: Surya Mobiles

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Address: # 31, SP Road, Bengaluru – 560089

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Country: India
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State; Karnataka
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Financial Year: 01-04-2017 to 31-03-2018
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5.3.1 Creation of Stock Group
Let us start the illustration of creation of inventory masters with the creation of stock group and
sub stock groups for Surya Mobiles.
Illustration 1: Creation of stock groups, sub stock groups using single stock group and
multiple stock group creation method.
Surya Mobiles deals in mobile phones of the following 3 brands:
 Sony Mobile Phone

 Samsung Mobile Phone
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 Apple iPhone
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Based on the above information, the stock groups that have to be created are:
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Main Stock Group and Sub Stock Group
Main Stock Group (Grouped Under Primary) Sub Stock Group
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Mobile Phone Samsung Mobile Phone
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Mobile Phone Sony Mobile Phone
Mobile Phone Apple iPhone
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Table 5.1
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It can be seen from the above table the grouping structure in Tally.ERP 9 is as follows:
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 Mobile Phone -main stock group, to be grouped under Primary

 Sony Mobile Phone - stock group under Mobile Phone
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 Samsung Mobile Phone - stock group under Mobile Phone

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 Apple iPhone - stock group under Mobile Phone

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Step 1: Creating the Main Stock Group

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1. Go to Gateway of Tally > Inventory Info. > Stock Groups > Under Single Stock
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Group > Select Create

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Mobile Phone
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Against the Field Action to be Performed

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Name Enter as Mobile Phone

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Under Select as Primary

Should quantities of items be added Set to Yes
Note: Should quantities of items be Added, if this option is enabled then the quantities of the stock
items with similar units of measure will be added up in the stock summary report.
Table 5.2
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The Stock Group Creation screen appears as shown in the figure 5.1:
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Figure 5.1 Stock Group Creation - Mobile Phone
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2. Accept the screen ED
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Note: You can delete a Stock Group by pressing Alt+D, option from Gateway of Tally > Inventory
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Info. >Stock Groups > Under Single Stock Group > Select Alter. The Stock Group will get deleted if
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the same is not used anywhere i.e., if sub stock groups or stock items are created, then the stock group cannot be
deleted until and unless the sub stock group and items are deleted.
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Step 2: Creating the Sub-Stock Group

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Sony Mobile Phone

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Name Enter as Sony Mobile Phone

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Under Select as Mobile Phone

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Should quantities of items be added Set to Yes

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Table 5.3
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The Sub-Stock Group Creation screen appears as shown in the figure 5.2:
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Figure 5.2 Sub-Stock Group Creation - Sony Mobile Phone
Accept the screen
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Step 3: Creating Sub Stock Groups using the Multiple Stock Group Creation method LE
To create the remaining sub stock groups like Samsung and iPhone Mobile Phones at one go, use
the Multiple Stock Group Creation method, follow the steps given below:
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1. Go to Gateway of Tally > Inventory Info. > Stock Groups > Under Multiple Stock
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Groups > Select Create.

2. Under Group filed select All Items
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3. Under Name of Stock Group, enter the name as Samsung Mobile Phone
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4. Under field select Mobile Phone

5. Set the option Should Quantities of Items be Added to Yes
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6. Enter details as shown in the figure 5.3:

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The Multiple Stock Groups Creation screen is shown in the figure 5.3:
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Figure 5.3 Multiple Stock Group Creation screen
Observation: Once after creating the stock groups check whether all the stock groups are created as per the
requirement. To check, go to Gateway of Tally > Inventory Info. > Stock Groups > Under Multiple
Stock Groups > Select Display > Select All Items from the List of Stock Groups. In Multiple
Stock Group Display screen, we will get the details of all the stock groups created in the company.
5.3.2 Creation of Unit of Measure

Now that the stock groups have been created, the next inventory master to be created is the unit
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of measure.
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Illustration 2: Creation of simple and compound units of measure.
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The stocks of Surya Mobiles are sold in numbers or dozens based on the type of sales, i.e., retail
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or wholesale.
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Based on this information, the units of measure to create are:
Simple Unit of Measure

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Numbers
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Dozens
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Compound Unit of Measure

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Dozen of 12 Numbers
Table 5.4
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Step 1: Creating Simple Units of Measure

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1. Go to Gateway of Tally > Inventory Info. > Units of Measure > Create
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Numbers
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Type By default it take as Simple

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Symbol Enter as Nos

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Formal name Enter as Numbers

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Number of decimal places By default it take as 0

Table 5.5
The Simple Unit Creation screen appears as shown in the figure 5.4:
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Figure 5.4 Simple Unit of Measure Creation -
Nos
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Activity: Create a Simple unit of Measure, ED
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 Doz (Dozen)
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Note: We can delete the Units of Measure by using the key Alt+D from the Unit Alteration screen.
However, you cannot delete the same if the Units of Measure are defined in stock item or used in creating compound
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nits.
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Step 2: Creating Compound Unit of Measure

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From Unit creation screen, Press Backspace to move to the Type field, and select Compound
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Numbers
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Type Select as Compound

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First Unit Select as dozen

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Conversion Enter as 12
Second Unit Select as Numbers
Table 5.6
The Compound Unit Creation screen appears as shown in the figure 5.5:
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Figure 5.5 Compound Unit Creation screen
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Accept the screen
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5.3.3 Creation of Stock Item
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The next inventory master to be created is the Stock Items

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Illustration 3: Creation of stock items using single stock item and multiple stock item
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creation methods, and generating statistics report to check the chart of inventory.
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The given table 5.7 shows the list of products within each mobile brand that Surya Mobiles deals
in and the corresponding unit of measure details are given in table 5.8.
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Stock Item Name Brand

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Samsung 32GB Mobile Phone Samsung Mobile Phone

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Samsung 64GB Mobile Phone Samsung Mobile Phone

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Sony 32GB Mobile Phone Sony Mobile Phone

Sony 63GB Mobile Phone Sony Mobile Phone
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iPhone 6S Apple iPhone

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Table 5.7
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Based on the information given in the scenario, the Stock Item structure in Tally.ERP 9 can be
defined as follows (table 5.8):
Stock Item Name Under Units of Measure

Samsung 32GB Mobile Phone Samsung Mobile Phone Nos
Sony 32GB Mobile Phone Sony Mobile Phone Nos
iPhone 6S Apple iPhone Doz of 12 Nos
Table 5.8
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Single Stock Item Creation Method
To Create Single Stock Item, follow the steps given below:
1. Go to Gateway of Tally > Inventory Info. > Stock Items > Under Single Stock
Item > Select Create
Note: In Stock Item Configuration (F12: Configure) screen, set the option Allow advanced
entries in Masters to Yes (By enabling this option, we can define the required Costing Method).
Samsung 32GB Mobile Phone
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Name Enter as Samsung 32GB Mobile Phone
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Under Select as Samsung Mobile Phone
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Units Select as Nos
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Opening Balance leave it Blank.
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Table 5.9
The Stock Item Creation screen appears as shown in the figure 5.6 ED
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Figure 5.6 Stock Item Creation- Samsung 32GB Mobile Phone

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Note: In the figure 5.6, Avg. Cost is the default costing method selected in Tally.ERP 9. If required we can define
the required costing method like FIFO, LIFO, Standard Cost etc.
Note: You can delete the stock item by using the key Alt+D from the stock item alteration screen. However, you
cannot delete the stock item, if the same is used in recording any transaction.
Multiple Stock Item Creation Method
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Let us create the following Stock items at one go using Multiple Stock Items creation option
Stock Item Name Under Units

iPhone Apple iPhone Doz of 12 Nos
Table 5.10
To create Multiple Stock Items at one go, follow the steps given below:
1. Go to Gateway of Tally > Inventory Info > Stock Items > Under Multiple Stock
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Items > Select Create > Under Group >Select as All Items > Press Enter
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2. Select the stock items to be created one by one as shown in the figure 5.7:
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The Multi Stock Items Creation screen appears as shown in the figure 5.7:
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Figure 5.7 Multi Stock Item Creation Screen

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After the stock items are created, the same can be seen in the Statistics Report in Tally.ERP 9.
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Let us check the types of inventory account created in Tally.ERP 9.

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To check the report, go to Gateway of Tally >Display > Statement of Inventory/Statement

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of Accounts > Statistics
The Statistics Report screen appears as shown in the figure 5.8:
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AN
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Figure 5.8 Statistics Report
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The Statistics report displays the count of accounts created in Tally.ERP 9. To check the
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details within each menu item, select particular required field and press enter. i.e., select Stock
Items field and press enter.
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The List of Accounts or Chart of Inventory screen appears as shown in the figure 5.9:
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Figure 5.9 List of Accounts or Chart of Inventory Screen

The report displays the list of inventory created in Tally.ERP 9, wherein 4 Stock Groups and
5 Stock Items are created.
In the List of Accounts, the mobile brands are created as main stock groups, and the different
products are grouped under the respective brand sub stock groups. Reports can be viewed brand
wise or product-wise: main stock group wise (Mobile Phone) and sub stock group wise
(Samsung, Sony Mobile Phones) and stock item wise (Samsung, Sony 32GB and 64GB Mobile
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Phone).
5.3.4 Creation of Godown

The place where stock items are stored is termed as a Godown. Examples of godowns include
warehouses, racks, showrooms, etc. We can obtain stock reports for each Godown and account
for the movement of stock between Locations/Godowns.
Illustration 4: Creation of godowns and defining opening stock balance.
Surya Mobiles has two godowns, where it stores its Stock Items
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Godowns
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Bengaluru Location
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Delhi Location
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Table 5.11
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To Create Godowns in Tally.ERP 9, follow the steps given below:
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Step 1: Configuration of Godown in Tally.ERP 9 LE
1. Go to Gateway of Tally > F11: Company Features > F2: Inventory Features
2. Enable the option Maintain multiple Godowns to Yes
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Note: Option Maintain multiple Godowns is enabled in order to create the required Godowns
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The Inventory Features screen with the options enabled, appears as shown in the figure 5.10:
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Figure 5.10 Inventory Features screen

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Step 2: Creation of Godowns
Go to Gateway of Tally > Inventory Info. > Godowns > Create
Bengaluru Location

Name Enter as Bengaluru Location
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 Allow storage of materials: This option is used for deciding whether storage of materials is allowed in
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this Godown or not. This option will appear only if the option Allow advanced entries in master is
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enabled in F12: Configuration, while creating stock items. If the option is not visible, then by default this
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option will be set to Yes.
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 Our Stock with Third Party: Set this option to Yes, if the godown is used to account the company's
goods lying with the third party.
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 Third Party Stock with us: Set this option to Yes, if the godown created is used to account the goods
received from third party and the stock of third party should not affect the company stock value.
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Table 5.12
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The Bengaluru Location Godown screen appears as shown in the figure 5.11:
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Figure 5.11 Godown Creation screen-Bengaluru Location

Activity: Create the Delhi Location godown under the head Primary
Note:
o Godowns have a pre-defined Main Location, because of which the options Display and Alter are functional
even before you create a godown.
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o We can delete a godown by using the key Alt+D. The same cannot be deleted if transactions are recorded
or stock items are allocated to the godown while defining the opening quantity.
5.3.5 Defining of Stock Opening Balance in Tally ERP 9

Opening balance is defined when the accounting data is transferred from manual books of
accounts to computerised books of accounts.
In Tally.ERP 9, you can define the opening balance for all the stock items one by one from the
single stock item alter menu or you can define the stock opening balance at one go from the
multiple stock items alter menu.
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Refer to the table given below (table 5.13) and define the stock opening balance in different
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locations of Surya Mobiles:
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Stock Item Godown Opening Rate per (₹) Amount (₹)
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Quantity
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Samsung 32GB Mobile 100 Nos 10000 1000000
Phone Bengaluru 50 Nos 10,000 5,00,000
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Location
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Delhi Location 50 Nos 10,000 5,00,000

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100 Nos 15,000 15,00,000

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Samsung 64GB Mobile

Phone Bengaluru 50 Nos 15,000 7,50,000
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Location
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Sony 32GB Mobile Phone 100 Nos 20,000 2,00,00,000

Bengaluru 50 Nos 20,000 10,00,000
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Location
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Sony 64GB Mobile Phone 100 Nos 30,000 3,00,00,000

Bengaluru 50 Nos 30,000 15,00,000
Location
Table 5.13
Defining stock item opening balance using single stock item alter menu
To define the opening balance of stock, follow the steps given below:
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1. Go to the Gateway of Tally > Inventory Info. > Stock Items > Under Single Stock
Item > Select Alter
2. Select Samsung 32GB Mobile Phone
3. Bring the cursor in the Quantity field and enter 100 Nos as opening balance, press Enter,
and to get the Stock Item Allocation screen of a particular stock item
4. In the Godown field select Bengaluru Location
5. Enter the Quantity as 50, Rate as 10,000 and the amount will get captured automatically
6. Press Enter, then select the Godown name as Delhi location
7. Enter the Quantity as 50, Rate as 10,000 and the amount will get captured automatically
The Allocations of Samsung 32GB Mobile Phone screen appears as shown in the figure 5.12:
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Figure 5.12 Godown Allocations screen

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8. Press Enter, and to get the stock item alteration screen as shown in the figure 5.13:
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The Stock Item Alteration screen appears as shown in the figure 5.13:
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Figure 5.13 Stock Item Alteration screen

Note: While creating the stock item, if behaviour field is not appearing, then press F12: Configure from the
stock item creation screen and enable the option “Allow advanced entries in master”.
Defining stock item opening balance using multiple stock items alter menu
To define the opening balance of stock, follow the steps given below:
1. Go to Gateway of Tally > Inventory Info. > Stock Items > Under Multiple Stock
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Items > Select Alter
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2. From the List of Groups, select All Items
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The Multi Stock Item Alteration screen appears as shown in the figure 5.14:
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Figure 5.14 Multi Stock Item Alteration Screen

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In figure 5.14, we can observe that, for the stock item Samsung 32 GB Mobile Phone, the
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opening quantity, rate and amount are filled as per the details defined in single stock item alteration
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screen.
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3. Now, bring the cursor in the Samsung 64 GB Mobile phone and enter the quantity as
100, you will get the Stock Item Allocation screen for particular stock item.
4. In the Godown field name select Bengaluru Location.
5. Enter the Quantity as 50, Rate as 15,000 and the amount will get captured automatically.
6. Press Enter, then select the Godown name as Delhi location.
7. Enter the Quantity as 50, Rate as 15,000 and the amount will get captured automatically.
8. Similarly, refer the figure 5.15 and provide the opening stock
The Multi Stock Item Alteration screen with opening balance appears as shown in the figure
5.15:
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Figure 5.15 Filled Multi Stock Alteration Screen
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Conclusion
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This chapter shows, the simplicity and efficiency of the inventory feature in Tally.ERP 9. This
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feature helps in organising inventory masters, leading to efficient logistics and supply chain
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management.
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Key Takeaways
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 Stock Groups are created for classification of stock items.

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 Stock Items refer to goods that you manufacture or trade.

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 Godowns/Locations are places where stock items are stored.


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Inventory feature in Tally.ERP 9 helps in recording of stock details like receipt of stock,
delivery of stock, stock movement between storage locations or godowns and providing
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information on stock availability.


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Shortcut Keys
Alt+C  From any master and voucher fields.

 To create a new master.
Alt+F1  From any accounting and inventory reports.
 To view in detailed mode.
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Ctrl+L  From the account group creation screen.
 To navigate to the ledger creation screen.
Ctrl+G  From the ledger creation screen.
 To navigate to the account group creation screen.
Ctrl+I  From any inventory master creation screen.
 To navigate to the stock item creation screen.
Practice Exercises
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1. What is the default Godown name in Tally?
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a. Primary Category
b. Primary Location
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c. Main Location
d. No Location
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2. Rajesh Enterprises sold 12 dozen chalk boxes, each containing 100 chalks, to Radha on
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April 02, 2017. Which type of unit of measure will you create in Tally.ERP 9 to record
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the above entry?

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a. Complex
b. Simple
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c. Compound
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d. Triple
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3. Nishith Enterprises sells the home appliances:

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Products Model
Bajaj Iron Boxes Model 1 Model 2
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Bajaj Mixer Grinders Model A Model B Model C

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Samsung Refrigerators Model X Model Y Model Z

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BPL TVs Model 10 Model 20 Model 30

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IFB Mixer Grinders Model H Model M Model T

IFB Washing Machines Model A1 Model B2
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Note: Each model has different features.

Based on the above information, answer the following questions:
i. If Nishith Enterprises creates Stock Groups based on the home appliance being sold,
how many Stock Groups have to be created?
a. 2
b. 3
c. 4
d. 5
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ii. Based on the information given in the table, how many Stock Items will have to be
created?
a. 3
b. 4
c. 6
d. 16
iii. Assuming that the company has made the Stock Groups based on the home appliances,
Stock Items are based on the Models under each Stock Group, identify the correct match:
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1. Nos a. Stock Group
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2. Mixer Grinders b. Units of Measure
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3. BPL TV – Model 10 c. Stock Item
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a. 1-c, 2-a, 3-b
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b. 1-b, 2-a, 3-c
c. 1-a, 2-b, 3-c
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d. 1-c, 2-b, 3-a LE
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4. Identify the odd one out:

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a. Stock Item
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b. Stock Group
c. Units of Measure
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d. Indirect Expenses
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5. It is compulsory to create a Stock Group for Stock Item creation.

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a. True
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b. False
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6. It is compulsory to create a Simple Unit before a Compound Unit in Tally.ERP 9.

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a. True
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b. False
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7. It is mandatory to create Stock Group to record inventory in Tally.ERP 9.

a. True
b. False
8. Mr. Karthik, the accountant at Surya Traders is trying to create a stock item from the screen
given in figure 5.16 in Tally.ERP 9:
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AN
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Figure 5.16 Stock Group Creation screen
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Mr Karthik can create the stock item from the above screen.
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a. True
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b. False
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Chapter 6
Recording of Day-to-Day
Transactions
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Learning Objectives
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 Recording contra voucher

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Recording payment voucher
 Recording receipt voucher
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 Recording sales voucher
 Recording credit note voucher
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 Recording purchase voucher
 Recording debit note voucher
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 Recording journal voucher

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 Recording optional voucher

 Recording memorandum voucher
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 Recording inventory vouchers

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 Recording stock transfers

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6.1 Introduction
Accounting is the practice of maintaining a record of the financial dealings of a business. It involves
identifying business transactions, recording them, and summarising the same in such a way that
important financial information can be communicated to stakeholders of the business.
The different phases of an accounting cycle are:
1. Identification of transactions
2. Preparation or receipt of business documents
3. Recording of transactions in books of original entry
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4. Posting of transactions to ledgers
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5. Preparation of trial balance
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6. Preparation of final accounts
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7. Passing of closing and adjustment entries
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In this chapter, we will learn how day-to-day transactions are recorded in an actual business
scenario using Tally.ERP 9, and the simplicity of generating reports through Tally software.
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6.2 Business Transactions ED
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The accounting cycle begins with the occurrence of a business transaction, which is then recorded
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in the books of accounts.

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A transaction is an event or happening that changes an organisation’s financial position and/or its
earnings. This involves a business concern and its clients, suppliers or others with whom the
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concern has business dealings. For example, when a company purchases goods for cash, the
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company’s cash balance reduces and its stock balance increases. The transaction involves a
reciprocal exchange of two things, i.e., receipt of cash and delivery of stock and vice versa.
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Similarly, every transaction involves the aspect of ‘give and take’. Thus, business transactions are
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exchanges of economic consideration between parties and have two-fold effects that are recorded
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in at least two accounts.

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Business transactions can be classified as follows:

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 Purchases – cash or credit

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 Sales – cash or credit

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 Payments – cash or bank

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 Receipts – cash or bank

 Purchase returns
 Sales returns
6.2.1 Source Document or Voucher

Business transactions are usually evidenced by appropriate documents such as cash memo, invoice,
sales bill, pay-in slip, cheque, salary slip, and so on. A document which provides evidence of the
transactions is called the source document or voucher.
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6.2.2 Recording Transactions in Tally.ERP 9
Recording of a financial transaction is the first step in an accounting cycle. Every day, business
concerns are involved in business activities like making purchases, sales, making payments to
vendors, receiving payments from customers and so on. Even if one of the transactions is not
recorded or is inaccurately recorded, the financial reports will not reflect the correct financial
performance or position of the company.
Under the manual system of accounting, transactions are first recorded in the books of original
entry called journals, as per the golden rules of accounting.
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Type of Accounts Golden Rules
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Debit the receiver
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Personal accounts
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Credit the giver
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Debit what comes in

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Real accounts
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Credit what goes out

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Debit all expenses and losses

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Nominal accounts
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Credit all income and gains

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Table 6.1
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A journal is a record of financial transactions in order, by date. Manual systems usually have a
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variety of journals such as a sales journal, purchase journal, cash receipts journal, cash
disbursements journal, and a general journal. However, in today’s computerized accounting
environment, a general journal is maintained in which adjusting entries and unique financial
transactions like provision entries are recorded. In other words, accounting software has eliminated
the need to first record routine transactions into a journal.
Next, the entries are posted into ledgers (if an organisation is large, then the entries are recorded
in subsidiary books like purchase, sales, credit note, debit note etc.), and then a trial balance is
prepared from the ledger accounts.
Now, let us see how day-today business transactions are maintained in Tally.ERP 9.
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In Tally.ERP 9, the first step is a one-time activity of creation of ledgers for recording transactions.
Recording of transactions in Tally.ERP 9 follows the Golden Rules of Accounting.
It involves use of separate vouchers for recording different types of transactions, like purchase
vouchers are used for recording purchase entries, sales vouchers for recording sales entries, debit
note vouchers to record purchase return entries, credit note vouchers for recording sales return
entries, etc.
After the transactions are entered using vouchers, posting to ledgers, and preparation of trial
balance and financial statements are automated in Tally.ERP 9, speeding up the accounting process
thus, saving precious time.
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6.3 Accounting Vouchers
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Accounting Voucher is the primary document in which the complete details of accounting
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transactions are recorded. Businesses require to maintain documentary evidence of their
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transactions to arrive at meaningful accounting information. This will help them to arrive at
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relevant reports.
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Without accounting vouchers, there would be no record of transactions occurring in a company.
Further, it would not be possible to get the relevant accounting reports.
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Tally.ERP 9 is pre-programmed with a variety of accounting vouchers, each designed to perform

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a different job.
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The standard Accounting Vouchers are:

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 Receipt Voucher (F6)

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 Contra Voucher (F4)

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 Payment Voucher (F5)

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 Sales Voucher (F8)

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 Credit Note Voucher (Ctrl+F8)

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 Purchase Voucher (F9)

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 Debit Note Voucher (Ctrl+F9)

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 Journal Voucher (F7)

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These vouchers can be altered to suit a company’s requirements. Tally.ERP 9 also allows creation
of new ones.
Let us illustrate the different types of transactions that take place in a real-time business
environment and the accounting procedure in Tally.ERP 9.
Business Scenario
Pratap started a company KRA Traders, with a capital of ₹ 20, 00,000, in April 2017. The company
traded in water bottles – steel and plastic water bottles. The company made frequent purchases
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from MK Traders; its biggest and most frequent customer is Chakri Traders. The company had a
current account in SBI for business purpose.
Before recording the transactions of KRA Traders, one must first create the company in Tally.ERP
9.
Activity: In order to record transactions in Tally.ERP 9, create the following company.
Company Name: KRA Traders
Address: No: 204, Hayavadana Main Road, Gavipuram Extension, Ramalaya Building, Gandhi Bazar,
Bengaluru - 560001
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Country: India
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State; Karnataka
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Now, the company is created. Let us begin recording the company’s business transactions.
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6.3.1 Receipt Voucher
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Any money received by a business concern, from sales or any other source capital introduced by
owners are considered receipts and any money received from debtors against sales, where money
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is received are accounted using the Receipt Voucher in Tally.ERP 9.

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Illustration 1: Recording a Receipt Voucher in Tally.ERP 9

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Pass the following transactions in the book of KRA Traders:

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Date Particulars
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01-07-2017 Voucher: Receipt

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KRA Traders Introduced ₹ 20, 00,000 as Capital into the business.

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Particulars L.F Dr. Cr.

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Cash Account_________________ Dr. 20,00,000

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To, Owners Capital A/c 20,00,000

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(Being cash invested by the proprietor)

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Table 6.2
To record the transaction of table 6.2, in the books of account, first ensure that the required ledgers
are created in Tally.ERP 9.
Step 1: Creation of Accounting Masters
Capital Ledger
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1. Go to Gateway of Tally > Accounts Info. > Ledgers > Create.
Owners Capital A/c
Name Enter as Owners Capital A/c
Under Select as Capital Account
Inventory values are affected Set to No
Table 6.3
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The Owners Capital A/c Ledger Creation screen appears as shown in the figure 6.1
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Figure 6.1 Owner’s Capital A/c Ledger Creation Screen

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Note: Cash Account is available as a pre-defined default account in Tally. ERP 9

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Step 2: Recording Receipt Voucher

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To record the receipt voucher in Tally.ERP 9, follow the steps given below:
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1. Go to Gateway of Tally > Accounting Vouchers > F6: Receipt

Receipt entries can be entered in Tally.ERP 9 in the following modes:
Double Entry Mode: This mode allows debiting and crediting of multiple accounts
at a time.
 Single Entry Mode: This mode allows debiting multiple accounts but crediting of
only one account at a time.
2. Press F12: Configure to get the Receipt Configuration, and set the option Use single
entry mode for payment/receipt/ contra vouchers to No.
3. Set Use Cr/Dr instead of To/By during entry to Yes.
4. Credit the Owners Capital A/c ledger and enter the amount, ₹20, 00,000.
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5. Debit the Cash Account, the amount will get captured automatically.
6. Enter the Narration.
The Receipt Voucher Creation screen appears as shown in the figure 6.2:
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Figure 6.2 Receipt Voucher Creation Screen
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7. Accept the screen.

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Note: The same entry can be recorded in single entry mode by setting the option - Use single entry mode for
payment/receipt/ contra vouchers to Yes from F12: Configure.
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6.3.2 Contra Voucher

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Contra Voucher is a transaction involving transfer of cash between one Cash A/c to another or
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one Cash A/c to another Bank A/c. A transaction indicating transfer of funds from:
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 Cash account to Cash account

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 Cash account to Bank account

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 Bank account to Cash account

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 Bank account to Bank account

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Illustration 2: Recording a Contra Voucher in Tally.ERP 9

Date Particulars
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01-07-2017 Voucher: Contra
KRA Traders deposited cash of ₹ 2, 00,000 into SBI Bank Account.
SBI Bank A/c ________________ Dr. 2,00,000
To, Cash A/c 2,00,000
(Being cash deposited to SBI A/c)
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Table 6.4
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Bank Account Ledger
1. Go to Gateway of Tally > Accounts Info. > Ledgers > Create. ED
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SBI Bank A/c

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Against the field Action to be performed

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Name Enter as SBI Bank A/c

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Under Select as Bank Accounts

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Bank Account Details

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A/c holder’s name KRA Traders

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A/c no. Enter as 00054215451

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IFS code Enter as SBII0123214

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Bank name Select State Bank of India (India)

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Branch Enter as Koramangala

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Bank Configuration
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Set cheque books Set to No

Set cheque printing configuration Set to No
Enable auto reconciliation Set to No
Table 6.5
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Figure 6.3 SBI Bank A/c Ledger Creation Screen
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Step 2: Recording Contra Voucher ED
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To record the Contra voucher in Tally.ERP 9, follow the steps given below:
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1. Go to Gateway of Tally > Accounting Vouchers > F4: Contra

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Receipt entries can be entered in Tally.ERP 9 in the following modes:

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 Double Entry Mode: This mode allows debiting and crediting of multiple accounts
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at a time.
 Single Entry Mode: This mode allows debiting multiple accounts but crediting of
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2. Press F12: Configure to get the Contra Configuration, and ensure the options are set as
given below:
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 Skip Date field during creation for faster entry to Yes (By enabling this option,
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the cursor will not move to date field).

 Use single entry mode for payment/receipt/ contra vouchers to No (By
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disabling this option, entries will be recorded in double entry mode i.e., Debit and
Credit mode).
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 Use Cr/Dr instead of To/By during entry to Yes (By enabling this option, the
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screen displays Cr and Dr instead of To/By).

3. Credit the Cash Account and enter the amount ₹ 2, 00,000.
4. Debit the SBI Bank A/c, the amount will get captured automatically.
5. Press Enter to view the Bank Allocations screen, by default Transaction Type will be
selected as cash, press Enter from the amount field, you will get the Cash
Denominations screen.
6. In the Denominations screen, enter the denomination of amount deposited
The Cash Denominations screen appears as shown in the figure 6.4:
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Figure 6.4 Cash Denomination Screen
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7. Press Enter.
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The Contra Voucher Creation screen appears as shown in the figure 6.5:
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Figure 6.5 Contra Voucher Creation Screen
Note: In Tally.ERP 9, the same entry can be recorded in single entry mode by setting the option - Use single
entry mode for payment/receipt/ contra vouchers to Yes from F12: Configure.
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6.3.3 Payment Voucher
Payment voucher is used to account all the payments made by the company by cash or through
bank.
Illustration 3: Recording a Payment Voucher in Tally.ERP 9
Date Particulars
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01-07-2017 Voucher: Payment
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KRA Traders Paid ₹ 50,000 as Salaries to Staff through cheque.
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Salaries to Staff _________________ Dr. 50,000
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To, SBI Bank A/c 50,000
(Being Salaries paid to staff) ED

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KRA Traders made a cash payment of ₹ 20,000 towards travelling expenses and
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20,000 towards food expenses.

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Travelling Expenses ___________ Dr. 20,000

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Food Expenses _______________ Dr. 20,000

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To, Cash A/c 40,000

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(Being Travelling and Food Expenses

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incurred)
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Table 6.6
Salaries to Staff Ledger
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Go to Gateway of Tally > Accounts Info. > Ledgers > Create
Salaries to Staff
Name Enter as Salaries to Staff
Under Select as Indirect Expenses
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Activity: Similarly, create the ledgers Travelling Expenses and Food Expenses.
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Step 2: Recording Payment Voucher involving one Debit and one Credit Account each
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To record the Payment voucher in Tally.ERP 9, follow the steps given below:
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1. Go to Gateway of Tally > Accounting Vouchers > F5: Payment
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Payment entries can be entered in Tally.ERP 9 in the following modes:
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Double Entry Mode: This mode allows debiting and crediting of multiple accounts
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at a time.
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Single Entry Mode: This mode allows debiting multiple accounts but crediting of
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2. Debit the Salaries to Staff ledger and enter the amount ₹50,000.
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3. Credit the SBI Bank A/c, the amount will get captured automatically
4. Press Enter to skip Cheque Range.
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5. Enter the instrument number and date in Bank allocation screen

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The Payment Voucher Creation screen appears as shown in the figure 6.6:
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Figure 6.6 Payment Voucher Creation Screen
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Note: The above entry (figure 6.6) is recorded in double entry mode. The same entry can be recorded in single entry
mode by enabling the option - Use single entry mode for payment/receipt/ contra vouchers to
Yes from F12: Configure.
Step 3: Recording Payment Voucher where One Account is Credited and Multiple
Accounts are Debited (Compound Entry)
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To record the Payment voucher using multiple accounts in Tally.ERP 9, follow the steps given
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below:
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1. From Payment Voucher Creation screen, Press F2: Date and change the date to 05-07-
2017.
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2. Debit the Travelling Expenses ledger and enter the amount ₹20,000.
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3. Debit the Food Expenses ledger and enter the amount ₹20,000.
4. Credit the Cash A/c, the amount will get captured automatically. ED
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In the entry of figure 6.7, two accounts have been debited and one account has been credited.
This is one form of Compound Entry. Similarly, you can debit multiple accounts and credit
multiple accounts in Tally.ERP 9.
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Illustration 4: Recording a Payment Voucher in Single Entry Mode
KRA Traders made a cheque payment of ₹ 20,000 towards travelling expenses

and 30,000 towards food expenses.
Travelling Expenses ___________ Dr. 20,000
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Food Expenses _______________ Dr. 30,000
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To, SBI Bank A/c 50,000
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(Being Travelling and Food Expenses
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incurred, paid by cheque)
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Table 6.8 LE
Note: All three ledgers, i.e. SBI Bank A/c, Travelling Expenses and Food Expenses involved in this transaction
have been already created in Tally.ERP 9.
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Step 1: Recording Payment Voucher Using Single Entry Mode

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2. Click F2:Date and change the date to 10-07-2017

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3. Click F12: Configure to get the Payment Standard Configuration, and set the option
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Use single entry mode for payment/receipt/ contra vouchers to Yes.

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Observation: On enabling the Single Entry mode, the payment screen displays the Account field (Select the
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ledger which has to be credited), Particulars field (Select the ledgers which has to be debited) and the amount
field (Enter the amount)
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4. Under Account field select SBI Bank A/c

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5. Under Particulars field Select Travelling Expenses ledger and enter the amount,
₹20,000.
6. Then select the Food Expenses ledger and enter the amount, ₹30,000
7. Press Enter.
8. Press Enter. The Bank Allocations screen appears.
9. Press Enter to skip the field Cheque Range.
10. Enter the instrument number and date in Bank Allocations screen.
The Payment Voucher Creation screen in single entry mode appears as shown in the figure 6.8:
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Figure 6.8 Payment Voucher Creation Screen (Single Entry Mode)
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In the entry of figure 6.8, one account i.e., SBI Bank A/c has been credited and two accounts i.e.,
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Travelling Expenses and Food Expenses have been debited. This is one form of compound entry.
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Similarly, multiple accounts can also be debited.

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6.3.4 Purchase Voucher

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Purchase is the cost incurred by the business concern during a period, for further sale of inventory.
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Purchase is an expense to the company. It is included in the income statement and is also
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considered under cost of goods sold.

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In accounting, the purpose and type of purchases is important. Purchase of fixed assets for own
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consumption will be accounted as fixed assets and shown in the Balance Sheet, while purchases
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made for further sale will be accounted as Expenses. (Inventory Accounting will be explained in
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the later section.)

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In Tally.ERP 9, a Purchase Voucher is used to record transactions, when a company purchases

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some goods on cash, cheque or on credit basis. A purchase voucher can be recorded in the
following three modes:
 Voucher Mode
 Item Invoice Mode
 Account Invoice Mode (will be explained in detail in chapter 17)
Voucher Mode: In Voucher mode, the debit and credit amount fields are shown adjacent to each
other.
The Sample Format of Voucher Mode in Tally.ERP 9 is shown in the figure 6.9:
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Figure 6.9 Purchase (Voucher Mode Sample Format)
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Note: From the Purchase Voucher Creation screen, press Ctrl+V to move to the Item Invoice mode and vice
versa.
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Item Invoice Mode: This mode allows entry of inventory details like Name of Stock Item,
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Quantity, Rate and amount details. This mode is useful for recording inventory movements in the
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books of account.
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Note: To pass a purchase entry in the invoice mode, ensure the the option- Enable invoicing in F11:
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Accounting Features is set to Yes.

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The Sample Format of Item Invoice Mode in Tally.ERP 9 is shown in the figure 6.10:
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Figure 6.10 Purchase (Item Invoice Mode Sample Format)
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.
Note: From the Accounting Voucher Creation screen in item invoice mode, press Alt+I or click I:
Accounting Invoice to change the mode to Accounting Invoice Mode and vice versa.
Accounting Invoice Mode: This mode allows a user to directly select/debit a ledger account
while passing an entry in Accounting Invoice mode. This mode is useful especially when a Service
Bill is being entered (as it does not include inventory details).
The Sample Format of Accounting Invoice Mode in Tally.ERP 9 is shown in the figure 6.11:
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Figure 6.11 Purchase (Account Invoice Mode Sample Format)

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Note: The above screen displays the fields Particulars, Rate, and Amount. To change to voucher mode, press
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Ctrl+V and for item invoice mode from this screen, press Alt+I key combinations.
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Similarly, we can record Sales transactions, Debit Notes, and Credit Notes in voucher mode, item
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invoice mode or accounting invoice mode.

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Once after understating about the different modes of voucher like item invoice, accounting invoice
and voucher mode, let us record the transactions in different vouchers like purchase, sales, debit
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note and credit note using these modes.

In Tally.ERP 9, purchase entries can be recorded with and without inventory details.
Let us now record the transactions in the different modes.
Illustration 5: Recording Purchase Transaction in Voucher Mode
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11-07-2017 Voucher: Purchase
KRA Traders, purchased goods for ₹ 20,000 on cash with supplier invoice
number 1.
Purchase A/c________________ Dr. 20,000
To, Cash 20,000
(Being purchase of goods on cash)
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Table 6.9
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Purchase Ledger ED
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Purchase A/c
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Name Enter as Purchase A/c

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Under Select as Purchase Accounts

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Voucher mode: By disabling the option Inventory values are affected? One can debit the purchase
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ledger but cannot define the inventory details like stock item name in voucher mode.
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Item invoice mode: By enabling the option Inventory values are affected? One can select the
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Purchase Ledger from the List of Ledger Account, if the same is disabled then the purchase ledger will not
appear for selection in item invoice mode.
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Table 6.10
Note: By disabling the option Inventory values are affected? the purchase ledger can be debited in a
transaction but inventory details can’t be provided in the transaction. This ledger can be used in the voucher mode or
an accounting invoice mode but will not be available in the List of Ledger Accounts for selection in the Item
Invoice mode.
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Step 2: Recording a Purchase Transaction in Voucher Mode
To record the Purchase transaction in voucher Mode, follow the steps given below:
1. Go to the Gateway of Tally > Accounting Vouchers > F9: Purchase.
2. From the Accounting Voucher Creation screen, press F12: Configure to view the
Purchase Standard Configuration.
3. Set Enable supplementary details to No.(If you enable this option, you will have to
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specify supplier details like Name , Address etc.)
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4. Press F2: Date and change the date to 11-07-2017.
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5. Press Ctrl+V (V: As Voucher) to record the transaction in voucher mode, if you are on
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the invoice mode.
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6. Enter the Supplier Invoice No. as 1
7. Credit the Cash Ledger and enter the amount ₹20,000
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8. Debit the Purchase A/c and the amount will get captured automatically
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The Purchase Voucher Creation screen appears as shown in the figure 6.12:
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Figure 6.12 Purchase Voucher (Voucher Mode)
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Illustration 6: Recording Purchase Transaction in Item Invoice Mode
KRA Traders purchased following stock items from MK Traders on cash, with
supplier invoice number 2.
Name of Item Quantity Rate per (₹) Amount (₹)

Plastic Water Bottle 100 Nos 100 10,000
Steel Water Bottle 100 Nos 500 50,000
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Table 6.11
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To record the transaction of table 6.11, in the books of account, first ensure that the required
ledgers are created in Tally.ERP 9.
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Purchase ledger
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Purchase of Goods
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Name Enter as Purchase of Goods

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Inventory Values are effected Set to Yes

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Step 2: Creation of Inventory Masters

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To record the purchase voucher in item invoice mode, the following inventory masters are to be
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created in Tally.ERP 9.
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Unit of Measure
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1. Go to Gateway of Tally > Inventory Info. > Units of Measure > Create.
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Numbers
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Symbol Enter as Nos
Formal Name Enter as Numbers

Number of decimal places Enter as 0
By default the type of units will be as Simple
Table 6.12
Stock Items
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Go to Gateway of Tally > Inventory Info. > Stock Items> Create
Plastic Water Bottle
Name Enter as Plastic Water Bottle
Under Under Primary
Units Select Nos
Table 6.13
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Steel Water Bottle
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Name Enter as Steel Water Bottle
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Under Under Primary
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Units Select Nos
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Table 6.14
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Step 3: Recording Purchase Transaction in Item Invoice Mode

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

2. From the Accounting Voucher Creation screen, click F12: Configure to view the
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Purchase Standard Configuration.

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3. Set Enable supplementary details to No (If you enable this option, you will have to
specify the supplier details like Name, Address etc.)
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4. Click F2: Date and change the date to 12-07-2017

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5. Press Ctrl+V to record the transaction in item invoice mode

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6. Enter the Supplier Invoice No. as 2

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7. In the Party A/c name field select Cash (In this field, you must select Sundry Creditors
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ledger, if purchases are made on credit basis)

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8. In the Purchase ledger field select Purchase of Goods ledger

9. Under the field Name of Item, select Plastic Water Bottle, enter the Quantity as 100
Nos, Rate as 100 per Nos, and the amount 10,000 will get captured automatically.
10. Press Enter.
11. Select the second stock item, Steel Water Bottle, enter the Quantity as 100 Nos, rate as
500 per Nos, and the amount 50,000 will get captured automatically
The Purchase Voucher Creation screen appears as shown in figure 6.13:
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Figure 6.13 Purchase Voucher (Item Invoice Mode)
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On recording of entries, relevant accounts like purchase and cash are updated automatically.
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Note: Recording transactions in Account Invoice mode will be covered in later chapters.
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6.3.5 Sales Voucher

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A Sales voucher is used when a company sells goods to customers on cash, cheque or credit basis.
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Sales entries lead in an increase in sales revenue.

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In Tally.ERP 9, a sales entry can be recorded with and without inventory details.
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The following illustration will demonstrate how a sales entry is recorded in Tally.ERP 9.
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Illustration 7: Recording Sales Transaction in Voucher Mode

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15-07-2017 Voucher: Sales

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KRA Traders, sold goods for ₹ 40,000 to Chakri Traders on cash with reference
number 1.
Cash A/c________________ Dr. 40,000

(Being sold goods to chakri traders on
cash)
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Table 6.15
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Sales Ledger
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Sales A/c
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Name Enter as Sales A/c

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Under Select as Sales Accounts

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Table 6.16
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Step 2: Recording Sales Transaction in Voucher Mode

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To record the sales transaction in voucher mode, follow the steps given below:
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1. Go to the Gateway of Tally > Accounting Vouchers > F8: Sales.

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2. From the Accounting Voucher Creation screen, click F12:Configure andset Enable
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supplementary details to No (If you enable this option, you will have to specify the
despatch details ,Order details, and Buyers details.)
4. Press Ctrl+V or click V: As Voucher to record the transaction in voucher mode.
5. Enter the Reference No. as 1
6. Debit the Cash Ledger and enter the amount 40,000.
7. Credit the Sales A/c and the amount will get captured automatically.
The Accounting Voucher Creation screen appears as shown in the figure 6.14:
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Figure 6.14 Sales Voucher (Voucher Mode)
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Illustration 8: Recording Sales Transaction in Item Invoice Mode
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KRA Traders sold the following stock items to Mahavir Traders on credit with
reference number 2.
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Name of Item Quantity Rate/Nos (₹) Amount (₹)

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Table 6.17
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Activity
1) Create a Customer’s Account as Mahavir Traders under Sundry Debtors.
2) Create a sales ledger Sale of Goods (Set the option - Inventory values are affected to Yes)
Stock items Plastic Water Bottle and Steel Water Bottle are already created in the books.
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Step 2: Recording Sales Transaction in Item Invoice Mode
1. Go to Gateway of Tally > Accounting Vouchers > F8: Sales
2. From the Voucher Creation screen, press F12: Configure to get the Sales Invoice
Standard Configuration and set Enable supplementary details to No (If you enable
this option, then you will have to specify the supplier details like Name and Address etc.)
3. Press F2:Date and change the date to 18-07-2017
4. Press Ctrl+V to record the transaction in item invoice mode.
5. Enter the Reference No. as 2
6. In the Party A/c name field select Mahavir Traders (In this field, you must select Cash
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ledger, if sale is made on cash basis)
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7. In the field Sales ledger select Sale of Goods.
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8. Under the field Name of Item, select Plastic Water Bottle, enter the Quantity as 50
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Nos, rate as 150 per Nos and the amount 7,500 will get captured automatically.
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9. Press Enter.
10. Select the second stock item, Steel Water Bottle, enter the Quantity as 50 Nos, Rate as
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700 per Nos and the amount 35,000 will get captured automatically.
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The Accounting Voucher Creation screen appears as shown in the figure 6.15:
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Figure 6.15 Sales Voucher (Item Invoice Mode)

On recording an entry, other relevant accounts such as sales, cash and sundry debtors are updated
automatically.
Note: Recording transactions in Account Invoice mode will be covered in later chapters.
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6.3.6 Debit Note Voucher
A Debit Note Voucher is used to record the transaction details of the purchases returns or returns
outwards. The reason for purchases returns could vary from supply of damaged goods, or goods
not as per specifications, to any other.
Purchases Returns must be recorded in the books of account, because the value of returned
goods must be deducted from the purchases.
In Tally.ERP 9, a purchase return transaction using Debit Note voucher can be recorded for
change in price consideration also. A Debit Note can be recorded in voucher mode as well as in
item invoice mode.
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Illustration 9: Recording Debit Note Voucher without Inventory.
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Activity: Record the below purchase transaction in voucher mode.
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As on 18-07-2017, KRA Traders, purchased goods for ₹ 30,000 on cash, with supplier invoice number 3.
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20-07-2017 Voucher: Debit Note ED
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Goods for ₹ 15,000 was returned to supplier for the purchase made on 18-07-
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2017 against invoice number 3

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Cash A/c________________ Dr. 15,000

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To, Purchase A/c 15,000

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(Being purchase returned to supplier)

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00
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Table 6.18
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Note: Ledgers used in this transactions are already created in Tally.ERP 9, hence there no need of creating these
21
ledgers once again.

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Step 1: Recording Debit Note voucher for accounting the details of purchase return for
cash purchase made.
To record the Debit Note voucher without inventory details, follow the steps given below:
1. This voucher type is made available when the option Use debit and credit notes is set to
Yes in the F11: Features (F1: Accounting Features)
2. Go to the Gateway of Tally > Accounting Vouchers > F9: Debit Note
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3. PressF2: Date and change the date to 20-07-2017
4. Mention the Original Invoice No as 3 and original invoice date as 18-07-2017 which is
returned
5. Debit the Cash Ledger and enter the amount ₹15,000
6. Credit the Purchase A/c and the amount will get captured automatically
7. Enter the Narration
The Debit Note Voucher Creation screen appears as shown in the figure 6.16:
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Figure 6.16 Debit Note Voucher (Cash Purchase Return)

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The entry of figure 6.16, will increase the cash balance and decrease the purchase/expense balance.
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Illustration 10: Recording Debit Note Voucher with Inventory.

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Activity: Record the below purchase transaction in Item Invoice mode.

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KRA Traders purchased following stock items from MK Traders on credit, with supplier
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invoice number 4
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Table 6.19
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23-07-2017 Voucher: Debit Note
Returned the following goods which are in damaged condition to MK Traders
for the purchase made on 21-07-2017, with supplier invoice no. 4.

Table 6.20
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Note: Ledgers and Stock Items used in this transactions are already created in Tally.ERP 9, hence there is no
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need of creating these once again.
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Step 1: Recording Debit Note Voucher for accounting the details of purchase return for
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credit purchase made.
To record the Debit Note Voucher with inventory details, follow the steps given below: ED
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1. This voucher type is made available when the option Use debit and credit notes and
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Record debit notes in invoice mode is set to Yes in the F11: Features (F1: Accounting
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Features).
2. Go to the Gateway of Tally > Accounting Vouchers > F9: Debit Note.
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3. Click F2: Date and change the date to 23-07-2017.

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4. Enter the Original Invoice No as 4 and original invoice date as 21-07-2017

5. In the Party A/c name field select MK Traders.
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6. In the Purchase ledger field select Purchase of Goods ledger.

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7. Under Name of Item field, select Plastic Water Bottle and enter the Quantity as 50
Nos, Rate as ₹ 100 per Nos and the amount ₹ 5,000 will get captured automatically.
00
8. Press Enter and select the second stock item, Steel Water Bottle and enter the quantity
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as 50 Nos, rate as ₹ 500 per Nos and the amount ₹ 25,000 will get captured automatically.
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Enter the Narration. The Debit Note Voucher Creation screen appears as shown in the figure
6.17:
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Figure 6.17 Debit Note Voucher (Purchase Return)
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6.3.7 Credit Note Voucher

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A Credit Note Voucher is used to record transaction details of sales returns or returns inwards.
The reason for sales returns could be damaged condition of goods sold, not as per specifications
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of the buyer or any other.

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Goods are mostly returned because they were damaged when sold, or were not as per the buyer’s
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specifications.
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Sales returns must be recorded in the books of account, because the value of returned goods must
be deducted from the sales.
00
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In Tally.ERP 9, a sales return transaction is recorded using Credit Note Voucher, generally issued
by the seller to the buyer. The Credit Note voucher can be recorded in Voucher mode as well as
8
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in Item invoice mode

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Illustration 11: Recording Credit Note Voucher without Inventory.

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Activity: Record the below sales transaction in voucher mode.

As on 24-07-2017, KRA Traders, sold goods for ₹ 40,000 on cash, with reference number 3.
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25-07-2017 Voucher: Credit Note
Goods for ₹ 20,000 was returned by customer for the sales made on 24-04-2017
against invoice number 3
Sales A/c________________ Dr. 20,000
To, Cash 20,000
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(Being sales return from customer)
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Table 6.21
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Note: Ledgers used in this transactions are already created in Tally.ERP 9, hence there no need of creating these
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ledgers once again.
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Step 1: Recording Credit Note Voucher for accounting the details of sales return for cash
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sales made.
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To record the Credit Note Voucher without inventory details, follow the steps given below:
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1. This voucher type is made available when the option Use debit and credit notes is set to
Yes in the F11: Features (F1: Accounting Features)
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2. Go to the Gateway of Tally > Accounting Vouchers > F8: Credit Note
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3. ClickF2:Date and change the date to 25-07-2017

4. Mention the Original Invoice No as 3 and original invoice date as 24-04-2017
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5. Credit the Cash Ledger and enter the amount ₹20,000

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6. Debit the Sales A/c and the amount will get captured automatically
8

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The Debit Note Voucher Creation screen appears as shown in the figure 6.18:
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Figure 6.18 Credit Note Voucher (Sales Return)
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The entry of figure 6.18, will decrease the cash balance as well as the sales balance.
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Illustration 12: Recording Credit Note Voucher with Inventory.

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Activity: Record the below sales transaction in Item Invoice mode.

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KRA Traders sold following stock items to Kalyani Traders on credit, with reference number
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4.
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Kalyani Traders
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Table 6.22
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Returned the following goods to Kalyani Traders for the sales made on 26-04-
2017, with invoice number 4.

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Table 6.23
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Note: Ledgers and Stock Items used in this transactions are already created in Tally.ERP 9, hence there no need
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of creating these once again.
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Step 1: Recording Credit Note Voucher for accounting sales return made on cash sales.
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To record the Credit Note Voucher with inventory details, follow the steps given below:LE
1. This voucher type is made available when the option Use debit and credit notes and
Record credit notes in invoice mode is set to Yes in the F11: Features (F1:
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Accounting Features).
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2. Go to the Gateway of Tally > Accounting Vouchers > F8: Credit Note
3. PressF2: Date and change the date to 28-07-2017
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4. Enter the Original Invoice No as 4 and Original Invoice Dt. as 26-07-2017 which is
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returned
5. In the Party A/c name field select Kalyani Traders
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6. In the Sales ledger field select Sale of Goods ledger

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7. Under Name of Item field, select Plastic Water Bottle and enter the quantity as 20 Nos,
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rate as ₹ 150 per Nos and the amount ₹ 3,000 will get captured automatically
00
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as 20 Nos, rate as ₹ 700 per Nos and the amount ₹ 14,000 will get captured automatically
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The Credit Note Voucher Creation screen appears as shown in the figure 6.19:
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Figure 6.19 Credit Note Voucher (Credit Sales Return)
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Since the transaction of figure 6.19, involves sales returns entries with inventory details, the
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inventory in hand will increase (as goods are received).

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6.3.8 Journal Voucher

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Journal vouchers are used to pass adjustment entries, to adjust the debit and credit amounts
without involving cash or bank accounts. Adjusting journal entries are typically made just before
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issuing a company's financial statements.

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Activity: As on 01-08-2017, KRA Traders made purchase of 100 Nos of Plastic Water Bottles
00
worth ₹ 10,000 from Kalyani Traders. Freight charges incurred towards purchase was ₹ 1,000 as
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on 15-08-2017.
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Freight charge was not recorded at the time of purchase, hence the same has to be recorded
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through a journal vourcher

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Illustration 13: Recording a Journal Voucher in Tally.ERP 9
Date Particulars
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15-08-2017 Voucher: Journal
Freight charges incurred ₹ 10,000 towards the purchase on 01-08-2017.
Freight Charges A/c___________ Dr. 1,000
To, Purchase of Goods A/c 1,000
(Being Freight Charges incurred on
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purchase of Plastic Water Bottle
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Table 6.24
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To record the transaction of table 6.24,in the books of account, first ensure that the required
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Step 1: Creation of Ledgers
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Freight Charges Ledger

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Freight Charges A/c

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Name Enter as Freight Charges A/c

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Table 6.25
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Step 2: Recording Journal Voucher

To record the Journal voucher in Tally.ERP 9, follow the steps given below:
1. Go to Gateway of Tally > Accounting Vouchers > F7: Journal
3. Debit the Freight Charges A/c and enter the amount, ₹ 1,000
4. Credit the Purchase of Goods
5. Accept the Inventory Allocations screen and the amount will get captured automatically
in the Credit field
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The Journal Voucher Creation screen appears as shown in the figure 6.20:
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Figure 6.20 Journal Voucher Creation Screen
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In the above section, we have seen how accounting transactions are recorded using different
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vouchers available in Tally.ERP 9.

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6.4 Creation of New Voucher Type

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In Tally.ERP 9, you have seen that there are predefined voucher types available to record
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transactions. However, you can create voucher types to suit specific requirements using the pre-
defined voucher types as the base.
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For example: KRA Traders wants to record bank payments and petty cash payments separately.
The company wants to maintain different voucher types to record only bank related transactions.
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Illustration 14: Creating a new voucher type and recording transactions in Tally.ERP 9
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In this scenario, KRA traders will create a new voucher type using payment voucher type
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as the base. The new voucher type will inherit the functions of a payment voucher.
Step 1: Accounting Masters Creation
Bank Payment Voucher Type
To create Bank Payment Voucher Type, follow the below given procedure:
1. Go to the Gateway of Tally > Accounts Info. > Voucher Types > Create
2. Enter Name as Bank Payment
3. Select Type of Voucher as Payment Voucher.
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4. Enter an abbreviation for the new voucher. The abbreviation will be used to denote this
new voucher in reports
5. Select the Method of Voucher Numbering as Automatic
Methods of Numbering and the purpose of using the numbering

Method of Numbering Purpose
Automatic
Select this option if you want Tally.ERP 9
to automatically number the vouchers in
this voucher type sequentially.
Automatic (Manual Override) This method will automatically number the
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voucher and also we can manually enter the
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number.
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Choose this option if you want Tally.ERP 9
to automatically number the vouchers, but
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also manually enter the voucher number
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when required.
Manual ED
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Select this option to manually enter the
voucher number.
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Multi-user Auto Select this option in a scenario where

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multiple users simultaneously record

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vouchers, and the voucher numbering

between different users should be
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managed by Tally.ERP 9.
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None Select this option to disable voucher

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numbering.
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Table 6.26
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6. Set the option Use Advance Configuration to No. ( To modify the voucher number as
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per your requirement like, you want to add suffix & prefix details, then the same need to
be enabled)
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7. Set the option Use effective dates for vouchers to No (By enabling this option, you
will get the additional effective date field while recording the entry)
8. Set the option Make this voucher type as ‘Optional’ by default to No (By enabling
this option the voucher will behave like a permanent Non Accounting Voucher, it will
not reflect in books of account)
9. Set the option Allow Narration in voucher to Yes (If the same is disabled, then you
will not get the option to enter Narration details while recording the entry in this
particular voucher)
10. Set the option Provide Narrations for each ledger in voucher to No (If you enable
this option, then after selecting each ledger, you will get the Narration option)
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11. Set the option Enable default accounting allocations to No & set/alter Default
Accounting Entries to No (If you enable this option, you will be able to define the
default entries or automation of the entry)
12. Set the option Printing voucher after saving to No
13. Press Enter on the field Name of Class to skip the field.
The Voucher Type Creation screen appears as shown in the figure 6.21:
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Figure 6.21 Bank Payment Voucher Type Creation Screen

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Similarly, in Tally.ERP 9, you can create many voucher types based on your requirements. For
example, an organization wants to maintain its credit & cash sales in separate vouchers. These
6
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requirements may vary from one organization to another.

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Activity:
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1) Create a new voucher type as Cash Payment

8
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2) Go to Gateway of Tally > Accounting Vouchers > Press F5: Payment > Select the required
voucher type from the list of voucher types (It will display two payment voucher types Bank Payment and Cash
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Payment)
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Note: Observe the voucher type 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 and function, the voucher type Display/Alter screens are identical to the creation screen.
Activity
1) Create a Payment voucher type to record for Petty Cash transactions in Tally.ERP 9
2) Record further entries in the books of KRA Traders:
Date Particulars
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21-08-2017 Voucher: Cash Payment
Cash Payment made to Kalyani Traders for ₹ 5,000 from SBI Bank account.
(Use Cash Payment Voucher Type to record the transaction)
Received cheque for ₹ 4,000 received from Mahavir Traders.
23-08-2017 Voucher: Bank Payment
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Salaries to staff of ₹ 2,500 amount paid through SBI Bank Account, vide cheque
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number 345678, date 23-08-2017
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(Use Bank Payment Voucher Type to record the transaction)
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24-08-2017 Voucher: Petty Cash
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Paid stationary charges of ₹ 50 from Petty Cash.
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(Use Petty Cash Payment Voucher Type to record the transaction)
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Received Cheque for ₹ 1, 50,000 received from MK Traders. and the same is
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deposited in SBI Bank Account.

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Table 6.27
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Once after recording above transactions of table 6.27 check the Day Book Report (This report
will display the details of day to day transactions)
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The Day Book is a report of all the transactions recorded on a day or in a period of time. Let us
view the transactions recorded in the Day Book.
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To view the Day Book,

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1. Go to Gateway of Tally > Display > Day Book

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2. Press F2: Period and mention the period as 21-08-2017 to 31-08-2017.

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The Day Book Report appears as shown in the figure 6.22

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Figure 6.22 Day Book Report Screen
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You can see that along with the pre-defined voucher types in Tally.ERP 9, the new voucher
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types created are also listed in the Day Book.
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6.5 Automation of Invoices (Voucher Classes)

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Voucher Classes are used to automate accounting allocations in transactions. It is a table for
predefining the entries to make invoice entry a simple task. This is useful in sales invoicing where
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the nominal ledger accounts to be credited for each item of sale is defined once.
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During voucher entry, the accounting credits for items sold are done automatically. Additional
6
accounting entries like tax, freight, and other charges, can be predefined to be carried out
00
untouched during actual invoicing.

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Voucher Classes are available for all major voucher types like Contra, Payment, Receipt, Journal,
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Sales, Credit Note, Purchases, Debit Note, Sales Order, Purchase Order, Delivery Note, Stock
8
Journal and Payroll.

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Business Scenario:
KRA Traders use SBI Bank account for all the bank payments that they make. They can avoid
selecting the SBI Bank A/c ledger every single time a bank payment transaction is made. They
automate this by using voucher classes in Tally.ERP 9.
Illustration 15: Creation and recording a bank payment voucher with voucher class and
automation of bank ledger in transaction.
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KRA Traders made a cheque payment of ₹ 1, 20,000 towards Rent Paid vide
cheque number 002314
Rent Paid A/c ___________ Dr. 1, 20,000
To, SBI Bank A/c 1,20,000
(Being Rent Paid by cheque)
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Table 6.28
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Activity: Create the ledger by name Rent Paid A/c ledger under Indirect Expenses group. ED
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Step 2: Creation of Class in Voucher Type Master
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SBI Payment Class

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To create a voucher class in the Bank Payment Voucher Type, follow the steps given below::
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1. Go to the Gateway of Tally > Accounts Info. > Voucher Types > Alter.
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2. Select Bank Payment from the List of Voucher Types.

3. Press Enter and move the cursor to Name of Class field.
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4. Enter as SBI Payment in Name of Class and Press Enter.

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The Voucher Type Class screen appears as shown in the figure 6.23:
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Figure 6.23 Voucher Type Class Creation Screen
5. Under Exclude these Groups field, select as End of List

6. Under Include these Groups field, select as End of List
Note: End of list is selected because we don’t want to exclude any ledger for this voucher type
7. Under Specific Ledger for which this Class is created (e.g. Cash, or a Bank
Account) field, select SBI Bank A/c as shown in the figure 6.24.
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Figure 6.24 Voucher Type Class Creation Screen

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8. Accept the Voucher Type Class screen.

The Voucher Type Alteration screen appears as shown in the figure 6.25:
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Figure 6.25 Voucher Type Alteration Screen

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Step 3: Recording Payment Voucher Using Voucher Class
To record the Payment voucher using voucher class in Tally.ERP 9, follow the steps given below:
2. In Name field, select Bank Payment from the List of Types.
3. In Class field, select SBI Payment from Voucher Class List as shown in figure 6.26.
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Figure 6.26 Voucher Class Selection Screen

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5. Under Account field, SBI Bank A/c is selected by default and the cursor does not move
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to Account field.
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6. Under Particulars field Select Rent Paid A/c ledger and enter the amount, ₹1, 20,000.
00
7. Enter the instrument number and date in the Bank Allocations screen.
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The Accounting Voucher Creation screen in single entry mode appears as shown in the figure
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6.27:
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Figure 6.27 Payment Voucher Creation Screen (Single Entry Mode)
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You can see that the Voucher Type is Bank Payment, and the Voucher Class is SBI Payment.
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Once the voucher class is selected, the SBI Bank Ledger is automatically selected and you need to
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select only the Ledgers which are to be debited.
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Note: The entry is done in Single Entry System, to make the data entry faster.
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Activity:
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1) Create a Ledger as Petty Cash A/c under Cash-in-Hand.

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2) Create a Voucher Class as Petty Cash Payment in Petty Cash Payment Voucher Type.
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3) Create a Voucher Class as Cash Receipt in Receipt Voucher Type.

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4) Record further entries in the books of KRA Traders:

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Date Particulars
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28-08-2017 Voucher: Petty Cash

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Cash Payment made on purchase of stationary for ₹ 150 using petty cash.
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(Use Petty Cash Payment Voucher Type with class to record the transaction)
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Cash Receipt made on sale of goods for ₹ 1,500 from Kalyani Traders.
(Use Receipt Voucher Type with class to record the transaction)
Table 6.29
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6.6 Non-Accounting Vouchers
The Non-Accounting/Unconventional Vouchers are the special vouchers that are used to
record provisional or non-accounting transactions. They are used as provisional entries from the
books of accounts and make them available for what-if (future reports, projections, forecasts etc.)
reports required at any given time. These Non-Accounting transactions doesn’t affect the regular
books of accounts.
Tally.ERP 9 comprises the following predefined non-accounting vouchers, to suit different
business requirements and for recording various transactions. Tally.ERP 9 also allows you to create
user-defined vouchers (voucher types) according to your requirements.
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 Memorandum Voucher
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 Optional Vouchers
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Let us see understand the non-accounting voucher in Tally.ERP 9 are used in real time business
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scenarios:
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6.6.1 Memorandum Voucher
Memorandum Voucher (memo voucher) is a non-accounting voucher and the entries made
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using memo voucher will not affect your books of accounts. You can use memo vouchers when
you are uncertain about the account to which the amount has to be allocated to when recording
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the transaction. When the account is determined, the memo voucher can be converted into a
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regular voucher, and the transaction can be brought to the books of accounts.
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Until then, Tally.ERP 9 stores these entries in a Memorandum Register.

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Uses of Memo Vouchers

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 Making suspense payments

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 Vouchers not verified at the time of entry

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 Items given on approval

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Illustration 16: Recording a Memorandum Voucher in Tally.ERP 9

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KRA Traders gave cash to office staff to buy stationeries, the company does not know the actual
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cost of stationaries and gave ₹ 1,000 as suspense payment assuming that the actual cost incurred
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on stationaries can be recorded in future.
KRA traders made a suspense cash payment of 1,000 to the office staff. However, the actual cost
of purchase wasn’t known. Pass the following transaction in the book of KRA Traders:
Date Particulars
171
01-09-2017 Voucher: Memorandum
KRA Traders gave cash ₹ 1,000 to Office Staff to buy stationaries.
Stationary A/c _______________ Dr. 1,000
To, Cash 1,000

(Being cash given to Office Staff to buy
Stationaries)
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Table 6.30
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In this transaction, the exact nature and cost of stationary is unknown. So we need to record the
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Memorandum Journal.
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To record the transaction of table 6.30, in the books of KRA Traders, first ensure that the required
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Stationary A/c Ledger

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Stationery A/c
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Name Enter Stationary A/c

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Under Select Indirect Expenses

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Table 6.31
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Step 2: Enabling Memorandum Voucher

Memorandum vouchers have to be enabled for the company from F: 11>Features.
To enable Memorandum Vouchers for the company,
1. Go to Gateway of Tally>F11: Features>F1:Accounts
2. Set the option- Use reversing journals and optional vouchers to Yes.
Step 3: Recording Memorandum Voucher
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To record the memorandum voucher in Tally.ERP 9, follow the steps given below:
1. Go to Gateway of Tally > Accounting Vouchers > F10: Memos.
3. Debit the Stationary A/c and enter the amount, 1,000
4. Credit the Cash Account, the amount will get captured automatically.
5. Enter the narration in the Narration field
The Memorandum Voucher Creation screen appears as shown in the figure 6.28:
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Figure 6.28 Memorandum Voucher Creation Screen

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The Memorandum voucher will not affect the regular books of accounts, you can convert this
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Memo Voucher into a regular voucher (Journal) by pressing F7 from the memorandum voucher
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alteration screen, when you decide to bring this entry into your books.
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Memorandum voucher can also be converted to payment by pressing F5 from memorandum

8
voucher alteration screen

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Memorandum Voucher is posted in Memorandum Register. To view the report,

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Go to Gateway of Tally >Exception Reports >Memorandum Vouchers

The Memorandum Register screen appears as shown in the figure 6.29:
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Figure 6.29 Memorandum Register
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The report of figure 6.29, displays the details of total monthly summary. Further, you can press
Enter from the monthly summary to get Voucher Register. It shows all the Memorandum
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Vouchers made for the specified period.
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Note: You can also view memorandum vouchers from the Day Book. To view the same, go to Gateway of
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Tally > Display > Day Book.

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6.6.2 Optional Vouchers

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Optional Vouchers are non-accounting vouchers. You can mark any existing vouchers as
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optional by Pressing Ctrl+L. Optional Vouchers do not affect regular books of accounts, but
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remain in the Optional Voucher Register. Again, by pressing Ctrl+L, from the voucher, the
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optional vouchers can be marked as regular.

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Optional vouchers can also be used to forecast future sales projections, to see the impact of
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transactions without actually posting them, and the transaction that is incomplete to affect the
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accounts (Proforma sales invoice).

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Proforma Invoice
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A Proforma invoice. is an estimated invoice sent by a seller to the buyer in advance before delivery
of goods. Proforma invoices are commonly used as introductory invoices along with the
Quotation.
Illustration 17: Recording proforma sales invoice in Tally.ERP 9
Pass the following transaction in the book of KRA Traders:
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01-09-2017 Voucher: Proforma Sales
On 01-09-2017, KRA Traders is making sales to Kalyani Traders with the
Reference no: 5. Before making the actual sales, KRA Traders is issuing a
proforma invoice as an estimated invoice in advance before the delivery of
goods.

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Table 6.32
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Note: Stock items: Plastic Water Bottle and Steel Water Bottle, and party ledger are already created in the books.
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Step 1: Recording Sales Transaction in Item Invoice Mode
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3. Press Ctrl+L and make the entry as Optional.
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4. Enter the Reference no. as 5

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5. In the Party A/c name field select Kalyani Traders (In this field, you must select Cash
ledger, if sale is made on cash basis)
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6. In the Sales ledger field select Sale of Goods ledger.

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7. Under Name of Item field, select Plastic Water Bottle and enter the quantity as 10 Nos,
rate as ₹ 250 per Nos and the amount ₹ 2,500 will get captured automatically.
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as 10 Nos, rate as ₹ 850 per Nos and the amount ₹ 8,500 will get captured automatically
00

00
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The Sales Voucher Creation screen appears as shown in the figure 6.30:
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Figure 6.30 Sales Voucher (Optional)
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The sales voucher recorded is marked as optional voucher and will not affect the regular books of
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accounts.
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To view the Optional Voucher Register

1. Go to Gateway of Tally >Exception Reports > Optional Vouchers
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2. Press Enter.
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The Optional Vouchers Register screen appears as shown in the figure 6.31:
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Figure 6.31 Optional Voucher Register
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The report of figure 6.31, displays the details of total number of optional vouchers made for the
specified period.
To print Proforma Invoice,
1. Press Enter on the sales voucher which is made optional. From sales voucher alteration
screen press Alt+P
The Proforma Invoice printing screen appears as shown in the figure 6.32:
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Figure 6.32 Voucher Printing Screen

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2. Press Alt+I for print preview.

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3. Press Enter
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The Proforma Invoice appears as shown in the figure 6.33:

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Figure 6.33 Proforma Invoice
You can convert this Optional Voucher (Proforma Invoice) into a regular voucher (Sales Invoice)
by pressing Ctrl+L from the voucher alteration screen, when you decide to bring this entry into
your books.
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Note: You can also view optional vouchers from the Day Book.
6.6.3 Reversing Journal

Reversing Journals are special journals that are automatically reversed after a specified date.
These accruals are usually short term and are cleared in the subsequent period.
Reversing journals can be used for accounting for Provisions.
For example: You can account for or providing for depreciation. Since, provision for depreciation
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is made at the end of the year, you can create Reversing Journal for a specific period to give more
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accurate status or position.
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This Reversing Journal voucher will not affect the regular books of accounts, you can convert
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this Reversing Journal into a regular voucher (Journal) by pressing F7 from the Reversing Journal
voucher alteration screen, when you decide to bring this entry into your books
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6.7 Recording Provisional Entries
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Provision refers to the amount that is kept aside from profits for future known liabilities.
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Provisions are shown on the liabilities side of a Balance Sheet. For example, provision for
expenses, provision for bad debts and provision for depreciation.
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Business Scenario: During the year-end (31-03-2018), KRA Traders incurred expenses of ₹
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10,000 payable the next year. To show the correct financial position of the company in its reports,
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the company must raise a provision for the expense.

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The company’s accounting entry for provision as on 31-03-2017 will be:

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31-03-2018 Particulars L.F Dr. Cr.

6
00
Expense A/c___________ Dr. 10,000

00
To, Provision for Expense A/c 10,000

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Table 6.33
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By accounting the above entry in its books of accounts, the company balance sheet will reflect a
liability of ₹ 10,000.
Reverse the above entry as on 01-04-2018, as shown below:
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01-04-2018 Particulars L.F Dr. Cr.
Provision for Expense A/c _______ Dr. 10,000
To, Expense A/c 10,000
Table 6.34
By recording the entry of table 6.34, the problem of double counting of expenses or revenues is
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eliminated.
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Note: Reversing Entries are recorded on the first day of the accounting period. These entries are required to remove
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the adjustment entries made in the previous accounting period.
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Illustration 18: Recording Provisional entry in journal and changing the financial year in
Tally.ERP 9
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Date Particulars LE
31-03-2018 KRA Traders, incurred expenses of ₹ 15,000 as audit fee, but it is payable in the
next financial year. (Because the bill is not yet received from the KR Vendor)
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01-04-2018 Record the reversal entry for the provision made.

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Table 6.35
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To record the transactions of table 6.35, in the books of KRA Traders, first ensure that the required
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6
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Expenses Incurred Ledger

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Expenses Incurred A/c

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Name Enter as Expenses Incurred A/c
Table 6.36
Provision for Expenses Ledger
Provision for Expenses A/c
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Name Enter as Provision for Expenses A/c
Under Select as Provisions
Table 6.37
Activity: Create a party as KR Traders under sundry creditors
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Step 2: Recording Journal Voucher
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To record the Journal voucher in Tally.ERP 9, follow the steps given below:
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1. Go to Gateway of Tally > Accounting Vouchers > F7: Journal
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3. Debit the Expenses Incurred A/c and enter the amount, ₹ 15,000
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ED
4. Credit the Provision of Expenses A/c and amount will get captured automatically.
5. Enter the narration in the Narration field
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Figure 6.34 Journal Voucher Creation Screen (Provisional Entry)

After recording the entry check the following reports:
 Balance Sheet: Go to Gateway of Tally > Balance Sheet > the amount will be reflected
as a Current Liability. To check the exact provision amount, press the Enter key on Current
Liability Account.
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 Profit & Loss Account: Go to Gateway of Tally > Profit & Loss Account > the amount
will be reflected under Indirect Expenses Account. To check the exact Expense Incurred
amount, press the Enter key on Indirect Expenses Account
Step 3: Recording Reversal Entry in the New Financial Year
1. Go to Gateway of Tally > Press Alt+F2: Period.
2. Enter date as 01-04-2018 to 31-03-2019 (Changing the Financial Year) and Accept.
Note: After the financial year is changed in Tally.ERP 9, you cannot view the data which belongs to previous
year, but the closing balance of the previous year will automatically be carried forward to the new financial year as
opening balance.
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3. Go to Gateway of Tally>Accounting Vouchers > Press F7: Journal
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4. Press F2: Date and change the date as 01-04-2018
5. Debit the Provision for Expenses A/c Ledger and enter the amount as ₹ 15,000
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6. Credit the Expense Incurred A/c Ledger and the amount will get captured automatically
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Figure 6.35 Journal Voucher Creation Screen (Reversal Entry)

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After recording the entry check the following reports:
 Balance Sheet: Go to Gateway of Tally > Balance Sheet > the amount will be reversed
(i.e., amount will not appear in the balance sheet)
 Profit & Loss Account: Go to Gateway of Tally > Profit & Loss Account > the amount
will be nullified.
Activity: Go to Gateway of Tally and press Alt+F2: Change Period and set the financial period as 01-04-2017
to 31-03-2019.
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6.8 Recording Inventory Vouchers
A voucher is a document that contains details of a financial transaction and is required for
recording the same into the books of accounts.
Inventory management is an integral part that helps in smooth running of the business and in
determining the deficiency/excess of stock at any time. Inventory management implies
maintaining an accurate record of incoming and outgoing stock.
Inventory vouchers record the details of receipt and issue of goods/stock, movement of goods,
transfer of stock between locations, and physical stock adjustments
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Without inventory vouchers, it would be impossible to record the movement of inventory when
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an accounting transaction has not taken place.
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Business Scenario
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TRA Traders expanded its business and now deals in Mobile Phones. The company would like to
deliver stock to their customer. The sales invoice will be sent on a later date. In this scenario, an
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inventory voucher recording movement of inventory but not affecting accounts is required.
The Inventory Vouchers are: ED
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
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Receipt Note Voucher (Alt+F9)

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 Delivery Note Voucher (Alt+F8)

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 Rejections In Voucher (Ctrl+F6)

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 Rejections Out Voucher (Alt+F6)

 Material Out Voucher (Ctrl+J)
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 Material In Voucher (Ctrl+W)

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 Stock Journal Voucher (Alt+F7)

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 Physical Stock Voucher (Alt+F10)

00
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These vouchers can be altered to suit a company’s requirements. Tally.ERP 9 also allows creation
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of new inventory voucher types.

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Let us illustrate the different types of inventory transactions that take place in a real-time business
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environment and the accounting procedure in Tally.ERP 9.

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6.8.1 Receipt Note Voucher

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Receipt note is used for recording goods received from the supplier or receipt of goods/items at
stores. It is also called as GRN i.e. Goods Receipt Note. Receipt Note updates only inventory
books and does not affect accounting books.
Example: Purchase Register, Party Accounts and other Subsidiary Books.
Illustration 19: Recording a receipt note voucher in Tally.ERP 9
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01-06-2018 Voucher: Receipt Note
KRA Traders received the following goods from JJ Enterprises with the
reference number 1 for ₹ 10,000 each.

Samsung 32GB 10 Nos 10,000 1,00,000
Mobile Phone
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Table 6.38
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Step 1: Configuration of Receipt Note
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To configure Receipt Note voucher, follow the steps given below:
1. Go to Gateway of Tally > F11: Company Features > F2: Inventory Features
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2. Set the option Use tracking numbers (enables delivery and receipt notes ) to Yes
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The Inventory Features screen with the required options enabled, appears as shown in the figure
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6.36
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Party Ledger
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2. Enter Name as JJ Enterprises
3. Select Sundry Creditors from the List of Groups
The party Ledger Creation screen appears as shown in the figure 6.37:
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Figure 6.37 Party Ledger Creation screen
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Activity: In Purchase A/c Ledger alteration, set the option – Inventory values are affected to Yes
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Stock Item
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Go to Gateway of Tally > Inventory Info. > Stock Items > Under Single Stock Item >
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Create
8

11

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Units Select as Nos
Opening Balance Leave it Blank
Table 6.39
The Stock Item Creation Screen appears as shown in the figure 6.38:
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Figure 6.38 Stock Item Creation- Samsung 32GB Mobile Phone
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Step 3: Recording Receipt Note Voucher
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To record the Receipt Note voucher in Tally.ERP 9, follow the steps given below:
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1. Go to Gateway of Tally > Inventory Vouchers > Alt+F9: Receipt Note

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2. From the Inventory Voucher Creation screen, click F12: Configure.

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3. Set the option Enable supplementary details to Yes.

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The Receipt Note Standard Configuration screen appears as shown in the figure 6.39:
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Figure 6.39 Receipt Note Standard Configuration screen

Note: By enabling the option Enable supplementary details to Yes, you will be able to get the Supplier
Details and Order Details while passing the Receipt Note Voucher.
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6. In the Party A/c name field, select JJ Enterprises
7. Provide the Other Reference(s) as GRN 01 in the Supplementary details screen.
8. Select the Purchase A/c ledger
9. Under Name of Stock Item select Samsung 32GB Mobile Phone
10. In the Item Allocations screen, Select Not Applicable from the List of Tracking
Numbers.
11. Enter Quantity as 10 Nos, Rate as ₹ 10,000 and the amount will get captured
automatically as ₹ 1, 00,000.
The completed Receipt Note Voucher Creation screen appears as shown in the figure 6.40:
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Figure 6.40 Receipt Note Voucher Creation screen

6
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The receipt note transaction will affect in stock summary, and all inventory books. If the option
integrate accounts with inventory is enabled in F11:F1:Accounting feature, then the stock value
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will reflect in accounting reports like balance sheet, profit & loss account, trial balance etc.
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6.8.2 Delivery Note Voucher

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Delivery note is used for recording goods delivered to the customer or deliver of goods/items
from stores. It is also called as DC i.e. Delivery Challan. Delivery Note does not affect accounting
books.
Illustration 20: Recording a Delivery Note Voucher in Tally.ERP 9
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05-06-2018 Voucher: Delivery Note
KRA Traders delivered following goods to Manya Enterprises with the reference
number – 1 for ₹ 15,000 each.

Samsung 32GB 05 Nos 15,000 75,000
Mobile Phone
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Table 6.40
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To record the transaction in the books of account, first ensure that the required ledgers are created
in Tally.ERP 9.
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Activity: Create the following Ledger Accounts in the books of KRA Traders:
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1) Create Manya Enterprises (Customer) under Sundry Debtors
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2) Alter Sales A/c and set Inventory values are affected to Yes
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Step 2: Recording Delivery Note Voucher

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To record the Delivery Note voucher in Tally.ERP 9, follow the steps given below:
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1. Go to Gateway of Tally > Inventory Vouchers > Alt+F8: Delivery Note

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6
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4. In the Party A/c name field, select Manya Enterprises

5. In the Party Details screen, provide the details as shown below:
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 Order Details
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o Order No(s) : DC 1 and date 05-06-2018

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o Mode/Terms of Payment : Cheque Payment

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o Other Reference(s) : DC 1 to Manya Enterprises

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o Terms of Delivery : Delivery and payment on same day

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 Despatch Details
o Despatch Doc No.: 01
o Despatch through : Truck
o Destination : Mysore
The Party Details screen displays as shown in the figure 6.41
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Figure 6.41 Party Details screen (Delivery Note)
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6. Select the Sales A/c ledger
7. Under Name of Stock Item select Samsung 32GB Mobile Phone
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8. In the Item Allocations Screen, Select Not Applicable from the List of Tracking
Numbers.
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9. Enter Quantity as 5 Nos, Rate as ₹ 15,000 and the amount will get captured automatically
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as ₹ 75,000.
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The completed Delivery Note Voucher Creation screen appears as shown in the figure 6.42:
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Figure 6.42 Delivery Note Voucher Creation screen

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The delivery note transaction will affect in stock summary, and all inventory books. If the option
6.8.3 Rejection In Voucher

Rejections In Voucher is used to record the goods that are rejected and returned by the customer
before recording the sales invoice.
Illustration 21: Recording a rejection in voucher in Tally.ERP 9
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07-06-2018 Voucher: Rejection In
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KRA Traders received following goods from Manya Enterprises for ₹ 15,000
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against the goods delivered on 05-06-2018.
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Samsung 32GB 01 Nos 15,000 15,000
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Mobile Phone
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Table 6.41
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Step 1: Configuration of Rejection In

6
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To configure Rejection In voucher, follow the steps given below:

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1. Go to Gateway of Tally > F11: Company Features > F2: Inventory Features > Enable
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the option Use rejection inward and outward notes to Yes

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The Inventory Features screen with the required options enabled, appears as shown in the figure
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6.43
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Step 2: Recording Rejection In Voucher ED
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To record the Rejection In voucher in Tally.ERP 9, follow the steps given below:
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1. Go to Gateway of Tally > Inventory Vouchers > Ctrl+F6: Rejection In

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3. In the Ledger Account field, select Manya Enterprises

4. In Customers Name and Address field, Manya Enterprises will capture automatically
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5. Under Name of Item select Samsung 32GB Mobile Phone

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6. In the Item Allocations Screen, Select Not Applicable from the List of Tracking
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Numbers.
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as ₹ 15,000.
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The completed Rejection In Voucher Creation screen appears as shown in the figure 6.44:
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Figure 6.44 Rejection In Voucher Creation screen
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The rejection in transaction will affect in stock summary, and all inventory books ED
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6.8.4 Rejection Out Voucher

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Rejections Out Voucher is used to record the goods that are rejected and returned to a supplier
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before recording the purchase bill.

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Illustration 22: Recording a rejection out voucher in Tally.ERP 9

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6
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10-06-2018 Voucher: Rejection Out

00
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As on 10-06-2018, KRA Traders Rejected 3 Nos of Samsung 32GB Mobile

Phones received from JJ Enterprises for ₹ 10,000 against the goods received on
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01-06-2018
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Samsung 32GB Mobile Phone 3 Nos 10,000 30,000
Table 6.42
Step 1: Recording Rejection Out Voucher
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To record the Rejection Out voucher in Tally.ERP 9, follow the steps given below:
1. Go to Gateway of Tally > Inventory Vouchers > Alt+F6: Rejection Out
3. In the Ledger Account field, select JJ Enterprises
4. Supplier’s Name and Address field, JJ Enterprises will capture automatically
5. Under Name of Item select Samsung 32GB Mobile Phone
6. In the Item Allocations screen, select Not Applicable from the List of Tracking
Numbers.
as ₹ 30,000.
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The completed Rejection Out Voucher Creation screen appears as shown in the figure 6.45:
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Figure 6.45 Rejection Out Voucher Creation screen

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The rejection out transaction will affect in stock summary, and all inventory books
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To view a Stock Summary Report,

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1. Go to Gateway of Tally > Stock Summary> Press Alt+F1 for detailed mode.
The Stock Summary screen appears as shown in the figure 6.46:
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Figure 6.46 Stock Summary Report
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2. Press Enter on Samsung 32GB Mobile Phone
3. You will get Stock Item Monthly Summary, Select June Month.
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4. Press Enter to view the Stock Vouchers
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The Stock Vouchers screen appears as shown in the figure 6.47:

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Figure 6.47 Stock Vouchers Report

The stock vouchers report displays (-) 1 Nos towards the rejection in entry passed in the outward
side of the report with (-) 15,000, because the stock is rejected by the customer Manya Enterprises.
The closing stock in the godown raises from 5 Nos to 6Nos after passing the rejection in voucher.
Similarly, (-) 3Nos displays in the inwards column for the rejections out entry made, because the
stock was rejected by KRA Traders and returned to supplier JJ Enterprises. The Closing stock in
the godown decreases from 6Nos to 3Nos after passing the Rejection Out voucher.
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6.8.5 Stock Journal Voucher
Stock Journal Voucher is used to transfer the goods from one location to another. The quantity
of stock remains the same, but the location (godown) changes. Stock journal voucher can also be
accounted for wastage or shortage of stock to increase or decrease in the Stock Item.
Illustration 23: Recording a Stock Journal Voucher in Tally.ERP 9
15-06-2018 Voucher: Stock Journal
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As there is shortage in stock in Delhi Location, KRA Traders transferred the
following goods from Bengaluru Location to Delhi Location.
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AR
Samsung 64GB Mobile Phone 20 Nos 15,000 1,00,000
H
ED
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Table 6.43
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Stock Item
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1. Go to Gateway of Tally > Inventory Info. > Stock Items > Under Single Stock Item
00
> Create
00

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8
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Units Select as Nos

Opening Balance Leave it Blank.
Table 6.44
Activity: In F11: Company Features >F2: Inventory Features > Enable the option Maintain
multiple Godowns
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Godown
Bengaluru Location

Name Enter as Bengaluru Location
 Allow storage of materials: This option is used for deciding whether storage of materials is
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allowed in this Godown or not. This option will appear only if the option Allow advanced
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entries in master is enabled in F12: Configuration, while creating stock items. If the option
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is not visible, then by default this option will be set to Yes.
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 Our Stock with Third Party: Set this option to Yes, if the godown is used to account the
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company's goods lying with the third party.
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 Third Party Stock with us: Set this option to Yes, if the godown created is used to account
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the goods received from third party and the stock of third party should not affect the company
stock value.
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Table 6.45
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Delhi Location
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Name Enter as Delhi Location

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Table 6.46
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Activity: Record the following transaction in the books of KRA Traders.

00
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KRA Traders purchased following stock items from JJ Enterprises, with supplier invoice
8
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number 6 and stored in Bengaluru Location.

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Samsung 64GB Mobile 100 Nos 15,000 15,00,000

Phone
Table 6.47
Step 2: Recording Stock Journal Voucher
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To record the Stock Journal voucher in Tally.ERP 9, follow the steps given below:
1. Go to Gateway of Tally > Inventory Vouchers > Alt+F7: Stock Journal
3. Select Samsung 64GB Mobile Phone under Name of Item from the List of Items,
which needs to be transferred under Source(Consumption)
4. Select the Godown as Bengaluru Location from the List of Godowns
5. Enter Quantity as 20 Nos, Rate ₹ 15,000 and the Amount ₹ 3, 00,000 will capture
automatically.
6. Press Enter
7. Select Samsung 64GB Mobile Phone under Name of Item from the List of Items, to
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which goods are being transferred under Destination (Production).
8. Select the Godown as Delhi Location from the List of Godowns
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9. Enter Quantity as 20 Nos, Rate ₹ 15,000 and the amount ₹ 3, 00,000 will get captured
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automatically
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The completed Stock Journal Voucher Creation screen appears as shown in the figure 6.48:
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Figure 6.48 Stock Journal Voucher Creation Screen

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The stock journal transaction will affect in stock summary, and all inventory books. If the option
6.8.6 Physical Verification of Stocks

Physical Stock Voucher is used for recording the actual stock which is verified or counted. It
happens when the stocks in books of accounts and the physical stock do not match.
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Example: If KRA Traders has 80 Nos of Samsung 64GB Mobile Phones as on 15-06-2018 in
Bengaluru Location godown and. On 20-06-2018, while physically counting it was found that the
stock in Bengaluru was 75 Nos.
In the above scenario, stock recorded in books of accounts is 80 Nos and while physically counting
the stock was 75 Nos. Remaining 5 Nos of stock, there is a shortage in Bengaluru Location godown
found during Physical verification should be accounted in the books of accounts.
Considering the above example, will illustrate the same in Tally, using Physical Stock Voucher.
Illustration 24: Recording a Physical Stock Voucher in Tally.ERP 9
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20-06-2018 Voucher: Physical Stock
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Physical Verification done on 20-06-2018 and found that there is only 75 Nos
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of Samsung 64GB Mobile Phones in Bengaluru Location.
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Name of Item Godown Quantity
Samsung 64GB Mobile
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Bengaluru Location 75 Nos
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Phones
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Table 6.48
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Step 1: Recording Physical Stock Voucher

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To record the Physical Stock Voucher in Tally.ERP 9, follow the steps given below:
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1. Go to Gateway of Tally > Inventory Vouchers > Alt+F10: Physical Stock Voucher
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3. Under Name of Item select Samsung 64GB Mobile Phones

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4. Select Godown as Bengaluru Location

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5. Enter Quantity as 75 Nos.

00
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The completed Physical Stock Voucher Creation screen appears as shown in the figure 6.49
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Figure 6.49 Physical Stock Voucher Creation Screen
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The physical stock entry will affect in Stock Summary, Physical Stock Register and all ED
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Inventory Reports.
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Godown Summary Report to Display Physical Stock Value.

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To view a Stock Summary Report to display the physical stock values in the particular godown,
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1. Go to Gateway of Tally > Stock Summary> Press F9: Inventory Reports > Select
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Godown Summary.
2. Press F2:Period and enter the required period
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The Godown Summary screen appears as shown in the figure 6.50:

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Figure 6.50 Godown Summary Screen
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3. Press Enter on Bengaluru Location
4. Press Enter on Samsung 64GB Mobile Phone
Samsung 64GB Mobile Phone Stock Quantity displays 45 Nos as shown in the figure 6.51
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Figure 6.51 Godown Summary screen (Samsung 64GB Mobile Phone)

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5. Press Enter to get the Godown Monthly Summary

6. Select June Month and to display the Godown Vouchers screen to get the Physical Stock
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Voucher as shown in the figure 6.52:

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Figure 6.52 Godown Vouchers Screen (Samsung 64GB Mobile Phone)

Here, the stock summary is displayed in detail for the particular godown (Bengaluru Location) to
have better visibility in Physical Stock quantity.
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Note: Physical Stock quantity will be displayed as actual stock in the Stock Summary from the date of entry of the
Physical Stock.
Physical Stock Register

This register summarises the stock adjustments made during the reporting period. An analysis of
the stock recorded in the register gives us an insight into the causes of discrepancies to ensure that
timely action is taken. Physical stock register displays a list, showing the number of vouchers in each
month
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To view a Physical Stock Register Report,
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1. Go to Gateway of Tally > Display> Inventory Books > Physical Stock Register >
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Press Enter on June month transaction
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The Physical Stock Voucher Register screen appears as shown in the figure 6.53:
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Figure 6.53 Physical Stock Voucher Register screen

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Conclusion
In this chapter we have learnt, how day-to-day business transactions are recorded in Tally.ERP
9. The instant report generation feature of Tally makes it possible to check out the impact of each
transaction in the books of a business concern and helps in tracking the status of inventory and
movement of goods, leading to efficient logistics and supply chain management.
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Key Takeaways
 A voucher is a document containing the details of a financial transaction.
 Any transaction indicating the transfer of funds from cash account to cash account, cash
account to bank account; bank account to cash account and bank account to bank account
is referred to as a Contra Entry.
 In Tally.ERP 9, a Payment Voucher is used to record all transactions involving payments
made by cash or bank.
 In Tally.ERP 9, a Receipt Voucher is used to record transactions involving receipt of cash
and through bank.
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 In Tally.ERP 9, a Sales Voucher is used to record entries when the company sells some
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goods to the customers either by cash, cheque or on credit basis.
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 In Tally.ERP 9, a Credit Note entry is passed to account for return of goods sold, generally
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issued by the seller to the buyer.
 In Tally.ERP 9, a Purchase Voucher is used when a company purchases some goods from
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its suppliers on cash, cheque or credit basis.
 In Tally.ERP 9, a Debit Note entry is passed for purchase returns or for any change in
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price consideration
 You can generate Proforma Invoice in Tally.ERP 9, generally issued by the seller to buyer
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as an estimated invoice.
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 You can account Non-Accounting vouchers in Tally, which are used for provisions.
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 You can account all inventory vouchers, Receipt Note, Delivery Note, Rejection in and
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out, Stock Journal and Physical Stock voucher.

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Shortcut Keys
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F2  From any Accounting voucher creation or alteration

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 To Change the Date

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F4  From accounting voucher creation screen

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 To access a Contra Voucher

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 To access a Payment Voucher

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 To access a Receipt Voucher
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 To access a Journal Voucher
 To access a Sales Voucher
 To access a Purchase Voucher
Ctrl+F8  From accounting voucher creation screen
 To access a Credit Note Voucher
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 To access a Debit Note Voucher
Alt+F9  From inventory voucher creation screen
 To access a Receipt Note Voucher
 To access a Delivery Note Voucher
 To access a Stock Journal Voucher
 To access a Rejections In Voucher
Ctrl+F6  From inventory voucher creation screen
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 To access a Rejections Out Voucher
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Ctrl+L  From accounting voucher creation/alteration screen
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 To make any voucher as Optional
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 To access Memorandum Voucher
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Alt+P  From accounting voucher creation/alteration screen
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or any reports from Tally.
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 To Print any invoice or reports
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Practise Exercises
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1. Which of the following does not qualify as a contra entry?

a. Cash account to bank account
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b. Purchasing furniture with cash

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c. Bank account to cash account

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d. One bank account to another bank account

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2. Tally has eliminated the need to first record routine transactions in a journal. In Tally.ERP
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9, a Journal Voucher is used for recording:

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a. Adjusting entries
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b. Unique financial transactions

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c. None of the above

d. Both (a) and (b)
3. Credit note is generally issued by a ___________________.

a. Seller to the buyer
b. Buyer
c. Customer Fixed Assets
d. None of Them
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4. Nandini Joshi started Universal Solutions by bringing in cash of ₹ 150,000. The correct
journal entry for the transaction is:
a. Cash Dr. 150,000; To Nandini Joshi Capital A/c Cr. 150,000
b. Bank Dr. 150,000; To Cash A/c Cr. 15,0000
c. Nandini Joshi Capital Dr. 150,000; To Cash A/c Cr. 15,0000
d. Nandini Joshi Capital Dr. 150,000; To Bank A/c Cr. 15,0000
5. Nandini Joshi hired Meena Kumari as an Accountant on a monthly salary of ₹ 10,000 in

her company. Which of the following accounting voucher entries will you pass in
Tally.ERP 9 for the hiring activity?
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a. Record a receipt voucher entry
b. Record a payment voucher
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c. Record a contra Voucher
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d. Record no voucher entry as it is not an accounting transaction
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6. Match the following transactions against the appropriate voucher details:
1 Made a payment of ₹ 15,000 to Sundry a ED
Debit Note Voucher
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Creditors.
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2 Received an amount of ₹ 15,000 from b Contra Voucher

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RK Vendors.
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3 Deposited Cash of ₹ 25,000 in Bank c Payment Voucher

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4 Damaged goods were returned to d Receipt Voucher

suppliers.
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a. 1-a, 2-b, 3-c, 4-d

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b. 1-c, 2-b, 3-a, 4-d

c. 1-a, 2-c, 3-d, 4-b
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d. 1-c, 2-d, 3-b, 4-a

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7. A Provision entry is recorded at the end of the accounting period.

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a. True
b. False
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8. In case of credit sales return, debit the Sales Ledger and credit the Party Ledger/Sundry
Debtors Ledger.
a. True
b. False
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9. In case of a Provision entry for expense, Debit the expense ledger and credit the Provision
for Expense Ledger.
a. True
b. False
10. Proforma Invoice cannot be recorded in Tally.ERP 9

a. True
b. False
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11. Referring to the screenshot shown in the figure 6.29, which of the following entry is being
recorded?
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AN
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Figure 6.54 Accounting Voucher Creation

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a. Sales Entry as Optional.

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b. Purchase Entry as Optional

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c. Sales Entry as Regular

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d. Sales Return Entry as Optional

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Chapter 7
Accounts Receivable and Payable
Management
Learning Objectives
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 Maintain party-wise bill details in Tally.ERP 9
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 Keeping track of receivables and payables
 Set-off bills using the different methods of adjustment
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 Make partial and full payment entries
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 Record credit transactions, and
 Manage outstanding
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 Credit limit
 Payment performance of debtors.
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7.1 Introduction
Efficient management of business requires systematic maintenance of all transactions. As the
number of business transactions increases, it becomes very difficult in keeping a track of the details
of creditors, debtors, pending bills and over dues. The bill-wise details feature in Tally.ERP 9
enables tracking of each and every transaction and efficient management of payables and
receivables.
7.2 Accounts Payable and Receivable

Accounts Payable: Accounts Payable is the amount payable to suppliers or vendors for goods
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or services provided on credit. Accounts Payable is credited in the books of account and it is
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reported as current liability in the company’s balance sheet.
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Example: Bay Traders purchased goods on credit for ₹10,000 from TT Traders on 1st July 2017
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and agreed to pay the amount on 15th July 2017. Bay Traders receives an invoice from TT Traders
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stating that the amount of ₹10,000 is due on 15th July 2017.
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After checking the invoice, Bay Traders will record the details in their books of accounts by
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debiting the expense account/purchase account and crediting the accounts payable
account/sundry creditors account.
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Accounts Receivable: Accounts Receivable is the amount due from customers to the business
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concern for goods sold or services rendered. Accounts Receivables are debited in the books of
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account; it is shown as a current asset in a company’s balance sheet.

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Example: Bay Traders sold goods on credit for ₹20,000 to Shabnam Traders on 1st July 2017. The
customer is allowed a credit period of 30 days to pay for the purchases.
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Bay Traders will issue the invoice to Shabnam Traders stating that the payments have to be made
within 30 days from the date of purchase i.e., Payment should be made on or before 30th July 2017.
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Once the invoice is issued, Bay Traders will account the entry in their books of account by debiting
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the accounts receivable account/sundry debtors account and crediting the income account/sales
Account.
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7.3 Maintaining Bill-wise Details

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The Bill-wise details feature in Tally.ERP 9 enables tracking of transactions and efficient
management of payables and receivables. Once transactions are recorded in Tally.ERP 9, reports
can be generated instantaneously. This feature, helps in tracking outstanding bills and in sending
reminders on time to customers, thus managing outstandings efficiently.
Bill-wise detail help us to maintain our sundry creditors and debtors bills systematically and we can
find the outstanding amount, due date of each bill and also we can allocate payments/receipts to
the correct invoice to maintain an accurate account of outstanding.
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Dependency on business owner reduces as user can refer the outstandings statement and know if
he is liable to pay or receive. Without Bill wise, tracking pending bills will be difficult to user. This
will result in adjusting wrong bill.
In Tally.ERP 9, four types of reference details can be entered for transactions. These reference
details, called Methods of Adjustments are New Ref, Agst Ref, Advance and On Account.
Method of Adjustment Used for
When a Purchase/Sales invoice is recorded, this method of

adjustment is selected to give the transaction a reference number
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with which it can be tracked when required.
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If we are making sales/purchase to the party for the first time,
New Ref select New Ref
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For example, if two purchase vouchers are recorded with the
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New Reference numbers 01 and 02, while recording the payment
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entry, the reference numbers will help in keeping track of the
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purchase against which payments are being made.
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When payment is received or made against any existing bill or
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against earlier advance, select Against ref for which the bill should
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be adjusted.
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Agst Ref For example, if New Reference number 02 is provided in a

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purchase voucher, then while recording a payment voucher, you

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will be able to track the particular purchase bill towards which the
payment is being made, and also you will get the list of purchases.
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Advance receipts and payments transactions are recorded using

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Advance this method of adjustment as its helps in tracking the transaction

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for which payments or receipts are made.

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On account is selected when one is unable to mark a payment or

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a receipt against any specific pending references.

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On Account For Example, when the party makes lump sum payment (a huge
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amount), the user may not be aware whether it has to be treated

as new ref or against ref. In these scenarios select On Account.
So that the amount can be classified later.
Table 7.1
Creating a reference is like writing down an entry in a notebook to use the references in future.
References remember on your behalf keeps the track of due payments/receipts. To distinguish
between references you need to give unique reference numbers.
Let us now use the method of adjustments in transactions to understand them better:
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Business Scenario
Bay Traders, Bengaluru deals in food items like Rice, Wheat flour, Ragi and Cooking oil. The
company makes frequent credit purchases and ensures that all payments are made within the due
date. It makes sales on credit basis to different dealer with the credit period of thirty days provided
to all debtors.
Before proceeding with the illustrations on using the bill-wise details feature, based on the above
Business Scenario, let us create the company in Tally.ERP 9 and activate the bill-wise details feature
for the company.
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Activity: Create a company in Tally.ERP 9 with the following details:
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Company Name: Bay Traders
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Address: No 123, 5th Block, Near Jambu Circle, Jayanagar, Bengaluru - 560041
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Country: India
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State: Karnataka
Financial Year: 01-04-2017 to 31-03-2018 ED
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7.4 Activation of Maintaining Bill-wise Details

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Feature
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In order to track the details of bills payable and receivable, the feature bill-wise details has to be
enabled in Tally.ERP 9.
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To enable the feature maintain bill-wise details in Tally.ERP 9, follow the steps given below:
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1. Go to Gateway of Tally > F11: Company Features >F1: Accounting Features

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2. Set the option - Maintain bill-wise details to Yes

3. Set the option - For non - trading accounts also to No, if you require to extend the
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tracking to non-trading accounts, then enable the option

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Note: Bill wise details for non-trading accounts is useful when one needs to track either an instalment to be paid
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or a loan outstanding to be received over a certain period of time

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The Accounting Features screen appears as shown in the figure 7.1:

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Figure 7.1 Accounting Features Screen
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Note: On after configuring Maintain bill wise details option as shown in the figure 7.1,, then Maintain
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balances bill-by-bill will be enabled by default in all the ledgers created under the groups sundry debtors and
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sundry creditors the option

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7.5 New Reference

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When a purchase/sales invoice is recorded, New Reference is selected to give the transaction a
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reference number with which it can be tracked as and when required.

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For example, if two purchase vouchers are recorded with New reference numbers as 01 and 02,
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then while recording a payment entry, the reference numbers will help to keep a track of purchase,
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against which the payment is being made.

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Illustration 1: Use of new reference for recording purchase and sale transactions and
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checking of payable and receivable reports.

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Pass the following transactions in the book of Bay Traders:

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Date Particulars
Purchased following stock items from the Saha Traders on credit against the Ref
No. ST/01 and agreed to pay the amount within 15 Days from the date of
purchase.
Name of the Stock Item Quantity Rate per (₹) Amount (₹)
Basmati 455 (W) 500 Kgs 100 50,000
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Basmati 455 (B) 500 Kgs 110 55,000
Dehradooni Basmati (W) 1,000 Kgs 100 1,00,000

Sold the following Stock Items to MM Traders on credit and agreed to pay the
amount within 30 Days from the date of Sales with the Ref No. BA/01/MM.
Basmati 455 (W) 250 Kgs 110 27,500
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Basmati 455 (B) 250 Kgs 120 30,000
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Table 7.2
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To record the transactions of table 7.2 in the books of Bay Traders, first ensure that the required
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Purchase Ledger
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Purchase A/c
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Inventory values are affected Set to Yes

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Table 7.3
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Sales Ledger
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Sales A/c
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Table 7.4
Party Ledger
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Saha Traders
Name Enter as Saha Traders
Under Select as Sundry Creditors

Maintain balances bill-by-bill Set to Yes
Default credit period Enter as 15 Days
Check for credit days during voucher entry? Set to Yes
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Inventory values are effected? Set to No
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Maintain balances bill-by-bill option should be enabled for tracking pending bills. If the option is
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disabled, it will not be possible to track bills while making or receiving payments.
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Default credit period: Enter the due date i.e., the credit days allowed by the supplier to make the
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payment. If the credit period is left blank then while recording the entry enter the credit period.
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Check for credit days during voucher entry: By setting this option to Yes, you can keep track of
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the credit period allowed to parties, payables to Sundry Creditors and receivables from Sundry Debtors.
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Table 7.5
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M M Traders
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Name Enter as M M Traders

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Under Select as Sundry Debtors

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Default credit period Enter as 30 Days

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Check for credit days during voucher entry? Set to Yes

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Table 7.6

Stock Items
Go to Gateway of Tally > Inventory Info. > Stock Items > Create
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Basmati 455 (W)
Name Enter as Basmati 455 (W)
Units Select as Kgs ( Press Alt+C to create the
Unit of Measure)
Table 7.7
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Basmati 455 (B)
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Name Enter as Basmati 455 (B)
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Units
ED Select as Kgs
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Table 7.8
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Dehradooni Basmati (W)

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Name Enter as Dehradooni Basmati (W)

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Units Select as Kgs

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Table 7.9
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Note: Can create the stock item at one go from Multi Stock Item menu
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Step 3: Recording Purchase Transaction

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3. Press Ctrl+V from voucher mode to enter in Item Invoice Mode
4. Press F12: Configure and set the option Use defaults for bill allocations to No
Note: If the option Use defaults for bill allocations is set to Yes, you will not be able to track bills or
check bill-wise details
5. Enter the Supplier Invoice No. as ST/01 and the date will capture automatically.
6. In the Party A/c name field select Saha Traders
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7. In the Purchase ledger field select Purchase A/c ledger.
Note: Once the cursor moves to purchase ledger field, if the purchase ledger is not appearing then alter the purchase
ledger and make sure the option Inventory values are affected is set to Yes.
8. Under Name of Item field, select Basmati 455(W), and enter the quantity as 500 Kgs,
rate as ₹ 100 per Kgs and the amount ₹ 50,000 will capture automatically.
9. Press Enter and select the second stock item, Basmati 455 (B)and enter the quantity as
500 Kgs, rate as ₹ 110 per Kgs and the amount ₹ 55,000 will capture automatically
10. Press Enter and select the third stock item, Dehradooni Basmati (W) and enter the
quantity as 1,000 Kgs, rate as ₹ 100 per Kgs and the amount ₹ 1,00,000 will capture
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automatically
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11. Select End of List twice and then the total amount field will get selected
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12. Press Enter to get the Bill-wise Details screen and fill the details given below:
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 In the Type of Ref field select New Ref.
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 In the Name field by default the Supplier Invoice number will be shown, change
it, if required
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 In the Due Date, or Credit Days field the credit days and date will be filled
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automatically. It is the credit period which you have entered while creating the
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party ledger
 The amount will be captured automatically
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Note: By default, the amount will be credited, because as per the accounting rule Account Payables are
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credited.
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The Bill-wise Details screen for Saha Traders appears as shown in the figure 7.2:
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Figure 7.2 Bill-wise Details Screen for Saha Traders
13. Press Enter and save the Bill-wise Details screen
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Note: If the screen of figure 7.2 is not appearing press F12: Configure from the voucher creation screen and
set the option Use default for bill allocation to No
14. Enter the narration in Narration field.
The Purchase Invoice screen appears as shown in the figure 7.3:
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Figure 7.3 Purchase Invoice Screen

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After recording the purchase transaction, the details are reflected in the bills payable report as the
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payment to Suppliers is still pending.

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To check the Bills Payable/Outstanding report:

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Go to Gateway of Tally > Display > Statements of Accounts > Outstandings > Payables
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Press Alt+F1 to view the report in detailed mode.

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The Bills Payable/Outstanding Report appears as shown in the figure 7.4:

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Figure 7.4 Bills Payable/ Outstanding Report
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The report of figure 7.4, gives you the details of total bills payable to all suppliers along with
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transaction details like date, ref. no, party name, pending amount and overdue by days.
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The total amount payable by the company is ₹2, 05,000 which is payable to Saha Traders.
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Step 4: Recording Sales Transaction

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3. Press Ctrl+V from voucher mode to enter in Item Invoice Mode

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4. Enter the Reference no: as BA/01/MM

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5. In the Party A/c name field select M M Traders

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6. You will get the Party Details screen, enter the despatch details, order details and buyer
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details like name and address

7. In the Sales ledger field select Sales A/c ledger.
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8. Under Name of Item field, select Basmati 455(W), and enter the quantity as 250 Kgs,
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rate as ₹ 110 per Kgs and the amount ₹ 27,500 will capture automatically.
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9. Press Enter and select the second stock item, Basmati 455 (B)and enter the quantity as
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250 Kgs, rate as ₹ 120 per Kgs and the amount ₹ 30,000 will capture automatically
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 In the Name field, enter as BA/01/MM
 In the Due Date, or Credit Days field the credit days and date will be filled
automatically. It is the credit period which you have entered while creating the
party ledger
 The amount will be captured automatically
Note: By default, the amount will be debited, because as per the accounting rule Account Receivables are debited.
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The Bill-wise Details Screen for M M Traders appears as shown in the figure 7.5:
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Figure 7.5 Bill-wise Details Screen for M M Traders
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Note: If the screen of figure 7.5 is not appearing press F12: Configure from the voucher creation screen and
set the option Use default for bill allocation to No
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The Sales Invoice screen appears as shown in the figure 7.6:

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Figure 7.6 Sales Invoice Screen
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After recording the sales transactions as shown in figure 7.6, the details are reflected in the bills
receivables report because the customer has not yet made any payment to the company.
To check the Bills Receivable/Outstanding report:
Go to Gateway of Tally > Display > Statements of Accounts > Outstandings > Receivables
Press Alt+F1 to view the report in detailed mode.
The Bills Receivables /Outstanding Report appears as shown in the figure 7.7:
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Figure 7.7 Bills Receivable/ Outstanding Report

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The report of figure 7.7, gives the details of Total Bills Receivables from the customers. It also
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displays the transaction details like date , ref. no, party name, pending amount and overdue by
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days.
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The total amount receivable from the customer M M Traders is ₹57,500.

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7.6 Against Reference

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This method of adjustment is used to track an existing transaction, which is already tagged with a
reference number. It helps in recording a payment voucher by selecting the reference number
against which the payment is made.
Illustration 2: Use of against reference for recording partial and full payment & receipt
transactions and checking of payable and receivable report.
Date Particulars
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Made a partial payment of ₹1, 05,000 to Saha Traders against the reference
number ST/01. The payment is made through Kotak Bank.
Received a Kotak cheque of ₹57,500 from MM Traders against the Bill
reference number BA/01/MM
Table 7.10
To record the transactions of table 7.10, in the books of Bay Traders, first ensure that the required
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Activity: Create Kotak Mahindra Bank ledger and provide debit opening balance of ₹5, 00,000
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Step 1: Recording Payment Transaction (Single Entry Mode)
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3. Press F12: Configure and set the option Use single entry mode for
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payment/receipt/contra vouchers? to Yes. Again press F12: Advanced and enable
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the option Preallocate bills for payment/receipt/contra voucher? to Yes

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Note: If the option- Use single entry mode for payment/receipt/contra vouchers? Is set to No,
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then the payment voucher will appear in the Debit and Credit mode (i.e., double entry mode).
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4. In the Account field, select Kotak Mahindra Bank

5. Under the Particulars field, select the party ledger from the List of Accounts to whom
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the payment has to be made, i.e., Saha Traders

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6. You will get the Bill-wise Details screen for Saha Traders with the details filled as given
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below:
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 In the Type of Ref field select Against Ref.

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 You will get the Pending Bills screen, which shows the total pending bills payable
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to Saha Traders along with the Reference name and Date details.
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 Select the bill name as ST/01 and press Enter

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 Due date, or Credit Days and amount will be captured automatically.

 When the cursor moves to the amount field, change the amount from ₹ 2,05,000
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to ₹ 1,05,000 ( Partial Payment )
The Bill-wise Details screen appears as shown in the figure 7.8:
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Figure 7.8 Bill-wise Details Screen with Against Reference
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 Press Enter and accept the Bill wise Details screen ED
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7. In the Bank Allocation screen, Transaction Type select as Cheque, and the amount will
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be captured automatically. Enter the cheque number in the Inst no. field and cheque
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date in the Inst date field and Accept the Screen.

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The Payment Voucher screen appears as shown in the figure 7.9:

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Figure 7.9 Payment Voucher Screen
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After making payment, check the Bills Payable/Outstanding report.
1. Go to Gateway of Tally > Display > Statements of Accounts > Outstandings >
Payables > press Alt+F1 to view the report in detailed mode.
2. Change the period as 01-07-2017 to 01-08-2017.
The Bills Payable/Outstanding report appears as shown in the figure 7.10:
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Figure 7.10 Bills Payable/Outstanding Report after making Payment

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In the report of figure 7.10, we will observe that the bill in the name of Saha Traders with Reference
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number as ST/01 shows 1, 05,000 instead of 2,05,000, because we have made a partial payment
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to Saha Traders.
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Step 2: Recording Receipt Transaction (Single Entry Mode)

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00

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3. Press F12: Configure and set the option Use single entry mode for
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payment/receipt/contra vouchers? to Yes.

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5. Under the Particulars field, select the party ledger from the List of Accounts from whom
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the payment is reveived, i.e., M M Traders

6. You will get the Bill-wise Details screen for M M Traders with the details filled as given
below:
 You will get the Pending Bills screen, which shows the total pending bills
receivable to M M Traders along with the Reference name and Date details.
 Select the bill name as BA/01/MM and press Enter
 Due date, or Credit Days and amount will be captured automatically with ₹
57,500
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Figure 7.11 Bill-wise Details Screen with Against Reference
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 Press Enter and select End of list

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Note: If the Bill-wise Details screen is not displayed on selecting the party ledger, Press F12: Configure
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twice and enable the option-Pre Allocate bills for payments/receipt/journal voucher in the
Payment Advanced Configuration> General Options.
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7. In the Bank Allocation screen, Transaction Type select as Cheque/DD, and the amount
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will be captured automatically. Enter the cheque date in the Inst date field and select the
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Bank to which the received Cheque belongs to, and accept the screen.
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8. Enter the Narration in narration field.

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The Receipt Voucher screen appears as shown in the figure 7.12:

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Figure 7.12 Receipt Voucher Screen
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9. Accept the Screen
After receiving payment from customer, check the Bills Receivables/Outstanding report.
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Go to Gateway of Tally > Display > Statements of Accounts > Outstandings > Receivables
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> In the bills receivable report, you will observe that of MM Traders with Reference number
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BA/01/MM is not visible. This is because payment has been received from MM Traders.
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7.7 Advance Reference

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The term Advance means income received in advance or payments made in advance by the
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company. Income received in advance will not be considered as income until the goods are
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delivered or services are rendered, as per accrual concept. Hence, all advance payments received
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will be considered as liabilities and all advance payments made will be considered as assets.
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Accrual Concept of Accounting: Under this concept, revenues are considered as income when
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the goods are delivered or services are rendered before collection of cash. If the cash is collected
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before rendering the service or delivering the goods, then the cash collected will not be considered
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as income earned.
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For Example: Assume Bay Traders, who deal in food products, receive advance/down payment
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of 20% from customers before selling the goods to them, and agree to deliver the goods within 10
days of receiving the advance payment.
As per the Accrual Concept, Bay Traders cannot show advance payment collected as revenue
earned because the goods are not delivered to the customer. Only after the goods are delivered to
the customer the revenue is considered as earned.
This method, helps in arriving at correct information about the profits earned by a company.
Similarly, whenever advance payments are made by the company to its suppliers, it is not
considered as an expense incurred, until the goods or services are received.
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In Tally.ERP 9, you can record advance receipts and payments by selecting the Method of
adjustment as Advance. You can also check the reports related to advance payments/receipts.
Illustration 3: Use of advance reference for recording advance receipts and payment
transactions and checking of outstanding reports
Date Particulars
Received advance payment of ₹2,200 from Superior Traders against Bill No.
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Adv/SUT/01
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Sold the following Stock Items on credit to Superior Traders with Invoice no
BA/02/SUT, where 20% of advance payment was made for this bill and agreed
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to pay rest of the amount after 10 days.
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Dehradooni Basmati Rice (W) ED

100 Kgs 110 11,000
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Made an advance payment of ₹20,000 to Saha Traders before making a purchase

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against Bill No. Adv/ST/01. The supplier has agreed to supply the Goods after
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10 days.
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Purchased the following Stock Items on credit from Saha Traders with Supplier
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invoice no. ST/03. Advance payment of ₹20,000 was made for this bill and
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agreed to pay the rest of the amount after 10 Days.

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Basmati 455 (B) 200 Kgs 110 22,000

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Table 7.11
To record the transactions of table 7.11 in the books of Bay Traders, first ensure that the required
Party Ledger
Superior Traders
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Name Enter as Superior Traders

Default credit period Leave it Blank
Check for credit days during voucher entry? Set to No
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Default credit period: It can be entered at the time of creating the master or while recording the
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transaction.
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Table 7.12
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Step 2: Recording Receipt Transaction (Single Entry Mode)
1. Go to Gateway of Tally > Accounting Vouchers > F6: Receipt ED
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4. Under the Particulars field, select the party ledger from the List of Accounts from
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whom the payment is received, i.e., Superior Traders

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5. You will get the Bill-wise Details screen for Superior Traders with the details filled as
given below:
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 In the Type of Ref field select Advance.

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 In the Name field, enter the bill number as Adv/SUT/01

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 In Due date, or Credit Days field do not enter any details

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 Enter the amount as 2,200

00

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Figure 7.13 Bill-wise Details Screen with Advance Reference
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 Press Enter and accept the Bill wise Details screen
6. In the Bank Allocation screen, Transaction Type select as Cheque/DD, and the
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amount will be captured automatically. Enter the cheque date in the Inst date field and
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select the Bank to which the received Cheque belongs to, and accept the screen.
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After receiving advance payment from customer, check the Group Outstanding report.
The Group Outstandings report displays the group-wise outstanding, total sundry creditors
outstanding bills and total sundry debtors outstanding bills. To check follow the steps given below:
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1. Go to Gateway of Tally > Display > Statements of Accounts > Outstandings >
Group > Sundry Debtors
2. Change the Period as 01-07-2017 to 01-08-2017
The Group Outstandings report appears as shown in the figure 7.15:
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Figure 7.15 Group Outstandings Screen

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In the report of figure 7.15, we can observe that the Superior Traders bill amount appears in the
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credit column. This is because the Advance payment received from Superior Traders is not
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considered as earned income till the goods are delivered as per Accrual Concept of
Accounting. Hence, it is considered as a Liability.
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Note: The advance payment entry will be shown in the Bills Payable/Outstanding Report, because the
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goods are not yet delivered to the customer.

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From the Group Outstandings press Enter on Superior Traders entry line and use the Alt+F1
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key combination to view the report in detailed mode.

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The Ledger Outstandings report is displayed as shown in figure 7.16:

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Figure 7.16 Ledger Outstandings Screen
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The report of figure 7.16, displays the details of advance received from Superior Traders.
Step 3: Recording Sales Transaction. ED
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3. Enter the Reference no: as BA/02/SUT

4. In the Party A/c name field select Superior Traders
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5. You will get the supplementary details screen, enter the despatch details, order
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details and buyer details like name and address

6. In the Sales ledger field select Sales A/c ledger.
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7. Under Name of Item field, select Dehradooni Basmati Rice (W), and enter the quantity
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as 100 Kgs, rate as ₹ 110 per Kgs and the amount ₹ 11,000 will capture automatically.
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00
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 In Type of Ref field, select Against Ref. (Against reference is being selected while
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recording this sales transaction, as advance payment has been made for this sales.
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So the against reference is selected to adjust the advance payment).

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 You will get the list of pending bills to adjust, select bill no. Adv/SUT/01 and
press Enter
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 By default, the amount field reflects the total amount as 11,000. Manually change
the amount to ₹ 2,200 Dr (as the total advance paid is ₹ 2,200), and press Enter
to adjust the remaining amount.
 In the Type of Ref field select New Ref, for the remaining amount; in the Name
field enter the reference number as BA/02/SUT
 In the Due Date, or Credit Days field enter 10 Days (because while creating the
party ledger you had not entered the credit period).
 Now, the Amount field will reflect the remaining amount of ₹ 8,800 i.e., ₹ 11,000
(Total bill amount) – ₹ 2,200 (Advance received) =₹ 8,800 (Amount receivable)
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The Bill-wise Details screen for Superior Traders appears as shown in the figure 7.17:
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Figure 7.17 Bill-wise Details Screen for Superior Traders
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The Sales Invoice screen appears as shown in the figure 7.18:

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Activity: Check the Group Outstanding report and the Outstandings of Superior Traders.
Ledger Outstanding Report
The Ledger Outstanding report displays the ledger wise or party wise outstanding bills along with
voucher details like date, Ref. No., Opening amount, and Pending amount.
To check the Ledger Outstanding Report,
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Go to Gateway of Tally > Display > Statements of Accounts > Outstandings > Ledger >
Select Superior Traders >Press Alt+F1: Detailed
The Ledger Outstanding Report appears as shown in the figure 7.19:
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Figure 7.19 Ledger Outstandings Report
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The report of figure 7.19 shows ₹ 8,800 as outstanding from Superior Traders, instead of ₹
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₹11,000, as the advance amount received from them has been adjusted the pending bill.
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In Tally.ERP 9, after an advance amount is adjusted, the outstanding report is generated with
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correct figures instantly.

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Step 4: Recording Advance Payment Voucher

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Activity: Record the following transactions:

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Date Particulars
00

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Made an advance payment of ₹20,000 to Saha Traders with the Bill No. Adv/ST/01
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before making purchase; the supplier has agreed to supply the Goods after 10 days
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(enter credit days as 10 days).

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Table 7.13
Open the Sundry Creditors Group Outstanding report and check whether the amount is reflected
in the debit or credit column. The amount should appear under debit column because we have
paid the amount in advance.
Step 5: Recording Purchase Transaction

Activity: Record the following transactions:
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Purchased the following Stock Items on credit from Saha Traders with the Supplier invoice no.
ST/02. Advance payment of ₹20,000 was made for this bill and agreed to pay the rest of the
amount after 10 Days.
Basmati 455 (B) 200 Kgs 110 22,000
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Hint: In order to change the due date, which is defined at the time of creating the party ledger,
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enable the option Allow modification of all fields during entry to Yes
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Table 7.14
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Open the Ledger Outstandings report of Saha Traders and check the pending amount for bill no.
ST/02 and the total outstanding against this party should show as 1, 02,000
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7.8 On Account ED
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On Account method of adjustment is selected when you are unable to mark a payment or a receipt
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against any specific pending references. This method is selected whenever a lump sum amount is
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paid or received and not able to mark against any previous pending bills.
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Illustration 4: Use of on account for recording receipt and payment transactions and
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checking of payable and receivable reports

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Date Particulars
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Sold the following stock items on credit to Ashok Traders with the Ref No.
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BA/03/AT and agreed to pay the amount within 10 days of purchase

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Dehradooni Basmati Rice (W) 50 Kgs 120 6,000
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BA/04/AT and agreed to pay the amount within 10 days of purchase
Basmati 455 (W) 50 Kgs 110 5,500
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SA/05/AT and agreed to pay the amount within 10 days of purchase
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Multigrain flour 50 Kgs 70 3,500
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Received ₹10,000 from Ashok Traders for pending bills but specific pending bill
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details are not provided.

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Table 7.15
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To record the transactions of table 7.15, in the books of Bay Traders, first ensure that the required
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Party Ledger
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Ashok Traders
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Name Enter as Ashok Traders

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Default credit period: It can be entered at the time of creating the master or while recording the
transaction.
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Table 7.16
Activity: Create a stock item by name Multigrain flour and enter the opening balance of 100 quantity and rate
as ₹60.
Step 3: Recording Sales Transactions
Activity: Create the necessary masters and record all the sales transactions given in table 7.15(refer to illustration
no. 4 for guidance)
Recording of Receipt Transaction (Single Entry Mode)
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4. Under the Particulars field, select the party ledger from the List of Accounts from whom
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the payment is received, i.e., Ashok Traders
5. You will get the Bill-wise Details screen for Ashok Traders with the details filled as
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given below:
 In the Type of Ref field select On Account. (On Account type of reference has
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been selected, as we do not have information about the bill (Bill No. BA/03/AT,
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BA/04/AT or BA/05/AT) against which the payment has been made by Ashok
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Traders.
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Note: If you select Against Reference, you will get all the pending bills of Ashok Traders.
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 Immediately after selecting Type of reference as On Account, the cursor will

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move to the amount field

 Enter the amount as 10,000
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Figure 7.20 Bill-wise Details Screen with On Account Reference
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 Press Enter and save the Bill wise Details screen
6. In the Bank Allocation screen, Transaction Type select as Cheque/DD, and the amount
will be captured automatically. Enter the cheque date in the Inst date field and select the
Bank to which the received cheque belongs to and accept the screen
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After receiving payment from the customer, let us check the Ledger Outstanding report.
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Go to Gateway of Tally > Display > Statements of Accounts > Outstandings > Ledger >
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Ashok Traders
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The Ledger Outstandings Report will appear as shown in the figure 7.22:
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Figure 7.22 Ledger Outstandings Report of Ashok Traders
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The report of figure 7.22, displays the total outstandings of Ashok Traders. Here we can observe
that the on account balances are also considered for calculating the outstanding amount.
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7.9 Credit Limit

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Credit Limit refers to the monetary limit agreed upon with the seller and the buyer of a business,
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for trading purposes. In Tally.ERP 9 credit limits can be specified for any ledger account falling
under the groups Sundry Debtors and Sundry Creditors. Credit Limits can also be defined for
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sundry creditors for the reason that there may be a two-way trade between the parties i.e., you may
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sell to a sundry creditor and buy from a sundry debtor account.

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Setting credit limits will help in restricting invoicing for the customers or parties exceeding the
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prescribed credit limits and thereby facilitating better and effective control of the outstanding.
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Example: Bay Traders has set the credit limit of ₹50,000 to M M Traders. As on 1st September
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2017, Bay Traders sold goods on credit for ₹40,000 to M M Traders; and on 5th September 2017
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making a sale for ₹15,000. Bay Traders will not be able to make sales and generate sales bill because
of exceeding the credit limit. The M M Traders is allowed a credit limit upto ₹50,000 and if the
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sale more than ₹50,000, then the transaction will be restricted.
7.9.1 Activate Credit Limit

In order to track the details of bills payable and receivable, the feature bill-wise details and
maintain budget & control has to be enabled in Tally.ERP 9.
To enable the feature maintain bill-wise details in Tally.ERP 9, follow the steps given below:
1. Go to Gateway of Tally > F11: Company Features >F1: Accounting Features
2. Set the option - Maintain budgets and controls to Yes
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Figure 7.23 Accounting Features Screen
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Note: On accepting the option - Maintain budgets and controls to Yes, in all the ledgers created
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under the groups’ sundry debtors and sundry creditors the option – Specify credit limit will be available.
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7.9.2 Setting Credit Limits

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You can set credit limits for party ledger accounts at the time of ledger creation or from the
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alteration screen or also at the time of invoicing.

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To set Credit Limits for single ledger account, follow the steps given below:
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1. Go to Gateway of Tally > Accounts Info > Ledgers > Alter

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2. Select M M Traders ledger from the List of Ledgers.

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3. In the Ledger Alteration screen, specify the credit limit as ₹ 50,000 in the Specify credit
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limit field
The Ledger Alteration screen appears as shown in the figure 7.24:
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Figure 7.24 Party Ledger Alteration Screen
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Note: We can set the credit limit for multiple ledgers falling under the group sundry debtors or creditors or branch
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division at once. To do so, Go to Gateway of Tally > Accounts Info. > Ledgers > Under Multiple
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Ledgers > Select Credit limits

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Note: Credit limit option will appear only if the option Provide advance information in masters is enabled in F12:
Configure.
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7.9.3 Exceeding Credit Limits

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During invoice or order entry, if the credit limit amount is exceeded, then on accepting the
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voucher, Tally.ERP 9 prompts the user with an error message displaying the amount exceeding
the credit limit specified.
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Illustration 5: Checking of credit limit exceeded message while recording sales voucher.
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Record the following transactions in the books of Bay Traders

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Date Particulars
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Sold the following Stock Items on credit to M M Traders with the Ref No.
BA/06/MM
Dehradooni Basmati Rice (W) 50 Kgs 120 6,000
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BA/07/MM
Dehradooni Basmati (W) 400 Kgs 110 44,000
Table 7.17
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Activity: Record the sales transaction which is shown in table 7.17.
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Note: In the above two transactions as shown in figure 7.17, the total amount is ₹ 50,000. I.e. the party has
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completely utilised the collocated credit limit.
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Date Particulars
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BA/08/MM
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Basmati 455 (W) 100 Kgs 110 11,000

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Table 7.18
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Note: While recording the entry of table 7.18, you will get the following error message as shown in the figure 7.25.
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The Sales Invoice screen with credit limit error appears as shown in the figure 7.25:
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Figure 7.25 Sales Invoice screen
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In order to complete the entry, either:
 Enter a lower value (within the prescribed credit limit), or

 Abandon the current entry and obtain authorisation to increase the credit amount limit
The significance of setting credit limits is that during voucher entry (or invoicing), the credit limit
is displayed for the selected ledger along with current balance to help ascertain the amount
permitted or acceptable.
7.9.4 Exception to Credit Limits
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Transactions which do not affect the accounting or inventory balances are excluded from the
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application of credit limitations.
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In Tally.ERP 9, Sales Order can be entered for a party with the value exceeding the credit limit set
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for the selected debtor.
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In this case Tally.ERP 9 will display a warning message as shown in the figure 7.26:
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Figure 7.26 Credit Limit warning in Sales Order

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However, sales order can be saved with the existing order value even though the message is
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displayed Credit Limit Exceeded!.

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7.10 Payment Performance of Debtors

Payment Performance of Debtors (Receivable Turnover in days) is the average time the customers
take to actually pay their bills irrespective of the outstanding balance on the statement date. It is
quite possible that the receivable turnover is low and the payment performance is high, indicating
that the customers cleared their outstanding, but took a long time to do so.
1. From Gateway of Tally >Ratio Analysis
The Ratio Analysis report appears as shown in the figure 7.27:
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Figure 7.27 Ratio Analysis Report Screen
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2. Select Recv. Turnover in days (It shows the amount of sales locked up with debtors in
terms of sales days)
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3. Press Enter to view the list of Sundry Debtors
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4. Select M M Traders to view the Ledger Payment Performance report

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The Ledger Payment Performance Report of M M Traders is as displayed as shown in the

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figure 7.28:
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Figure 7.28 Ledger Payment Performance Details of MM Traders
5. Click F1: Detailed to display the report in detailed mode as shown in the figure 7.29:
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Figure 7.29 Ledger Payment Performance - Detailed
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The Ledger Payment Performance report gives the details of all invoices raised on the debtor
and the dates when the payments were made, with the analysis of delays.
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The Ledger Performance Report can also be viewed from ledger vouchers screen. From Gateway
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of Tally > Display >Accounts Books > Ledger > Select M M Traders> Press F2: Period and
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enter the period from 01-04-2017 to 02-06-2017 >Press F8: Related Reports > Select Ledger
Payment Performance.
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7.11 Changing the Financial Year in Tally.ERP 9

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(While continuing to work in the same Company)

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In this company, you have seen transactions being recorded for the financial year 01-04-2017 to
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31-03-2018. Now, assume that you have completed recording transactions for the financial year
2017-18 and now want to record the transactions for the new financial year 2018-19.
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Note: Financial Year is the year in which you will earn the income and the Assessment Year is the year in
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which the income is taxed.

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Activity: Record the Following transactions in Tally.ERP 9

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Date Particulars
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Sold the following Stock Items on credit to Ashok Traders on cash with the Reference no.
BA/08/AT
Basmati 455 (B) 100 Kgs 120 12,000
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BA/09/AT
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Basmati 455 (B) 50 Kgs 120 6,000
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BA/10/AT
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Basmati 455 (B) 100 Kgs 120 12,000

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Table 7.19
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Observation: Once you change the date to 01-04-2018, you will get an error Date cannot be above the
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current period (31-Mar-2018)

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The Error displays as shown in the figure 7.30:

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Figure 7.30 Change Voucher Date Screen with Error Message
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This error appears because the financial period for Bay Traders is from 01-04-2017 to 31-03-2018
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and you are trying to record the entry after this period i.e., you are recording the entry for a new
financial year, and hence you not able to record the entry. To check the financial period for the
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company, go to Gateway of Tally screen.
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The Gateway of Tally Screen with Current Financial Period appears as shown in the figure
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7.31:
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Figure 7.31 Gateway of Tally screen (Current Period)

In order to record the sales transaction as on 01-04-2018 (This entry will fall under new financial
period 01-04-2018 to 31-03-2019), you need to change the financial period.
To change the financial period, follow the steps given below:
1. Go to Gateway of Tally > Press Alt+F2:Period
2. Enter the date as 01-04-2018 to 31-03-2019.
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The Change Period screen appears as shown in the figure 7.32:
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Figure 7.32 Change Period Screen
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3. Press Enter from the figure 7.31screen, to go back to the Gateway of Tally screen
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The Gateway of Tally Screen with Changed Financial Year appears as shown in the figure
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7.33:
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Figure 7.33 Gateway of Tally screen (Changed Financial Year)

After changing the current period, you will be able to record the sales entries as on 01-04-2018.
Note: In Tally.ERP 9, you can continue to record the data in the same company just by changing the financial
year or you can create a new company with the latest financial year and maintain the data separately.
Conclusion
Accounts Receivables and Payables Management is a very important aspect of any business. In
Tally.ERP 9 one can keep the track of receivables and payables by using the feature Maintain bill-
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wise details wherein you can define the credit limit, credit days and generate instant outstanding
reports.
Key Takeaways
 Accounts Receivables are debited in the books of account and is shown as a Current Asset
in a company’s Balance Sheet.
 Accounts Payables are credited in the books of account and is shown as a Current Liability
in company’s Balance Sheet.
 Bill-wise Details are specified while creating vouchers to allocate payments to invoices.
The Outstandings Statements can be generated using Bill-wise Details.
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 In Tally.ERP 9, four types of reference details can be entered for transactions. These
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reference details, called Methods of Adjustments are New Ref, Agst Ref, Advance and On
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Account.
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 Advance Payment/Receipts can be adjusted to actual bills on a later date as required.
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 On Account is the reference, which is used when the lump sum amount is paid or received
without any bill reference details
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 Setting Credit Limits will help in restricting invoicing for the customers or parties
exceeding the prescribed credit limits
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Shortcut Keys
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F11  From all screens wherever available

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 To access Company Features

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Alt+F1  From Outstanding report

 To view Outstanding report in detailed mode
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F4  From Receivable report

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 To go to Payables report and vice-versa

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Alt+C  From Ledger Outstanding report

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 To view Ledger Contact details

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Practice Exercises
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1. Account Receivables and Payables can be maintained by enabling which of the following
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features in Tally.ERP 9?
a. Maintain Bill-wise details

b. Maintain Cost centres
c. Maintain Payroll
d. Maintain Stock Category
2. Bad Debts details can be extracted from which of the following reports in Tally.ERP 9?
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a. Stock Ageing Report
b. Ageing Analysis Report
c. Cost Ageing report
d. Not Available
3. Nishanth Traders purchased goods on credit for ₹ 30,000 from Vibhav Traders on 1st
August 2017 and agreed to pay the amount on 15th August 2017. In the books of
Nishanth Traders, this transaction will be recorded as __________________.
a. Accounts receivable
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b. Accounts payable
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c. Bad debt
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d. Doubtful debt
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4. While working in Tally.ERP 9, _______________ is selected when you are unable to
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mark a payment or a receipt against specific pending references.
a. New Reference ED
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b. Against Reference
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c. Advance
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d. On Account
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5. The Maintain bill-wise details feature in Tally.ERP 9 enables tracking of every transaction
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and efficient management of _____________.

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a. Only Payables
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b. Only Receivables
c. Receivables and Payables
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d. Stock in Progress
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6. Which of the following is the correct entry for advance payments made to Creditors?
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a. Debit Cash/Bank A/C and Credit Creditors A/C

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b. Debit Creditors A/C and Credit Cash/Bank A/C

c. Debit Creditors A/C and Credit Liabilities A/C
d. Debit Assets A/C and Credit Cash/Bank A/C
7. Rajesh received a payment of ₹5000 against a pending invoice. However, he was unable
to decide against which bill the payment was received. In Tally.ERP 9, he should account
the payment as:
a. New Reference
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b. Against Reference
c. Advance
d. On Account
8. Ashish Enterprises owes ₹20,000 to Vinod Traders for purchase of goods on credit. In
the Balance Sheet of Ashish Enterprises, this amount will reflected under Current
Liabilities.
a. True
b. False
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9. The Gateway of Tally screen shows the Current Financial Period of a company selected
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in Tally.ERP 9.
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a. True
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b. False
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10. In Tally.ERP 9, ledgers are created under Groups.
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a. True
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b. False
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11. The term ‘Advance’ refers to income received in advance or payments made in advance.
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a. True
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b. False
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12. Setting Credit Limits will help in restricting invoicing for the customers exceeding the
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prescribed credit limits

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a. True
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b. False
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13. Given below are the types of references and a transaction of each in a jumbled format.
Match the following
Type of Reference Transactions
1 On Account A Purchase goods on credit and the payment will
be made on future date.
2 Advance B Cleared the payment for the purchases made
earlier.
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3 Against Reference C Before making the purchase from the supplier,
paid . 20,000 to supplier.
4 New Reference D Received a lump sum amount from the
customer and unable to mark a receipt against
specific pending references.
a. 1-d, 2-c, 3-b, 4-a

b. 1-a, 2-b, 3-c, 4-d
c. 1-d, 2-a, 3-c, 4-b
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d. 1-c, 2-a, 3-d, 4-b
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14. ________ is selected when you are unable to mark a payment or a receipt against specific
pending references.
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a. On Account
b. New Reference
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c. Against Reference
d. Advance
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15. This method of adjustment is used to track an existing transaction, which is already
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tagged with a reference number in Tally.ERP 9 is __________.

a. On Account
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b. New Reference
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c. Against Reference
d. Advance
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16. Referring to the figure 7.34, what is the Bill-wise reference and voucher entry recorded.
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Figure 7.34 Ledger Outstanding Report
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a. On Account reference in Payment voucher ED
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b. Advance reference in Payment voucher
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c. Advance reference in Receipt voucher

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d. New reference in Payment voucher

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Chapter 8
Banking
Learning Objectives
 Banking payments
 Configure cheque printing
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 Cheque management in Tally.ERP 9
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 Print cash and cheque deposit slips
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 Print payment advice
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 Perform bank reconciliation
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 Record post-dated cheque

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Activate auto bank reconciliation
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 Auto bank reconciliation in Tally.ERP 9
 E-payments in Tally.ERP 9
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 Check e-payments reports
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8.1 Introduction
Banking Module has been enhanced in Tally.ERP 9 to simplify the overall banking experience,
recording transactions and generating various banking reports. The Banking Module focuses on
managing and streamlining banking transactions and activities
The salient features of Banking in Tally.ERP 9 are as follows
 Cheque Printing
 Cheque Register
 Bank Reconciliation
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 Deposit Slips
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 Payment Advice
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8.2 Banking Payments
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The Banking feature in Tally.ERP 9 facilitates maintenance of records and processes that are
fundamental to effective recording of accounting transactions for timely payments. This feature
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enables business owners to perform a host of bank-related activities, including payments to
parties, bank reconciliation, and cheque management. Using this feature enhances and simplifies
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the banking experience significantly by saving time, reducing errors, improving productivity, and
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scaling up traceability.
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The Banking feature in Tally.ERP 9 provides an end-to-end solution to the banking needs for
running your company. You can use its e-payments capability to make timely payments to your
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parties, manage cheques, reconcile bank statements, and others. Tally.ERP 9's banking feature
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supports the following major areas of your business operations:

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The banking transactions can be provided with bank allocation details such as the transaction
type, instrument no, date, etc. A single bank amount can also be allocated to multiple transaction
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types such as Cheque/DD, Cash, Electronic Cheque, Electronic DD/PO, e-Fund Transfer,
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Others, Card and ATM based on the requirement.

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For Example: Coffee Federation Ltd. purchased goods on credit for ₹10,000 from Swathik
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Traders on 1st July 2017 and agreed to pay the amount on 15th July 2017 by cheque.
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In this scenario, the payment is made though cheque. While making the payment to Swathik
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Traders, for ₹10,000 the transaction type can be selected as Cheque/DD with the Cheque
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number and Cheque issue date.
8.3 Setting up Banking Features

Tally.ERP 9 provides the default banking features required to record payment transactions. By
using F11: Company Features, you can modify the default settings for banking features of your
company depending on the business requirements.
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Company Name: Coffee Federation Ltd.
Address: No 23, 15th Block, 8th Sector, Koramangala, Bengaluru - 560081
Country: India
State: Karnataka
To Setup the Banking Features, follow the below mentioned steps:
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1. From Gateway of Tally>F11: Company Features>F1: Accounting Features>
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Banking features.
 Set the option Enable cheque printing to Yes ( By default this option is enabled
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for cheque printing)
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 Set the option Set/alter transaction types to Yes, you will get the Alteration of
Transaction Type screen
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The Alteration of Transaction Types screen appears as shown in the figure 8.1:
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Figure 8.1 Alteration of Transaction Types Screen

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You can include or exclude the required transaction types like ATM, Cash, and ECS etc., based
on your business needs. The Cash, Cheque, e-Fund Transfer, and Others options are enabled by
default.

 Set/alter banking features (By enabling this option, we can add the beneficiary
details in the ledger. This feature is available only when you create bank ledgers
with e-payments enabled.)
 Set/alter post-dated transaction features (By enabling this option, we link the
notional banks to support post-dated transactions)
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Note: As of now enable the options as shown in the figure 8.2
The Company Operations Alteration screen appears as shown in the figure 8.2:
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Figure 8.2 Company Operations Alteration Screen
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8.4 Cheque Management

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A cheque is a written order to the bank to pay the stated sum of money. Cheques are usually
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handwritten. In order to automate the entire cheque printing process, Tally.ERP 9 allows
cheques to be printed directly.
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Cheques are still the most preferred payment instrument across businesses. Easy management of
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this form of payment adds significant value in day to day operations, and hence, effective
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Cheque Management system is essential in any business.

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Tally ERP 9 allows creation of multiple cheque books with unique ranges for every bank in bank
ledger creation, selection of cheque ranges during voucher entry and auto cheque numbering, &
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giving a report of the status of all the cheques in the form of cheque register.
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Business Scenario
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Coffee Federation Ltd. opens up its current account in Kotak Mahindra Bank for its business
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banking, so that the cheque deposits and withdrawals, RTGS, NEFT transactions can happen
smoothly and also the company has received the cheque book from bank.
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Illustration 1: Configuration of cheque book and printing cheques from Tally.ERP 9.
Pass the following transaction in the book of Coffee Federation Ltd.
Date Particulars
Coffee Federation Ltd., deposited cash of ₹ 20, 00,000 in bank.

Coffee Federation Ltd., purchased goods for ₹ 1, 50,000 from Raj Traders on
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credit.
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Coffee Federation Ltd. made a payment for ₹ 1, 50,000 to Raj Traders.
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mode of payment : Cheque
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cheque number : 000001
instrument date : 05-07-2017
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Table 8.1
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Before recording the transactions of Table 8.1., let us configure cheque book and then record the
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transactions.
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Configuration of Cheque Book in Tally.ERP 9

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Create Kotak Mahindra bank and configure cheque book, by following the steps given below:
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2. Enter the Name as Kotak Mahindra Bank

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3. In Under field select Bank Accounts

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The Bank Ledger Alteration screen appears as shown in the figure 8.3:
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Figure 8.3 Bank Ledger Creation Screen
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 If the IFS code in incorrect, Tally prompts the warning message "Invalid IFS Code. The IFS Code must
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be in proper format and should contain 4 alphabets, followed by 0 and 6 numbers/alphabets.

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 IFS code used in this chapters are for illustration purpose only.
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4. Once you enable the option - Set cheque books to Yes, you will get the Cheque Book
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Management screen
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The Cheque Book Management screen appears as shown in the figure 8.4
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Figure 8.4 Cheque Book Management Screen

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5. Provide the Cheque Range for Kotak Mahindra Bank:
 From Number - Enter as 000001
 To Number - Enter as 000100
 Number of Cheques – Captures as 100
 Cheque Book Name - Enter as Kotak Cheque Book 1
Note: You can provide many number of cheque books from the same Cheque Book Management screen for the
particular bank.
The Cheque Book Management screen with cheque range appears as shown in the figure 8.5:
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Figure 8.5 Cheque Book Management Screen with Cheque Range

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6. Press Enter and Accept the Cheque Book Management screen, you will go back to
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ledger creation screen

7. Next, set the option Set cheque printing configuration to Yes as shown in figure 8.6
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Figure 8.6 Ledger Creation Screen with Cheque Printing Configuration
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8. From the ledger creation screen as shown in the figure 8.6, press Enter to get the Cheque
Format Selection screen
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The Cheque Format Selection screen appears as shown in the figure 8.7
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Figure 8.7 Cheque Format Selection Screen
Note:
 Internet and valid TSS (Tally Software Services) is required to get the list of banks, additionally for bank
configuration, i.e to get the cheque formats.
 CTS stands for Cheque Truncation System, this was introduced on 1st April 2013, in this system physical
cheque movement is eliminated and electronic cheque is used for movement. This system is undertaken by
Reserve Bank of India.
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9. Select the required format and press Enter, to get the Cheque Dimensions screen
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The Cheque Dimensions screen appears as shown in the figure 8.8:
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Figure 8.8 Cheque Dimensions Screen
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Note:
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 The cheque dimensions as shown in the figure 8.8 is the predefined dimensions as per the format which we
have selected. If required we can press Backspace and define the dimensions.
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 We can copy the cheque dimensions from one bank to another by using the key Ctrl+C: Copy From
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 We can compare the cheque dimensions (sample) with the actual cheque and modify accordingly to suit your
requirement. Take the bank’s cheque book and measure the dimensions of a cheque leaf carefully in
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millimetres using scale and fill the form. You may need to correct it after trying out a couple of cheques so
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that the positioning is accurate. The placing of the cheque in the printer also determines the printing. Trials
could be made on photocopies of a cheque before using an actual cheque leaf.
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 In case of a cheque with two signatories, both can be specified (Both could be the same salutation or different,
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e.g., the first one as Director and the second one as Secretary).
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10. Enable the option Print Company Name on Cheque and accept the screen
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The Sample Format of Cheque Selected appears as shown in the figure 8.9:
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Figure 8.9 Sample Format of Cheque Selected
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11. Press Esc from figure 8.9 screen
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The Completed Ledger Creation screen appears as shown in the figure 8.10:
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Figure 8.10 Completed Ledger Creation Screen

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Once after configuring cheque book and cheque printing options let us record the transactions
of Table 8.1
Activity: Create the following ledgers
 Raj Traders under Sundry Creditors
 Purchase of goods under Purchase Accounts
Activity: Record the following transactions
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Date Particulars
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Coffee Federation Ltd., deposited cash of ₹ 20, 00,000 in bank.

Coffee Federation Ltd., purchased goods for ₹ 1, 50,000 from Raj Traders on credit.
Table 8.2
Note: Make sure while recording the contra entry cash balance should be available
Step 2: Recording Banking Payment Voucher Using Single Entry Mode
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2. Click F2:Date and set the date to 01-07-2017
3. Press F12: Configure - Payment Standard Configuration, and set the option Use
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single entry mode for payment/receipt/ contra vouchers to Yes.
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Note: On enabling the Single Entry mode, the payment screen displays the Account field (Select the ledger
which has to be credited), Particulars field (Select the ledgers which has to be debited) and in the Amount
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field (Enter the amount)
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4. Under Account field select Kotak Mahindra Bank

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5. Under Particulars field Select Raj Traders ledger and enter the amount, ₹1, 50,000.
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 In the Name field by default the Pending Bills is shown with voucher number,
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Date, Balance and Final Balance.

 Due Date or Credit Days field, will be skipped
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 The Amount ₹1, 50,000 will be captured automatically

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 From the Bank Allocations screen, Press F12: Configure > Set the option – Show
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cheque cross using to Yes

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The Configuration screen in single entry mode appears as shown in the figure 8.11:
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Figure 8.11 Configuration Screen
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 Accept the Configuration screen
 Select Transaction Type as Cheque
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 Amount ₹1, 50,000 will be captured automatically.
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 Cheque range 000001 - 000100 will be selected by default

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 Cross using will be A/c Payee by default

 The Cheque number as 00001 will be automatically captured in Inst no. field
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 Let the Inst. date be as it is i.e., 01-07-2017

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 Accept the Screen

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The Bank Allocations screen in single entry mode appears as shown in the figure 8.12:
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Figure 8.12 Bank Allocations Screen
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Note:
 The Cheque range and Cheque number captures automatically, because cheque book is configured
in the Cheque Book Management screen in Kotak Mahindra Bank ledger alteration.
 In F12: Configure – Payment Standard Configuration screen, Use default values for
bank details to be set to No. Then only then Bank Allocation screen will appear while passing the
Payment Entry.
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11. On accepting the Payment Voucher Creation screen, you will get the Cheque Printing
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screen
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The Cheque Printing Configuration screen appears as shown in the figure 8.14:
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Figure 8.14 Cheque Printing Configuration Screen
12. Press Enter
The Cheque Printing screen appears as shown in the figure 8.15:
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Figure 8.15 Cheque Printing Screen
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Note: In F12: Configure – Payment Standard Configuration screen, Print cheque after
saving voucher; and Confirm each cheque before print to be set to Yes.
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Activity: On 10-07-2017, Coffee Federation Ltd. made an advance payment of ₹ 50,000 to Raj Traders.
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Date Particulars
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Coffee Federation Ltd. made a payment for ₹ 50,000 to Raj Traders.

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Raj Traders A/c ______ Dr. 50,000

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To, Kotak Mahindra Bank 50,000

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(Being payment made to Raj Traders)
Table 8.3
8.4.1 Cheque Printing

The Cheque Printing option allows you to print all the pending, already printed or the required
cheques continuously from a single screen. It also allows to update the cheque details of a
transaction, i.e., the instrument no, instrument date, cheque favouring, etc.
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Cheque printing feature in Tally.ERP 9, manual errors can be avoided. Tally also has provision to
select respective bank’s cheque image to identify the cheque. By doing this configurations will be
created automatically.
8.4.1.1 Single Cheque Printing

Tally.ERP 9 allows you to print a single cheque. To print a single cheque, follow the steps given
below:
1. Go to Gateway of Tally > Banking > Cheque Printing

2. Select Kotak Mahindra Bank from the List of Banks
3. Click F2: Period and Enter the full period. Enter as 01-07-2017 to 31-07-2017
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4. Press Spacebar to select the transaction for which the cheque has to be printed
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The Single Cheque Printing screen appears as shown in the figure 8.16:
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Figure 8.16 Single Cheque Printing Screen

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5. Press Alt+P to get the Print Report screen

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Note: From Cheque Printing screen, we can alter the cheque details by pressing F7: Edit Ch. Details
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The Cheque Print Report screen appears as shown in the figure 8.17:
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Figure 8.17 Cheque Print Report Screen
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6. Press Enter to get the Cheque Printing screen
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7. Press Enter to get the Cheque Print
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8.4.1.2 Multi Cheque Printing

Tally.ERP 9 allows you to print a multi cheque from the single screen. To print a multiple
cheque, follow the steps given below:
1. Go to Gateway of Tally > Display>Account Books > Ledger

2. Select Kotak Mahindra Bank from the List of Ledgers
3. Click F2: Period and enter the full period. Enter as 01-07-2017 to 31-07-2017
The Ledger Vouchers screen appears as shown in the figure 8.19:
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Figure 8.19 Ledger Vouchers Screen
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4. Press Alt+F6 to get the Cheque Printing screen
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5. Press Alt+P to get the Print Report screen.
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6. Press Enter to get the Cheque Printing screen

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7. Press Enter to get the Cheque Print

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8.4.2 Cheque Register

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The Cheque Register helps you to manage your cheque books for various banks by providing the
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status and values of the total number of cheques for each bank (Cheque Book wise) that are
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Available, Unreconciled, Reconciled, Blank, Cancelled and Post-dated. The report also gives
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information about cheques which do not belong to any cheque range available.
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Cheque Register maintains cheque books in systematic manner. This report gives you overall
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bank cheque book status from one screen and also helps in tracking cheque books and also can
search status of check instantly.
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Cancellation of cheques are single click from this report. Cheque Register ensures no cheque leaf
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is missing and the status of cheque can be viewed irrespective of banks.

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Using this Multi Cheque Print option, you will be able to print bulk or more number of cheques
which belongs to the same bank at one go.
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Activity:
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 Record the following transactions and the instrument date is same as voucher date, the cheque s are used
from cheque book range : 000001 to 000100.
Date Particulars
Coffee Federation Ltd. made a payment for ₹ 2, 50,000 to Rajdhani Traders.
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Coffee Federation Ltd. made a payment of ₹ 25,000 to Rajdhani Traders.
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Coffee Federation Ltd. made a payment for ₹ 15,000 to Aruna Traders.
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Table 8.4
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 Create Following Cheque Book of Kotak Mahindra Bank and set the cheque range as 000101 to
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000200.
Hint: Alter Kotak Mahindra Bank Ledger and configure cheque book details.
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The Cheque Book Management screen appears as shown in the figure 8.20
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Figure 8.20 Cheque Management Screen
Once after recording the transactions of table 8.4, view the cheqe register by following the steps
given below:
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1. Go to Gateway of Tally > Banking > Cheque Register
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The Cheque Register screen appears as shown in the figure 8.21:
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Figure 8.21 Cheque Register Screen
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Observation: Cheque register will display the details of total number of cheques available, unreconciled &
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reconciled cheques, blank cheque details, cancelled cheque details and you can alter cheque book by using Alt+B
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key from the above screen

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2. Press Enter on Kotak Mahindra Bank to view the Cheque Range Register screen The
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Cheque Range Register screen appears as shown in the figure 8.22:

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Figure 8.22 Cheque Range Register Screen
3. Further, you can press Enter on the Cheque Range to get the Instrument Wise report
The Instrument Wise Report screen appears as shown in the figure 8.23:
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Figure 8.23 Instrument Wise Report
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in transactions like instrument number, instrument date, voucher type and amount etc.,
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8.4.2.1 Cancelled Cheque

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Tearing a cheque leaf is nothing but cancelling the cheque. Cheques also get cancelled in many
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scenarios:
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 After issuing cheque due to some reason you may make cash payment, then the cheque
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has to be cancelled.
 Any business decision due to which cheques may get cancel.
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 Loss of cheque leaf etc.

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Date Particulars
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25-07-2017 Coffee Federation Ltd. cancelled a cheque having cheque number 000010 as the
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cheque was torn.
Table 8.5
Cancellation of cheque leaf
To cancel the cheque, follow the steps given below:

2. Press Enter on Kotak Mahindra Bank to view the Cheque Range Register screen
3. Press Enter on the Cheque Range – 000001-000100 (Kotak Cheque Book 1)
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4. Instrument Wise report gets displayed, Select the Cheque no. 000010 by pressing space
bar > Press Alt+A : Alter Status to get the Cheque Status.
The Cheque Status screen appears as shown in the figure 8.24:
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Figure 8.24 Cheque Status Screen
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5. Select Cancel Cheque

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6. Enter the Date as 25-07-2017 ( Date on which cheque is to be cancelled)

7. Enter the Remarks as Damaged Cheque
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The Cheque Status Update Screen appears as shown in the figure 8.25:
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Figure 8.25 Cheque Status Update Screen

The selected Cheque number 000010 is cancelled and updated in Cheque Register.
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The cheque status in the Instrument Wise Report will be updated as Cancelled Cheque as
shown in the figure 8.26:
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The Instrument Wise screen with cancelled cheque appears as shown in the figure 8.26
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Note: If any cheque is cancelled by mistakenly in Tally.ERP 9, then the same can be reused by using the option
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Alt+A: Alter Status from instrument wise screen. Please the selection line on cancelled cheque and then use the
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key.
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8.4.2.2 Blank Cheque

In a business based on trust blank cheque will be written without the amount. In a business
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people will exchange blank cheque & will be informed to fill the amount once after actual
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transaction is made (sales or purchase). Whenever such cheque is issued, the same can be marked
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in Tally, so that particular cheque number will be blocked.

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Illustration 3: Issuing of blank cheque

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Date Particulars
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26-07-2017 Coffee Federation Ltd. issued a blank cheque having cheque number 000011 to
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Ranjan Enterprises, which is to be used as security cheque deposit.

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Table 8.6
Activity: Create a party ledger as Ranjan Enterprises under Sundry Creditors.

Issuing Blank Cheque
To Issue Blank Cheque, follow the steps given below:
1. From Gateway of Tally > F11: Company Features> F1: Accounting Features >
Enable the following options:
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 Use reversing journals and optional vouchers
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 Enable zero-valued transactions
3. Press Enter on Kotak Mahindra Bank to view the Cheque Range Register screen
4. Press Enter on the Cheque Range – 000001-000100 (Kotak Book 1)
5. Instrument Wise report gets displayed, Select the Cheque no. 000011 by pressing space
bar > Press Alt+A : Alter Status to get the Cheque Status.
6. The Cheque Status screen appears, Select the Cheque Status as Blank Cheque
The Cheque Status screen appears as shown in the figure 8.27:
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Figure 8.27 Cheque Status Screen

7. Select Blank Cheque
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in the figure 8.28:
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8. Under Particulars, select the party ledger Ranjan Enterprises
Activity: If the party ledger is not created then use Alt+C key to create or go to Accounts Info menu.
Note: The cursor does not move to Amount field, as it is a Blank Cheque.
10. In the Bank Allocation screen, the below details will be captured automatically:
 Transaction Type as Cheque
 Amount field will be Blank
 Cheque range captures as 000001-000100
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 Cross using will be A/c Payee
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 Cheque number is 000011 in the Inst no. field
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 Cheque date is 26-07-2017 in the Inst date field
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The Bank Allocations screen in single entry mode appears as shown in the figure 8.29:
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 Accept the screen

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11. Enter the narration

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screen without Amount.
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The Cheque Printing Configuration screen appears as shown in the figure 8.31:
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Figure 8.31 Cheque Printing Configuration Screen

14. Press Enter
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In the above shown figure 8.32, the Amount field is left blank because the entry is made for
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Blank Cheque with the instrument number 000011 without Amount.
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The cheque status in the Instrument Wise Report will be updated as Blank Cheque as shown
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in the figure 8.33:
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Activity:
 On 01-08-2017, Coffee Federation Ltd. Cancelled a Cheque having number 00015. The same Cheque
was issued as cancelled cheque to PF department.
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 Record the following transaction
Date Particulars
Coffee Federation Ltd. issued a blank cheque having cheque number 000115 to Raj
Traders.
Hint: In this scenario, you need to select the cheque book in the name of Kotak Cheque
Book 2, with the cheque book range as 000101 to 000200 for the Kotak Mahindra
Bank.
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Table 8.7
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8.5 Bank Reconciliation
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Bank reconciliation is a statement where we can see the mismatch between the cash book and
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the bank book (Pass book). LE
Reconciliation of bank balance as per the cash book with the bank balance as per the pass book.
BRS is prepared in order to have authenticity of the transactions entered to verify the balances
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from the actual with the general.

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Bank Reconciliation helps in cross verification between bank passbook/statement and Tally
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book and this is most important task to perform in a business as revenue in involved. There are
chances of misappropriation in balance if reconciliation is not done. Any error in company book
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or bank can be identified immediately.

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Reasons
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 Cheque issued but not presented for payment.

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 Cheque deposited but not collected.

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 Direct payment into bank on behalf of the customer.

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 Bank charges, Interest debited in pass book

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 Cheque dishonour
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 Collections made by the banker on behalf of the customer

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 Payment made by the banker on behalf of the customer

 Cheque drawn but not recorded in cashbook.
8.5.1 Manual Bank Reconciliation

In this section we will learn to how to perform manual reconciliation in Tally.ERP 9.
To view and reconcile the transactions relating to bank account for Coffee Federation Ltd.,
1. Go to Gateway of Tally > Banking > Bank Reconciliation

2. Select Kotak Mahindra Bank from the List of Bank Ledgers
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3. Click F2:Period and set the date to 01-07-2017 to 31-07-2017
The Bank Reconciliation Screen appears as shown in the figure 8.34:
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Figure 8.34 Bank Reconciliation Screen
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Note: The Bank Reconciliation screen can also be accessed from Gateway of Tally > Display >
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Accounts Books > Cash/Bank Books > Select Bank Ledger > Select Month >Press F5:
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Reconcile.
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The Bank Date has be to be provided based on the Instrument Date and not on Voucher
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Date.
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4. The Bank Reconciliation screen displays the following

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 Balance as per company books

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 Amounts not reflected in bank and

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 Balance as per bank

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Observation: We can observe that there is a difference in the Balance as per bank and the
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Balance as per company books, because the reconciliation is not done. Once reconciliation is
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done referring to the Bank Statement, Balance as per bank and the Balance as per company
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books will get matched.

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5. Enter the Bank Date as shown in the figure 8.35
The Bank Reconciliation Screen after reconciliation appears as shown in the figure 8.35:
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Here, the Reconciliation is done for the month of July 2017. 01-07-2017, 02-07-2017, 11-07-
2017, 21-07-2017, 26-07-2017, 27-07-2017 are the bank Dates provided for reconciliation
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respectively.
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(Once the dates are entered, you will find the bank balance as per company books is impacted
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i.e., decreases/increases accordingly)

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You can observe, that the Balance as per bank and the Balance as per company books are
matched.
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To check the Bank Balance follow the steps given below:

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1. Go to Gateway of Tally > Display > Accounts Books > Ledger > Select Kotak
Mahindra Bank.
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2. Click F2:Period and set the date to 01-07-2017 to 31-07-2017

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You can observe the Closing Balance in Kotak Mahindra Bank is ₹ 15, 10,000, as shown in the
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figure 8.36:
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The Ledger Voucher screen appears as shown in the figure 8.36
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Figure 8.36 Ledger Vouchers Screen
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3. Press F5: Reconcile. ED
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By Pressing F5: Reconcile, you will be taken to Bank Reconciliation screen, Where the
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Balance as per bank and the Balance as per company books are getting balanced.
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Note
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 Press F12: Configuration from Bank Reconciliation screen and set the option:
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o Show Payment Favouring/Received From to Yes to display the payment

favouring/received from details in the report. The favouring name column displays only those
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names which are different from the party/ledger account names.

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 Press Alt+C: Create Voucher to create vouchers from the Bank Reconciliation screen itself.
 In case, if you have opening bank transactions (transactions pertaining to the last year) which are not yet
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credited/ debited into bank account, you can provide Opening BRS for such transactions by pressing
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Alt+U (U: Opening BRS) and provide the information in the unreconciled details for sub-screen.
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 You can reconcile the bank transactions from cheque register, by pressing F5:Reconcile
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8.5.2 Auto Bank Reconciliation

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Tally.ERP 9 has enhanced the Bank Reconciliation capability to view and import the bank
statement and to auto reconcile the transactions. Tally.ERP 9 provides its users with the facility
of selecting the formats which includes configurations and input file type. Tally.ERP 9 supports
Excel, CSV and MT940 formats of bank statement. Currently the formats of many banks with
supporting file types such as Excel, CSV and MT940 are made available.
Auto Bank Reconciliation in Tally.ERP 9 requires a valid Tally Software Services and internet
connectivity.
The following illustration will help you to understand how auto reconciliation is handled
in Tally.ERP 9.
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Activity:
1. Create a Bank Ledger by name HDFC Bank under Bank Account and configure cheque printing. Enter
the bank opening balance as ₹ 100,000 Dr
2. Record the following transactions.
Date Particulars
Coffee Federation Ltd. made a purchase of ₹15,000 from Ram and made payment
through HDFC cheque, vide cheque no: 000005 dated 23-08-2017.
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Coffee Federation Ltd., made a cash deposit of ₹25,000 in HDFC Bank.
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Table 8.8
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Once after recording the transaction of table 8.8, auto reconcile the vouchers, to do so follow
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Step 1: Activating Auto Bank Reconciliation LE
To activate Auto Bank Reconciliation, alter the ledger Bank Account
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1. Go to Gateway of Tally > Accounts Info > Ledgers > Alter > HDFC Bank
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2. Enable the option Enable auto reconciliation to Yes and enable the option Set/alter
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auto BRS configuration to Yes

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The Banking Configuration screen appears as shown in the figure 8.37

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Figure 8.37 Banking Configuration Screen
3. Press Enter and accept the screen (If required, you can enter the location details)
Step 2: Defining the Location of Excel files
This is required as the bank statement is imported to Tally.ERP 9 from the path mentioned.
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1. Go to Gateway of Tally > F12: Configure > Select Banking Configuration
2. In the Location of new bank statements , enter the path of the folder containing the
excel format to be imported
The Banking Configuration screen is as shown in the figure 8.38:
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Figure 8.38 Banking Configuration Screen
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Step 3: Import and Auto Reconcile Bank Transactions

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To view, import and auto reconcile the banking transactions,

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1. Go to Gateway of Tally > Banking > Bank Reconciliation > Select Bank Account
2. Press Alt+B or B: Bank Statement
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The Select File screen appears as shown in the figure 8.39

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Figure 8.39 Select File Screen
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Note: Before importing the file make sure to close the bank statement file.
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3. The success message provides the user with the following details:
 Total entries in bank statement
 Number of reconciled transactions
 Additional Bank Entries: Tally.ERP 9 also lists out the additional entries present in
the bank statement to enable the users to enter these transactions in Tally.ERP 9
Note: The below given screen shots (Figure No. 8.40, 8.41 and 8.42) are used for
illustration purpose only.
4. Press any key to view the Bank Reconciliation screen as shown in the figure 8.40:
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The Bank Reconciliation screen appears as shown in the figure 8.40
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In the Bank Reconciliation screen, the vouchers are automatically reconciled.

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Note:
 Vouchers can be created from the Bank Reconciliation screen for the transactions
that appear in the field Amounts not reflected in the company books. Voucher can
be created using the C: Create Voucher button.
 All the unlinked transactions can be reconciled using the Ctrl+R: Reconcile All
Unlinked button.
To Account for Amount not reflected in the company books follow the steps given below:
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1. Go to Gateway of Tally > Banking > Bank Reconciliation > HDFC Bank> Keep
cursor on transaction which reflect under the field Amount not reflected in company
books > press Alt+C
The Bank Reconciliation screen appears as shown in the figure 8.41:
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2. Then make payment of ₹ 8,500 to Mr. Ram

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Figure 8.42 Accounting Voucher Creation Screen
8.6 Deposit Slip

The Deposit Slip option in banking enables you to generate deposit slips for cash or cheque(s)
that are deposited to the bank for any particular date.
8.6.1 Cash Deposit Slip
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Any cash received has to be deposited in the bank with Cash Deposit Slip attached. Tally.ERP 9
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allows users to generate cash deposit slip for depositing cash into a bank.
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The cash deposit slip provided in Tally.ERP 9 has all the contents of cash deposit slip – account
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number, account holder name, bank name, branch name, company’s telephone number, and
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cash denomination details, so that user will not have to manually enter all the details.
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This is standard format to deposit cash to bank. If it doesn’t exist then user has to rewrite all
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those cash denomination in bank challan during deposit. LE
Illustration 4: Cash Deposit transaction and Generating of Cash Deposit Slip.
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Date Particulars
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24 -8-2017 Voucher: Contra

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Coffee Federation Ltd. deposited cash of ₹ 4, 00,000 to Kotak Mahindra Bank

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Table 8.9
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Activity: Provide opening balance of ₹ 30, 00,000 for Cash Ledger Account.
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To record the transaction of table 8.9, in the books of Coffee Federation Ltd., first ensure that
the required ledgers are created in Tally.ERP 9.
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Step 1: Recording of Contra Voucher

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1. Go to Gateway of Tally > Accounting Vouchers > F4: Contra

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3. Press F12: Payment Standard Configuration, and set the option Use single entry
mode for payment/receipt/ contra vouchers to No.
Note: On enabling the Single Entry mode, the payment screen displays the Account field (Select the ledger
which has to be credited), Particulars field (Select the ledgers which has to be debited) and in the Amount field
(Enter the amount)
4. In the Credit field, select Cash ledger and enter the amount as ₹ 4,00,000
5. In the Debit field, select Kotak Mahindra Bank
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6. Press Enter to view the Bank Allocations screen, by default Transaction Type will be
selected as cash, press Enter from the amount field, you will get the Cash
Denominations screen
The Cash Denominations screen appears as shown in the figure 8.43:
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Figure 8.43 Cash Denominations Screen

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7. In the Denominations screen enter the denomination of amount deposited as shown

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in the figure 8.44:

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Figure 8.44 Cash Denominations Screen
8. Press Enter to accept the Cash Denomination screen & accept the Bank Allocation
screen
The Contra Voucher Creation screen appears as shown in the figure 8.45:
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Figure 8.45 Contra Voucher Creation– Cash Deposit
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Once after recording the entry of figure 8.45 let us view & generate Cash Deposit Slip in
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Tally.ERP 9.
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Step 2: Generating of Cash Deposit Slip

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To view Cash Deposit Slip menu, follow the steps given below:
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1. Go to Gateway of Tally > Banking >Deposit Slip>Select Cash Deposit Slip

2. Select Kotak Mahindra Bank
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The Cash Deposit Slip screen appears as shown in the figure 8.46.
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Figure 8.46 Cash Deposit Slip Screen
3. Press Alt+P to print cash deposit slip
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The Printing Cash Deposit Slip screen appears as shown in the figure 8.47:
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Figure 8.47 Printing Cash Deposit Slip Screen
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4. Set the option Print Cash Deposit Slip to Yes
5. Press Enter to get the Cash Deposit Slip Details and Cash Denomination as shown in
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the figure 8.48:
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Figure 8.48 Cash Deposit Slip Details and Cash Denomination Screen
6. Press Enter to get the Cash Deposit Slip Print
The Cash Deposit Slip (Banker’s Copy) appears as shown in the figure 8.49:
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Figure 8.49 Cash Deposit Slip (Banker's Copy)

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The Cash Deposit Slip (Customer’s Copy) appears as shown in the figure 8.50:
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Figure 8.50 Cash Deposit slip (Customer’s Copy)
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8.6.2 Cheque Deposit Slip
It enables the user to generate the deposit slip for payments received through cheque which need
to be deposited into the bank.
This is the standard format to deposit cheques to bank. This is the slip where all received cheque
details are available, information entered during receipt voucher. It avoids manual error, time &
effort, It is easy to write if it is one or two cheques per day, however very much useful if more
cheques are depositing every day.
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The Cheque Deposit Slip in Tally ERP 9 displays only those transactions which have Cheque as
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Transaction type allocated in the Bank Allocation screen in the Receipt voucher entry.
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Illustration 5: Cheque deposit transaction and generating cheque seposit Slip.
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Date Particulars
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Coffee Federation Ltd. received advance payment from Aruna Traders and
deposited the cheque of ₹ 3, 10,000 to Kotak Mahindra Bank.
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Customer Bank : ICICI Bank (India)

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Cheque number: 002145

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Table 8.10
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Step 1: Recording of Receipt Voucher

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3. In the Credit field, select Aruna Traders ledger and enter the amount as ₹ 3,10,000
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4. In the Debit field, select Kotak Mahindra Bank

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5. Press Enter to view the Bank Allocations screen,

 Select Transaction Type as Cheque/DD
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 Amount ₹ 3, 10,000 will be captured automatically.

 Provide the Inst no. as 002145
 Enter the Cheque date as 25-08-2017 in the Inst date field
 Select ICICI Bank (India) from the List of Banks.
The Bank Allocations screen appears as shown in the figure 8.51:
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6. Accept the screen LE
7. Enter the Narration and accept the screen.
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The Receipt Voucher Creation screen appears as shown in the figure 8.52:
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Figure 8.52 Receipt Voucher Creation– Cheque Deposit

Step 2: Generating of Cheque Deposit Slip
To view Cheque Deposit Slip menu, follow the steps given below:
1. Go to Gateway of Tally > Banking >Deposit Slip>Select Cheque Deposit Slip

2. Select Kotak Mahindra Bank
The Cheque Deposit Slip screen appears as shown in the figure 8.53:
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Figure 8.53 Cheque Deposit Slip Screen
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3. Press Alt+P to print cheque deposit slip LE
The Printing Cheque Deposit Slip screen appears as shown in the figure 8.54:
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Figure 8.54 Printing Cheque Deposit Slip Screen
4. Set the option Print Cheque Deposit Slip to Yes

5. Set the option Print Customer’s Copy also to Yes
6. Press Enter to get the Cheque Deposit Slip Print
The Cheque Deposit Slip (Banker’s Copy) appears as shown in the figure 8.55:
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Figure 8.55 Cheque Deposit Slip (Banker's Copy)
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The Cheque Deposit Slip (Customer’s Copy) appears as shown in the figure 8.56:
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Figure 8.56 Cheque Deposit slip (Customer’s Copy)
Note: Cheque’s deposited can also be entered in Contra Voucher similar to Cash Deposit.
8.7 Payment Advice

Payment Advice is an advice or a document sent to the supplier or the other parties along with
the cheque or other instrument. Payment Advice slip is sent along with the payment voucher
containing the payment details and requesting an acknowledgement for the remittance made.
This is the clear document for receiver to know for what reason payment has been made. If
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payment is made without advice, then other end user may find difficult to verify/ trace the
details. The benefit of this document will help the receiver to pass respective transactions in their
books of accounts. And the receiver may revert immediately if any discrepancy is found in
transaction.
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Illustration 6: Generating payment advice
Date Particulars
Coffee Federation Ltd. made a cheque payment of ₹ 2, 20,000 to Ranjan

Enterprises through Kotak Mahindra Bank.
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Cheque book range : 000001 to 000100
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Cheque book name : Kotak Book 1
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Table 8.11
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Step 1: Recording of Payment Voucher
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3. Press F12: Payment Standard Configuration, and set the option Use single entry
mode for payment/receipt/ contra vouchers to Yes
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4. Under Account field select Kotak Mahindra Bank

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5. Under Particulars field Select Ranjan Enterprises ledger and enter the amount as ₹ 2,
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20,000.
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 In the Name field by default the voucher number will be shown, change it, if
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required
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 Due Date, or Credit Days field, keep it blank

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 The Amount ₹ 2,20,000 will be captured automatically

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8. In the Bank Allocation screen,
 Select Transaction Type as Cheque
 Amount ₹ 2, 20,000 will be captured automatically.
 The Cheque range will capture 000001-000100 automatically by default.
 Cross using will be A/c Payee by default
 The Cheque number will capture 000006 automatically in the Inst no. field
 Enter the Cheque date as 26-08-2017 in the Inst date field
9. Accept the Screen
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screen
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13. Press Enter if you want to Print Cheque, or make it No.

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Step 2: Generating of Payment Advice

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To print Payment Advice, follow the steps given below:

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1. Go to Gateway of Tally > Banking > Payment Advice

2. Select Ranjan Enterprises ledger from the List of Ledgers
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3. Press Spacebar to select the payment voucher recorded on 26-08-2017. (Payment made
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through Kotak Mahindra Bank Account)

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4. Press Alt+P to Print Payment Advice.

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The Printing Payment Advice Screen appears as shown in the figure 8.58:
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Figure 8.58 Printing Payment Advice Screen
5. Press Enter and accept the screen

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The Payment Advice Screen appears as shown in the figure 8.59:

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Figure 8.59 Payment Advice Screen
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8.8 Managing of Post-dated Cheques
Post-Dated vouchers are ignored by Tally.ERP 9 until the date in question. This is useful for
entering transactions that take place on a regular basis. For example, if there is a payment for
something on instalments, user can set up the payments in advance, and Tally.ERP 9 will only
enter them in the ledgers as and when they fall due.
A voucher is marked as post-dated at the time of creation or alteration. Click the button Post-
Dated or press Ctrl+T to make the voucher a Post-Dated voucher.
Business Scenario
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Coffee Federation Ltd., expanded its business and now deals in buying and selling of Coffee
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Mugs and for few customers they sell on instalment basis and the payment has to be made
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through PDC cheque in advance.
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Coffee Federation Ltd., should not record the cash receipt until the cheque date arrives, nor
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should it reduce the related accounts receivable balance until that date listed on the cheque.
Thus, they decide to use post-dated cheque which has no impact on the financial statements of
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Coffee Federation Ltd., until the date listed on the cheque. LE
Illustration 7: Recording of PDC related transactions in Tally.ERP 9
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Date Particulars
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Coffee Federation Ltd., sold 1000 Quantity of Coffee Mugs on credit to

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MK Traders at ₹ 100 each. MK Traders issues two PDC cheque of fifty

thousand each and the cheque is post-dated to 02-10-2017 and 02-11-2017.
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Table 8.12
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To record the transactions of table 8.12, in the books of Coffee Federation Ltd., first ensure that
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the required ledgers are created in Tally.ERP 9.

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Party Ledger
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Go to Gateway of Tally > Accounts Info > Ledgers > Create

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MK Traders
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Name Enter as MK Traders
Default Credit period Leave it Blank
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Check for credit days during voucher entry Set to No
Table 8.13
Sales Ledger
Sales
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Enter Enter as Sales
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Inventory Values are effected Set to Yes
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Table 8.14
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Create stock item
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Go to Gateway of Tally > Inventory Info > Stock Items > Create
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Coffee Mugs
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Name Enter as Coffee Mugs

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Units Select as Nos. (Bring the cursor in the unit

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field and press Alt+C)

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Opening Balance Enter as qty- 5000, rate-90

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Table 8.15
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Step 3: Recording of Sales Transactions
1. Go to Gateway of Tally > Accounting Vouchers > Press F8: Sales

2. Press F2:Date and enter the date as 27-08-2017
3. Make sure the sales voucher is in item invoice mode, if it is in voucher mode press
Ctrl+V
4. Enter the Reference no: as 1
5. In the Party A/c Name field enter as MK Traders
6. In the Sales Ledger field select as Sales ledger
7. Under Name of Item field select the stock item Coffee Mugs
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8. Enter the quantity as 1000, rate as 100 and the amount will get captured automatically
9. In the Bill wise Details screen, select type of reference as new reference and enter the bill
details and save the Bill wise Details screen
The Sales Voucher screen appears as shown in the figure 8.60:
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After recording the sales transaction, the post-dated cheque received by MK Traders need to be
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accounted/recorded in Tally.ERP 9. Following steps will explain how to record the post -dated
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transaction in Tally.ERP 9.
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Step 4: Recording the Post-Dated Transactions

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1. Go to Gateway of Tally > Accounting Vouchers > Receipt

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2. Click F2: Date and provide the date of cheque i.e., 02-10-2017
3. In the Voucher Creation screen, press Ctrl+T: Post-Dated. The voucher will be
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marked with the words Post-Dated as shown in the figure 8.61:

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The Receipt Voucher Creation screen with Post-Dated option appears as shown in the figure
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8.61:
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Figure 8.61 Recording the Post-Dated Transaction in Accounting Voucher
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Note: From the above screen, if you press Ctrl+T: Current, then the post-dated
option will be removed from the screen.
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Activity: Create the SBI Bank account under Bank Accounts group
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4. In Account field select SBI Bank

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5. Under Particulars, select as MK Traders from whom the post-dated cheque has been
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received
6. In the Bill wise Details screen select against ref. and enter the amount as 50,
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Note: Once after selecting the party ledger, if the Bill wise Details screen is not
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appearing, then press F12: Configure and enable the option Pre allocate bills for
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payment/receipt/journal voucher
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7. Press Enter
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8. Fill in the required details. A new field, PDC receipt date, will be available on the screen.
This field is available for post-dated transactions only. Fill in the date on which the post-
dated cheque was received from the party. By default, the system date is captured
9. Press Enter to save the Bank Allocations screen. The Voucher Creation screen appears
The Voucher Creation screen appears as shown in the figure 8.63:
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Figure 8.63 Completed Post Dated Receipt Voucher

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Note: Press F12: Configure from the receipt entry voucher and enable the option Show
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final balances of bill in order to get the amount that remains due, if any post allocation is
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done in the Bill-wise Details screen.

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Activity: Record one more post-dated receipt transaction for ₹ 50,000 dated 02-11-2017.
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Once after recording the transaction the details will be updated in Post-dated Summary report.
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8.9 Notional Bank

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A notional bank exhibits the same features as a normal bank account, created under the group
Bank Accounts. You can create a notional bank account when you are:
 Unable to decide the bank to which the post-dated cheques received are to be deposited,
while creating the post-dated transactions.
 Manually converting the post-dated cheques received.
Business Scenario:
Coffee Federation Ltd., is not able to decide the bank to which the post-dated cheques
received are to be deposited while recording the transaction.
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Coffee Federation Ltd., decided to use the notional bank feature of Tally.ERP 9.
Illustration 8: Configuration of notional bank and recording of post-dated transaction

using notional bank in Tally.ERP 9
Date Particulars
Coffee Federation Ltd., sold 2,000 qty of Coffee Mugs at ₹ 100 each
on credit to Tara Traders and the total sales value is ₹ 2, 00,000.
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Tara Traders issues two PDC cheque leafs of one lakh each and the
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cheques are post-dated to 03-10-2017 and 03-11-2017
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Table 8.16
To record the transactions of table 8.16, in the books of Coffee Federation Ltd., first ensure that
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the required ledgers are created and notional bank is configured in Tally.ERP 9.
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Activity:
1. Create a party ledger Tara Traders under Sundry Debtors.
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2. Record the sales transaction which is made to Tara Traders on 27-08-2017.
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Step 1: Enabling Notional Bank

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1. Go to Gateway of Tally > F11:Company Features > F1:Accounting Features

2. Enable the option Set/alter post-dated transaction features to Yes
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Figure 8.64 Enabling Post Dated Transaction Features
Activity: Create a bank named Notional Bank for recording transactions related to above scenario.
3. Select the Notional Bank account for transacting with post-dated cheques
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The Post-dated Transaction Features screen appears as shown in the figure 8.65
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Figure 8.65 Selecting Notional Bank
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4. Press Enter and accept the Accounting Features screen
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Step 2: Recording the Post-dated Transactions using Notional Bank

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1. Go to Gateway of Tally > Accounting Vouchers > Receipt

2. In the Voucher Creation screen, Press Ctrl+T: Post-Dated. The voucher will be marked
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with the words Post-Dated.

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3. Click F2: Date and provide the date of the cheque i.e., 03-10-2017
4. In Account field select a Notional Bank
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5. Under Particulars, select as Tara Traders

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6. Enter the amount as ₹ 1,00,000, press Enter to view Bill wise Details screen
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7. Select the Against Ref in the Bill wise Details and the amount will get captured as
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1,00,000
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8. Press Enter from the total amount field

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Figure 8.66 Bank Allocations for Notional Bank Receipt
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Note: If instrument number field is not appearing then press F12: Configure, from the above screen and
enable the option Show instrument number during voucher creation.
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9. Fill in the required details in Bank allocations screen
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10. Press Enter to save the bank details. The Voucher Creation screen appears.
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The Voucher Creation screen appears as shown in the figure 8.67

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Figure 8.67 Post-Dated Receipt with Notional Bank
Activity: Record the following post-dated transaction

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Date Particulars
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Received post-dated cheque from Tara Traders for ₹ 100,000. Date of post-dated
transaction is 03-11-2017. Cheque number: 300002.
Hint: Select Notional Bank
Table 8.17
Note: Notional Bank can be changed to actual bank from Post-dated Summary report
8.10 Post-dated Report
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The Post-dated Summary report provides a month-wise breakup of transactions for which the
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post-dated cheques have been received or issued.
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To get the Post-dated Summary report follow the below given path:
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1. Go to Gateway of Tally > Banking > Post-dated Summary > Select the required
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Bank, in this case select as Notional Bank
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The Post-dated Transactions Monthly Summary appears as shown in the figure 8.68
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Figure 8.68 Post-dated Transaction Monthly Summary Report

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From the report of figure 8.68, drill down by placing the cursor under Received field, to view
post-dated received report.
Similarly, you can drill down by placing the cursor under Issued field, to get the post-dated
issued report.
Drill down from one of the months in the received column to get the post-dated received report
which is shown in the figure 8.69:
The Post-dated Received report screen appears as shown in the figure 8.69:
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Figure 8.69 Post-dated Received Report
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Note: Status is showing as unlinked because we have recorded the entry by selecting the
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Notional Bank, once the entry is linked to the actual bank, then the entry will be
removed from the above screen as shown in figure 8.69.
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2. Press F2:Period and enter the period 01-07-2017 to 30-11-2017

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3. Select the entry which is recorded on 03-10-2017, to select the entry press Spacebar
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The Post-dated Transactions screen appears as shown in the figure 8.70:

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Figure 8.70 Altering the Status of Post-dated Receipt
4. Press Alt+F4 and link to the actual bank
The New Bank Name field screen appears as shown in the figure 8.71
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Figure 8.71 Linking Post-dated Transaction to Actual Bank
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5. Select the actual bank to which the entry has to be linked, in the above screen (figure 8.71)
select SBI Bank ledger and press enter, you will get the screen as shown in the figure 8.72:
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The Post-dated Received screen after linking to actual bank appears as shown in the figure
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8.72:
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Figure 8.72 Post-dated Transactions Report
In the figure 8.72, the entry which was linked has been removed from the report.
Note:
 The same activity can be done from Post-dated issue report (Payment made in
PDC). Post-dated report can be viewed from Day Book report by pressing the key
Alt+T , enter the complete period to get all the post-dated transactions.
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 Go to Gateway of Tally> Display> Exception reports> Post-Dated Voucher, in this
report you will get the list of all post-dated transactions.
Activity: Check the following reports and make the post-dated transaction as regular.
 Check the Balance Sheet report and take down the total value of Bank Account:
o Go to Gateway of Tally > Balance Sheet>Select Current Asset Account
o Check the Bank Account value.
 Make the post-dated transaction as regular:
o Now, go to Gateway of Tally> Display> Exception reports> Post-dated voucher, in this report you
will get the list of all post-dated voucher.
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o Select the entry which is recorded on 02-09-2017, drill down to voucher level.
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o Press Ctrl+T: Current option and save the entry, to save at one shot press Ctrl+A. the entry will be
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removed from the list of post-dated voucher.
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 Check the Balance Sheet report and take down the total value of bank account and compare it with the
previous bank account value.
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 The value will be increased, because we have made the post-dated voucher as a regular voucher/current
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voucher and the same is updated instantly in the report.
8.11 Handling e-Payments in Tally.ERP 9 ED

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In Tally.ERP 9, we can maintain electronic fund transfer from one bank to another or same bank
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transfer. This allows us to record transactions easily and make payments to vendors and
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suppliers quickly. It also allows direct upload or export payment instructions to the bank portal.
Presently this feature is given to DBS Bank customers only.
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Payment instructions can be sent directly to bank from Tally.ERP 9 (currently applicable for
DBS Bank), if e-payment feature is activated or enabled. To send payment instructions directly
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to the bank for authorization, you need to have your Tally.NET ID registered with your bank.
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It also provides a seamless integration between the business and the bank on real time basis. You
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can directly send all completed transactions to the bank through online with a click of a button,
and access real-time status of the transactions.
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Business Scenario
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Coffee Federation Ltd., makes an online payment for vendor/supplier and also sends the e -
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payment details to DBS Bank on regular basis.

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Illustration 9: Recording of e-payment entry and uploading the details to DBS Bank
Date Particulars
Purchased 500 Qty of Coffee Mugs at ₹ 50 each from Shine Traders on
credit.
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Shine Traders made an online payment through DBS Bank for ₹ 25,000
to the supplier.
Table 8.18
To record the above transactions in the books of Coffee Federation Ltd., first ensure that the
required ledgers are created in Tally.ERP 9.
Bank Ledger
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To create Bank ledger follow the steps given below:
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1. Go to Gateway of Tally > Accounts Info > Ledgers > Create
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2. Enter the Name as DBS Bank
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3. In the Under field select Bank Accounts head
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4. Enter the Bank Account Details as shown below:
 A/c holder’s name: Enter as Bhaskar Software Solutions
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A/c no: Enter as 0051234567
 IFS code: Enter as DBSS0IN0811
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 Bank name: Select as DBS (India) from the List of Banks
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 Branch: Indranagar
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Note: Once after selecting the bank name as DBS Bank, you will get the e-payment feature under Bank
Configuration.
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The Selection of Bank from List of Bank screen appears as shown in the figure 8.73:
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Figure 8.73 Selecting the DBS Bank from the List of Banks
5. Under Bank Configuration enter the following details

 Set the option Set cheque books to No (Enable the same option if you wanted
to configure cheque book details)
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 Set the option Set cheque printing configuration to Yes (by this you can define
the cheque details like cheque dimensions details)
 Enable auto reconciliation, you can enable this option if you want to use the
auto reconciliation feature
 Set the option Enable e-Payments to Yes and Set/alter e-Payments
configuration to Yes (Ensure that this option is set to yes, in order to perform
the online payments in Tally.ERP 9), you will get the following screen
The e-Payments Configuration screen appears as shown in the figure 8.74:
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Figure 8.74 e-Payments Configuration Screen

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6. In the e-payments configuration screen as shown in figure 8.74, enter the location of
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payment instruction
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Note:
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 You can send a payment instruction (currently applicable for DBS bank) from Tally.ERP 9 to
your bank if you have enabled the e-Payments feature. For other banks, you can export the payment
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instruction in the required format, and upload the same to your bank portal. By default, the location
of payment instructions will be Tally folder path.
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Enable e-Payments: This option is applicable only for banks supported for electronic modes of payment
i.e. DBS Bank – India, Standard Chartered Bank – India, Standard Chartered Bank – UAE,
YES BANK – India, ICICI Bank – India and Kotak Mahindra Bank.
7. Press Enter, to go back to the Ledger Creation screen
The DBS Bank Ledger Creation screen appears as shown in the figure 8.75:
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Figure 8.75 DBS Bank Ledger Creation Screen
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Activity: Alter the DBS Bank ledger and enter the opening balance as ₹ 5, 00,000
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Party Ledger
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Let us create a party ledger and enter the bank details in the same ledger, to create follow the
steps given below:
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2. Enter the Name as Shine Traders

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3. In the Under field select as Sundry Creditors

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The Ledger Creation screen appears as shown in the figure 8.76:

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Figure 8.76 Party Ledger Creation Screen
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4. Enable the option Provide Bank details to Yes, you will get the Bank Details screen
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5. Enter the following details as shown in the figure 8.77:
 Select the Transaction Type as e-Fund Transfer
 Enter the A/c no details
 Enter IFS code
 Select the Bank
The Completed Bank Details screen appears as shown in the figure 8.77:
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Figure 8.77 Completed Bank Details Screen

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Note: Once Transaction Type is selected as e-Fund Transfer, then while recording the transaction it will
auto identify the same bank or inter-bank transfer details based on the bank name selected while recording the
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transaction.
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6. After selecting the Bank from List of Banks, press Enter, you will go back to ledger
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creation screen
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The Completed Ledger Creation screen appears as shown in the figure 8.78:
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Figure 8.78 Completed Ledger Creation Screen
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Note: No need of creating purchase ledger as the same is created by you for recording previous purchase
transaction.
Activity: Record the following Transaction.

Date Particulars
01-10-2017 Purchased 500 Qty of Coffee Mugs at ₹ 50 each from Shine Traders on credit.
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Table 8.18
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Hint: While recording the purchase entry if the purchase ledger is not appearing, then alter the same ledger and
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enable the option Inventory values are effected.
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Step: 2 Recording of e-Payment Transaction
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To record the transaction, follow the steps given below:
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1. Go to Gateway of Tally > Accounting Vouchers > Press F5:Payment
2. Press F2:Date and change the date as 10-10-2017
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3. In the Account field select as DBS Bank
4. Under Particulars field select as Shine Traders
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5. Enter the amount as ₹ 25,000, press Enter you will get the Bill wise Details screen.
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6. In the Bill wise Details screen enter the following details:

 In Type of Ref select as Against Ref
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 Select the bill from pending bills list

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
The amount will get captured automatically, enter and save the Bill wise d etails
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screen
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7. Press Enter till you get the Bank Allocations screen, by default the bank details provided
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at the time of creation of party ledger are captured here.

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Note: From the screen of figure 8.79, we can also alter the bank details like A/c no, IFS code and Bank.
8. Accept the Bank Allocations screen
9. Enter Narration
The e-Payment Voucher Creation screen appears as shown in the figure 8.80:
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Figure 8.80 e-Payment Voucher Creation Screen

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Once after recording the entry of figure 8.80, the details will reflect in the e-payments reports,
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you can check the same from banking report.

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8.11.1 e-Payments Report

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In Tally.ERP 9, we can check the details of e-payments transactions in e-payments reports. This
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report displays the details of all payment instructions that are ready to be sent to bank and it also
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displays the details of transactions with incomplete information and information mismatch with
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masters.
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Let us check the e-Payments report in Tally.ERP 9
To check, follow the below given steps:
1. Go to Gateway of Tally > Banking > e-Payments
The e-Payments Report screen appears as shown in the figure 8.81:
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Figure 8.81 e-Payments Report Screen
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2. In the report of figure 8.81, we will get the details of the entry which was recorded
previously. And also the details of Transaction with incomplete information and
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information mismatch with masters will get captured here
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3. From the e-payments screen, press Ctrl+B, to send the transaction to DBS Bank. For
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now do not make any changes.

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Activity: Record the following transaction

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Date Particulars
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16-10-2017 Make a payment of ₹ 30,000 to Ram. While recording the entry do not enter any bank
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details but select the Transaction Type as e-fund transfer.

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16-10-2017 Make a payment of ₹ 20,000 to Shisha Traders. Make sure while creating the Shisha
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Traders ledger enable Bank details and enter the following details.
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 Transaction Type as e-fund transfer

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A/c no. as 12345678965

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 IFS code as SBIN0123456

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 Bank as State Bank of India (India)

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While recording the payment entry change the A/c no. as 123456 and IFS code as
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DSBN0123456,in the Bank Allocations Screen, then save the entry
16-10-2017 Make a payment of ₹ 6,000 to Sona Enterprises, Make sure while creating the party
ledger provide the Bank details and enter the following details.
 Transaction Type as e-fund transfer
A/c no as 34567867896
 IFS code as DBSN0123478
 Bank as DBS (India)
 While recording the payment entry do not make any changes in the Bank
Allocations screen, accept the screen as it is.
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Once after recording the entry check the e-payments report and observe the effect of the entry
in the report.
Table 8.19
8.11.2 Exporting e-Payment Transactions from e-

Payments Report
In Tally.ERP 9, we can export the online payment transaction details from e-payment report to
bank. And also can export the transactions in the required format for uploading to the bank’s
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portal. Once after uploading the exported file on the bank's portal, we can authorise them for
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payment.
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Note: Exporting e-payment transaction instruction from e-payments report is given only for the following Banks
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 Standard Chartered Bank (India)
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 Standard Chartered Bank (UAE)
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 Kotak Mahindra Bank (India)
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 YES Bank (India)
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 ICICI Bank (India)
 DBS Bank customers can export as well as send the payment instructions directly to DBS Bank portal.
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Step 1: Rectify the Transactions which are falling under the head “Transactions with
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incomplete information” and “Transaction with information mismatch (with master)”

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To rectify the entry which falls under Transaction with incomplete information, follow the steps
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given below:
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In the report of figure 8.82 you are getting the following details:
 Transactions with incomplete information: It provides the information about the

number of transaction in which the bank details like A/c no., IFS code, Bank Name, etc.,
is not provided. In this field the first payment entry which you have made to Mr Ram is
reflecting.
 Transaction with information mismatch (with master): It provides the information
about the number of transaction in which the bank details provided at the entry level is
not matching with the bank details provided at the Master/ledger level (Party Ledger
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Level). In this field the second payment entry which you have made to Shisha Traders is
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reflecting.
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 Ready for Sending to Bank: It provides the information about the transactions which
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are ready to be sent to the bank (This feature is provided only for DBS Bank) or export
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the transactions (all other banks) to the required template. In this field the third payment
entry which you have made to Sona Enterprises is shown.
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 Transactions sent to Bank (Unreconciled): It provides the information about the
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transactions which are sent to bank (DBS Bank). Transactions sent to bank is blank
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because you have not sent any e-payment transactions to bank.
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2. Drill down from the field Transactions with Incomplete information and rectify the
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entry
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The e-Payment (Transactions with Incomplete Information) screen appears as shown in the
figure 8.83:
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Figure 8.83 e-Payment (Transactions with Incomplete Information) Screen
3. In the figure 8.83, we are getting the error as Account Number is Mandatory and IFSC
Code is mandatory.
4. To rectify the error, press Enter on the entry line and you will get the Bank Details screen
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5. Enter the correct IFS code and press Enter, to get the screen as shown in the figure 8.84
The Bank Details screen appears as shown in the figure 8.84:
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Figure 8.84 Bank Details Screen
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6. Press D:Add so that the IFS code & Account Number entered should get updated in
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master
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Activity: Alter the ledger by name Ram and enable the option Provide bank details to Yes, we can observe
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that the IFS code & Account number is updated in the party master. This is because we have used the option D:
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Add while rectifying the error.

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Note: In the above screen as shown in the figure 8.84, the following details are appearing:
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
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Press A to accept the transaction with the information you entered

 Press D to accept the transaction and also update your master ledger
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 Press B if you wish to go back to the screen

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7. Press Enter. The entry will get removed from the screen and the same entry will move
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to Ready for sending to bank field.

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8. In the figure 8.85, we can observe that the entry is appearing under Ready for sending to
bank field
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To rectify the entry which falls under Transaction with information mismatch (with
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master), follow the steps given below:

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1. From the e-Payments report drill down from Transaction with information mismatch
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(with master) field

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The e-Payment (Transactions with Information Mismatch with Master) screen appears as
shown in the figure 8.86
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Figure 8.86 e-Payment (Transactions with Information Mismatch with Master) Screen
2. In the figure 8.86, we are getting the warning as Account Number Altered, IFS Code
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Altered
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Note: In the above screen Alt+A: Accept as is option is available for you to accept the entry as it is.
3. Press Enter from the figure 8.86, you will get the Update Bank Details screen
The Update Bank Details screen appears as shown in the figure 8.87:
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Figure 8.87 Update Bank Details Screen

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4. Press F6: Copy Master Info., this will copy the master bank details to voucher, as shown
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in the figure 8.87

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The Update Bank Details screen (Copy Master Info.) appears as shown in the figure 8.88:
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Figure 8.88 Update Bank Details Screen (Copy Master Info.)
5. In the figure 8.87, we can observe that the F6: Copy Mater Info., button is greyed out
6. Accept the screen, the entry will move out from the screen
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Activity: Go to e-payments report and observe that the entry of figure 8.88, will appear under Ready for
sending to bank field.
Step 2: Exporting e-Payment Transactions
To export the e-payment transaction, follow the steps given below:

2. Press Enter on Ready for sending to bank field, you will get the e-payments
transactions which are ready for sending
The e-Payments Transactions Report Screen (Ready for Sending to Bank) appears as
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Figure 8.89 e-Payments Transactions Report Screen (Ready for Sending to Bank)
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Note: In the figure 8.89, under Transaction Type field you are getting Same Bank Transfer and
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NEFT, this is updated automatically based on the bank selected in the party ledger.
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3. From the e-payments screen, select the required transactions and press E: Export, to
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export the payment instructions to bank (Here select all the transactions by pressing Ctrl
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+ Spacebar key
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The Export Payment Instructions screen appears as shown in the figure 8.90:
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Figure 8.90 Export Payment Instructions Screen
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4. Press Enter from the exporting screen, you will get the following screen with successful
message
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Note: Enable the option Include Bill Details to Yes in order to get the invoice number/bill number
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details.
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The e-Payments Screen (Successful message) appears as shown in the figure 8.91:
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Figure 8.91 e-Payments Screen (Successful message)
5. In the figure 8.91, we are getting the information about the location and file name, press
enter. The file will be available in the exported location.
6. Now one can log in to bank portal to upload the exported output file from local
system
7. Once after exporting the entry the above payment entries will reflect in Transactions
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sent to bank (unreconciled) field.
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The entries are reflected under Transactions sent to bank (unreconciled) field.
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Note: DBS Bank customers can directly send the e-payment instructions to the bank portal instead of
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exporting the file and uploading the same in bank portal like other banks.
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8.11.3 Sending Payment Instructions to Bank

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DBS Bank customers have a facility to upload the payment instructions directly to the Bank
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portal and authorise the same, instead of exporting the file and then uploading it.
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Activity: Record the following transactions

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Date Particulars
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Made a payment of ₹ 20,000 to Shisha Traders, through DBS Bank.
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Made a payment of ₹ 25,000 to Shisha Traders through DBS Bank.

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Table 8.20
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Once after recording the above entry, let us send the payment instructions directly to DBS Bank.
To send payment instructions directly to DBS Bank, follow the steps given below:
Step 1: Enable Security Control
Only a Tally.Net User will have permission to send the e-Payment instructions to DBS portal
directly from within Tally. Hence creation of Tally.Net User is mandatory.
1. Go to Gateway of Tally > Press Alt+F3 > Alter
2. Select the company
3. Enable the option Use security control to Yes
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4. Enter the Name of administrator as admin
5. Enter the password as admin123
6. Enter the same password in the Repeat password field
7. Save the Company Alteration screen
Step 2: Authorise Tally.NET User
1. Go to Gateway of Tally > Press Alt+F3 > Security Control
2. Enter on Users and Passwords
The Users for Company screen appears as shown in the figure 8.93:
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Figure 8.93 Users for Company Screen

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3. Enter Security Level and Username, make sure the user name should be registered in
DBS Bank (If it is not registered then you cannot send the payments instruction directly
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to bank from Tally.ERP 9)

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4. Press Enter from User for Company screen and save

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Note: The username given in the list of users for company as shown above is the e mail ID registered with DBS
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Bank. After creating the security level, Tally.Net password will be sent to the same e-mail ID through which you
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can login to the same company.

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Step 3: Load the Company with Tally.NET User

1. Open the company and enter the Name of User and Password
The Company Login screen appears as shown in the figure 8.94:
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Figure 8.94 Company Login Screen
2. Press Enter, now you have logged in to the company with Tally.NET User
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Note: The Tally.NET User I.D used only for illustration purpose.
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Step 4: Sending the payment instructions directly to the Bank
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To send the payment instructions, follow the steps given below:
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1. Go to Gateway of Tally > Banking >e-Payments

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2. Press Enter on Ready for sending to bank field

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3. Press Ctrl+ Spacebar and select both the entries

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The e-Payments Screen (Ready for Sending to Bank) appears as shown in the figure 8.95
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Figure 8.95 e-Payments Screen (Ready for Sending to Bank)

4. From the e-payments screen as shown in the figure 8.95 press Ctrl+B, to send the bank
details directly to bank, you will get the screen as shown in the figure 8.96
The Upload Payment Instructions screen appears as shown in the figure 8.96:
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Figure 8.96 Upload Payment Instructions Screen
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5. Press Enter from the Uploading payment Instructions screen as shown in the figure
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8.96, to get the screen as shown in the figure 8.97 LE
The e-Payments Screen with Successful Message appears as shown in the figure 8.97:
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Figure 8.97 e-Payments Screen with Successful Message

Note: Once the payment instructions are updated on your bank portal, you can authorize the same.
6. Press Enter from the e-payments screen as shown in figure 8.97, the entry will move
from above screen (figure 8.97) and appears in e-payments report under the field
Transaction sent to bank (unreconciled)
7. Press Enter on Transaction sent to bank (unreconciled) field
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Note: First four entries status is showing as exported because in the previous section we have exported the same.
8. Authorise last two Transactions
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9. From the report of figure 8.98, press Ctrl+T, to authorise, this will lead you to DBS
Bank login page.
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10. Log in to DBS portal and authorize the transactions for making payment to the party
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11. Transactions can fall under one of the following categories:

 Submitted – When transactions are sent to the bank
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 Verifying – When transactions are under verification by the bank

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 Authorisation pending – When transactions have been accepted by the bank, and
are available for authorization on the bank’s portal
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 Authorised – When transactions are authorised on the bank’s portal

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 Processed – When transactions are processed by the bank

 Failed – When transactions failed due to incorrect sender A/c no., invalid IFS
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code, unregistered TSS ID with bank, and so on

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Note: You can reset the status of entry from the above screen by using the key F7: Reset Status, once it is
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reset the entry will move back to Ready for sending to bank field
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8.12 Updating the Bank Details Instantly in

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Tally.ERP 9
If you are already maintaining the data in Tally.ERP 9 and have many party ledgers in which
bank details are not configured, it may be very difficult and time consuming to enter the bank
details manually in each and every party ledger. To address this problem you can make use of
Import Bank Details feature in Tally.ERP 9
Activity: Create the following ledgers under Sundry Creditors and make sure not to enter bank details.
 Magadi Traders
 Rajbhog Pvt. Ltd.
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 TM Traders
Note: The above ledgers are created for illustration purpose only.
To Import the Bank Details of all the party ledger, follow the steps given below:
Step 1: Update the Party Bank Details in Excel Sheet
1. Go to Gateway of Tally > Import Data > Bank Details
2. Press Alt+P: Payee Sample File, to export the blank excel sheet to feed the party bank
details
The Exporting Sample File screen appears as shown in the figure 8.99:
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Figure 8.99 Exporting Sample File Screen

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3. Enter the export location (This is the location in which your exported file will be saved)
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4. Enter other details as shown in the figure 8.99

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5. Press Enter to accept the screen, the blank excel sheet will get opened
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The Blank Exported Excel Sheet screen appears as shown in the figure 8.100:
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Figure 8.100 Exported Blank Excel Sheet
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6. Feed the details in the above screen
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The Excel Sheet with Ledger Bank Details appears as shown in the figure 8.101:
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Figure 8.101 Excel Sheet with Ledger Bank Details

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Note: In the above screen you can click on Help option and refer the criteria for entering the bank details in the
excel sheet
7. Save the excel sheet and close
Step 2: Import the Bank Details of the Ledger from Excel
To import the details bank details of ledger from Excel to Tally, follow the below given steps:
1. Go to Gateway of Tally > Import Data > Bank Details

2. Enter the location and name of the excel file to be imported, the path format should
be (Location of folder\excel sheet name.xlsx) for example: D:\Tally.
6.0.2_exe\Ledger Bank Details.xlsx
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Note: If the location is not in the proper format as shown in above screen then the file
will not get imported.
The Importing of Payee Bank A/c Details Screen appears as shown in the figure 8.102:
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Figure 8.102 Importing of Payee Bank A/c Details Screen
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3. Press Enter from the above screen, the bank details will get updated in the party ledger
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and you will get the below given screen with success message
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The Completed Importing of Payee Bank A/c Details Screen appears as shown in the figure
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8.103:
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Figure 8.103 Completed Importing of Payee Bank A/c Details Screen

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4. Press Enter. All the ledgers will get updated with the bank details which were
available in the excel sheet.
Once after importing the bank details, alter the Mahavir party ledger and enable the option
Provide banks details to Yes and check. Bank details will be updated.
Conclusion
Banking Feature is a very important aspect of any business. In Tally.ERP 9 one can print cheque,
keep track of cheque books and cheque numbers by using the feature Cheque Printing. And also
we have learnt how e-payments transactions are handled in Tally.ERP 9. We can generate cash
deposit and cheque deposit slips instantly; including payment advice. We can handle Bank
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Reconciliation in which we have the option to reconcile manually or automatically in Tally.ERP
9.
Key Takeaways
 The Cheque Printing option allows you to print all the pending, already printed or the
required cheques continuously from a single screen. Using cheque printing feature in
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Tally.ERP 9, manual errors can be avoided.
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 Tally also has provision to select respective bank’s cheque image to identify the cheque.
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By doing this configurations will be created automatically.
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 Tally ERP 9 allows creation of multiple cheque books with unique ranges for every bank
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in bank ledger creation, selection of cheque ranges during voucher entry and auto cheque
numbering, & giving a report of the status of all the cheques in the form of cheque register.
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Whenever required, you can issue blank cheque and cancel cheque as per business
requirements.
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 Reconciliation of bank balance as per the cash book with the bank balance as per the pass
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book. In Tally.ERP 9, the vouchers can be reconciled by just entering the appropriate dates
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in the reconciliation screen

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 Cash and Cheque Deposit Slips, Payment Advice can be printed from Tally.ERP 9
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 Handling e-payments transactions in Tally.ERP 9

 Managing Post dated cheques
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Shortcut Keys
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Alt+F6  From Bank ledger voucher screen

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 To Print Multi Cheque

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Ctrl+F6 
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From Bank ledger voucher screen

 To Print Deposit Slip
Alt+A  From Cheque Register

 To Alter the Cheque Status either as blank cheque or Cancel
cheque
F5  From Bank ledger voucher screen

 To get the Bank Reconciliation Screen
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Alt+B  From Bank Reconciliation screen
 To import the Bank Statement
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Practice Exercises
1. Cheque Printing can be maintained by enabling which of the following features in

Tally.ERP 9
a. Set the option - Enable cheque printing to Yes in F11 >F1 features
b. Set the option – Set/alter transaction types to Yes in F11>F1 features
c. Set the option - Enable cheque printing to No in F11 >F1 features
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d. Set the option - Enable cheque printing to Yes in F11 >F2 features
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2. What is the limitation for providing cheque number while creating the cheque book?
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a. 9
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b. 6
c. 8
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d. 10
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3. How many characters does the Bank IFSC code contain?

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a. 11
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b. 12
c. 10
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d. 9
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4. Find the navigation path to do bank Reconciliation in Tally.ERP 9.

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a. Gateway of Tally >Ledger>Bank> Reconcile

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b. Gateway of Tally >Banking>Bank Reconciliation

c. Gateway of Tally>display>Account Books>Group
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d. Gateway of Tally>F11:Accounting Features>Bank Reconciliation

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5. In the Bank Allocations screen, the Cheque Range and the Instrument Number is auto
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filled when the cheque numbers are configured while creating the Bank ledger.
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a. True
b. False
6. It is possible to issue a blank cheque in Tally.

a. True
b. False
7. We can generate both, a cheque deposit slip & a cash deposit slip in Tally.
a. True
b. False
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8. What shortcut key is used to alter the cheque status a Cancelled or Blank from Cheque
register?
a. Alt+I
b. Ctrl+I
c. Alt+A
d. Ctrl+C
9. E-fund transfer can be made using Tally.ERP 9.
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a. True
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b. False
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10. PDC stands for _____ _ _ _ .
a. Post-draft cheque
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b. Post-dated Cheque
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c. Post-dated Compensation
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11. Using _____ _ _ __ feature i can import bank statement for reconciliation.
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a. Auto Bank Reconciliation

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b. Manual Reconciliation
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c. Post-dated cheque
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d. Payment Advice
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12. Given below are the types of references and a transaction of each in a jumbled format.
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Match the following

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Terms Meaning
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1 Bank Reconciliation A A document sent to the supplier with the

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payment details.
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2 Cancelled Cheque B Find mismatch between the cash book and the
bank book (Pass book).
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3 Blank Cheque C Cheque given to Mr. Jack which was torn
4 Payment Advice D Cheque issued as security deposit to Mr.

Murali
13. Referring to the figure 8.102, what is the key combination used to reconcile the
transactions from Ledger Vouchers screen.
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Figure 8.104
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a. Press Alt+F6:Multi Cheque Print
b. Press F6:Bank Reconcile
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c. Press F5:Reconcile
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d. Press Alt+F5:Reconcile
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14. The following Bank Reconciliation report as shown in figure 8.105 displays the difference
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in amount in balance as per company books and balance as per bank books. Provide the
solution to match the balances of both the books.
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Figure 8. 105
a. Need to reconcile the Vouchers by proving bank date
b. Need to reconcile the Masters by providing bank date
c. Need to reconcile the Voucher without proving the bank date
d. Need to reconcile the Masters without proving the bank date
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354

Chapter 9
Allocation and Tracking of
Expenses and Incomes
Learning Objectives
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 Create and maintain cost centres
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 Create and maintain the cost categories
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View reports relating to cost centres and cost categories
 Create and maintain cost centres class
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 Generate reports related to cost center and categories
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9.1 Introduction
In any organisation, it is very important to keep the track of cost and profit made by an
organisation. It is also very important to keep the track of expenses incurred by each department
and the profit earned by each department. The tracking of expenses and incomes helps an
organisation to find out the details like, which department is earning profit and which department
is incurring more expenses, these information will help an organisation in making right decision at
right time.
In Tally.ERP 9, we can allocate the expenses and incomes to the unit of an organisation, this unit
vary from business to business. For example unit can be department, product, company or
individuals etc. We can configure and maintain cost allocation in Tally.ERP 9 with ease and the
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reports gets generated instantly after recording the transactions related to cost centres.
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9.2 Cost Centre and Cost Categories
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A Cost Centre is any unit of an organisation to which transactions (generally, revenue) can be
allocated. When only costs or expenses are allocated to these units, they are referred to as Cost
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Centres. When profits are allocated to these units, they become Profit Centres.
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Tally.ERP 9’s cost centres allow a dimensional analysis of financial information. Tally.ERP 9 gives
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you the cost centre break-up of each transaction as well as details of transactions for each cost
centre and also it gives the information about whether a particular unit/product/Individual is
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undergoing loss or earning profit to an organisation.
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Examples are:
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 Departments of an organisation - Finance, Manufacturing, Marketing, and so on.

 Products of a company.
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 Individuals such as Salesman Manish, Salesman Jemil.

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Cost Categories are useful for organisations that require allocation of revenue and non-revenue
items to parallel sets of Cost Centres. Cost categories facilitate third dimensional reporting of
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Expenditure and Revenue. And Cost Categories are the distinct for any cost centre, hence each
cost centre can have a particular category
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Examples are:
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 Region-wise or Geography-wise
 Employee-wise
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 Department-wise
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Note: It is not necessary to create the Cost Categories, if required we can use the default cost category by name
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Primary Cost Category.
Let us take an example of Cost Centres and Cost Categories given above. To understand the above examples in
combination of cost centre and categories given in table 9.1:
Cost categories Cost Centres
Salesman Manish
Employees
Salesman Jemil
Table 9.1
In the table 9.1, employees will be a Cost Category and Salesman Manish & Jemil are the Cost Centres, which
falls under Cost Category Employees.
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Business Scenario
PCNet World Pvt Ltd started a company as on 01-04-2016. They sell DataNet Protect
Antivirus. The organisation have different departments and many employees in the organization.
In trading activity business generates some expenses and income from different levels.
The objective of an organization is to generate, view and analyse the reports of sources of income
and expenses generated by department and employees, which helps to develop and control the
finance.
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Activity: Create the following Company
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Company Name: PCNet World Pvt Ltd
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Company Address: Block No: 879, 3rd Cross Road, Tilaknagara, Near Silicon Stationery, Bengaluru,
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Country: India
State: Karnataka
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Pin: 560001
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9.2.1 Activation of Cost Category and Cost Centre ED
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To activate Cost Centre and Cost Categories:

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1. Go to Gateway of Tally > F11: Company Features > F1: Accounting Features
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2. Set the option - Maintain cost centres to Yes

3. Set the option - Maintain more than one payroll/cost category to Yes
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Illustration 1: Creation of cost centres and cost categories in Tally.ERP

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Date Particulars
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01-07-2017 The company has decided to track the expenses and incomes of the following
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branches.
Name of Cost Centres
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Gurgaon Office
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Mumbai Office
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01-07-2017 The company has decided to track the expenses and incomes of the following
employees with further breakdown.
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Name of Cost Categories Name of Cost Centres

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Employees Salesman Manish

Employees Salesman Jemil
Table 9.2
To maintain the details of table 9.2, in the books of accounts, first ensure that the required masters
are created in Tally.ERP 9
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Cost Categories
Go to Gateway of Tally > Accounts Info > Cost Categories > Create
Employees
Name Enter as Employees
Allocate Revenue Items Set to Yes
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Allocate Non-Revenue Items Set to Yes
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Allocate revenue items: if you enable this option, then the cost centres created under this cost category
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will appear while recording the entry for Purchase, Sales, Expense and Incomes.
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Allocate non-revenue items: if you enable this option, then the cost centres created under this cost
category will appear while recording the entry for Assets and Liabilities.
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Table 9.3
Note: While creating cost category, it is mandatory to enable any one of the option Allocate revenue items
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or Allocate Non-revenue items, or both can be enabled, but if both the options are disabled, then you will
not be able to save the cost category.
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Cost Centres
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Go to Gateway of Tally > Accounts Info > Cost Centres > Create
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Salesman Manish
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Category Select as Employees

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Name Enter as Salesman Manish

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Under Select Primary

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Note: Press Backspace key to change the category as Employees.

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Table 9.4
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Salesman Jemil
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Category Select as Employees
Name Enter as Salesman Jemil
Table 9.5
Gurgaon Office
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Category Select as Primary cost category
Name Enter as Gurgaon Office
Table 9.6
Mumbai Office
Cost Category Let it be Primary cost category
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Name Enter as Mumbai Office
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N
Table 9.7
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Note: Cost Centre will not affect the Books of Account
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Cost centres are applicable: Once this option is set to yes, then while recording the transaction using
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this ledger, we will get the allocation screen in which we can allocate the amount to their respective cost centers
and categories.
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9.2.2 Allocation of Expenses and Incomes using Cost

Centre
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In this section, we will learn how to allocate the expenses and incomes to their respective cost
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centres.
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Illustration 2: Allocation of expenses and incomes to cost centre

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Pass the following transactions in the book of PCNet World Pvt Ltd.
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Date Particulars
8

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PCNet World Pvt Ltd Paid ₹ 75,000 towards Rent, out of which ₹ 30,000 was
paid towards Gurgaon Office and ₹ 45,000 towards Mumbai office (Use Cost
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Centre), vide cheque no 000002 dated 05-07-2017

PCNet World Pvt Ltd, received 40,000 income from its branch office, out of
which 20,000 earned by Gurgaon Office and 20,000 by Mumbai Office.
Table 9.8
To record the transactions, in the books of account, first ensure that the required masters are
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Ledgers

SBI Bank
Name Enter as SBI Bank
Under Select as Bank Account
Cost centres are applicable Set to No
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Opening balance Enter as 10,00,000 Dr
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Table 9.10
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Rent
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Name Enter as Rent
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Cost centres are applicable Set to Yes
Table 9.11
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Step 2: Recording of Payment Voucher

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2. Press F2:Date, set the Date as 05-07-2017

3. To record the entry in double entry mode the user need to disable, Use single entry mode
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for payment/ receipt/ contra vouchers to No from the F12 Configure

4. Debit the Rent ledger and enter the amount as ₹ 75,000, you will get the option Cost
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Allocation for screen

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5. Select Primary Cost Category, then select the cost centre as Gurgaon Office enter the
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amount as 30,000 and Mumbai Office amount of 45,000, will be captured automatically.
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The Cost Centre Allocations screen appears as shown in the figure 9.1
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Figure 9.1 Cost Centre Allocations Screen
6. Credit the SBI Bank ledger and the amount will get captured automatically
7. Enter the bank details, the Instrument no: 000002 and date 05-07-2017.
The Payment Voucher appears as shown in the figure 9.2
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Once after recording the entry of figure 9.2, let us check how this entry is reflecting instantly in
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the report. To check the same follow the steps given below:
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1. Go to Gateway of Tally > Statements of Accounts > Cost Centres

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2. Select Category Summary, you will get the Cost Category Summary report.
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3. Cost Category summary report displays the details of allocated amount with closing
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balance.
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Note: If the closing balance amount have debit balance, then it is a cost to the company, if it has credit balance
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then it an income to the company

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Date Particulars
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PCNet World Pvt Ltd, received 40,000 income from its branch office, out of which 20,000
earned by Gurgaon Office and 20,000 by Mumbai Office.
Table 9.12
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9.2.3 Allocation of Expenses and Incomes using Cost
Centre with Cost category
In this section, we will learn to allocate the expenses and income to parallel sets of cost centres. For
example: We can allocate expenses and incomes to the classification based on the following
types:
 Region-wise or Geography-wise
 Employee-wise
 Department-wise
Illustration 3: Allocation of expenses and income to cost centre and cost categories.
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AI
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Date Particulars
AN
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The sales team of PCNet World Pvt Ltd Began customer visits for giving a demo
of its DataNet Protect Antivirus. The company provided ₹ 35,000 towards their
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transportation and food expenses. Out of which, ₹ 15,000 was allocated for
Salesman Manish and ₹ 20,000 to Salesman Jemil, vide cheque no: 000003 dated
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01-08-2017 (Use Cost Centre and Cost Category).
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Table 9.13
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To record the transactions, in the books of account, first ensure that the required masters are
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Expense ledger
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Cost of Expenses
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Name Enter as Cost of Expenses

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Cost centres are applicable Set to Yes

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Table 9.14
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Step 2: Recording Cost of Expenses in Payment Voucher

4. Debit the Cost of Expenses ledger and enter the amount ₹ 35,000 you will get the
option Cost Allocation for screen
 Select cost category as Employees
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 Select Cost centre as Salesman Manish and enter amount ₹ 15,000, and the
Salesman Jemil ₹ 20,000
The Cost Centre Allocation screen appears as shown in the figure 9.3:
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Figure 9.3 Cost Centre Allocation Screen
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5. Credit the SBI Bank ledger, and the amount field will be updated automatically
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6. Enter the bank details like Instrument no: 000003 and date 01-08-2017
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The Payment Voucher appears as shown in the figure 9.4

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Once after recording the entry the details will get updated in the respective reports.
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9.2.3.1 Allocation of expenses to multiple cost centres and cost
categories
In this section, we will learn to allocate expenses to multiple cost centres and cost categories while
recording a payment voucher and also check the relevant reports.
Let us bring two cost categories and cost centres.
Cost categories &
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Cost Centre
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Departments Grade
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Marketing Accounts Senior Junior

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Figure 9.5 Cost Category and Cost Centre Chart

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Illustration 4: Allocation of expenses to multiple cost centre and cost categories

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Date Particulars
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Made a payment towards cost of expenses for ₹ 1, 50,000, vide cheque no: 000004,
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cheque dated 13-09-2017. Allocate the total amount as follows

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Cost Category: Department

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Cost Centre Amount

Marketing 90,000
Accounts 60,000
Cost Category: Grade
Senior 1,10,000
Junior 40,000
Table 9.15
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To record the transaction of table 9.15 in the books of account, first ensure that the required
masters are created in Tally.ERP 9
Cost Categories
Go to Gateway of Tally > Accounts Info > Cost Categories > Create
Departments
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AI
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Name Enter as Departments
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Table 9.16
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Grade
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Name Enter as Grade

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Table 9.17
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Cost centres
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Go to Gateway of Tally > Accounts Info > Cost Centres > Create
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Marketing
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Cost Category Departments

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Name Enter as Marketing

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Table 9.18
Accounts
Cost Category Departments
Name Enter as Accounts
Table 9.19
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Activity: Refer to cost centre of department and create the senior and junior cost centres and select the cost category
as grade
Step 2: Record Payment Voucher
1. Go to Gateway of Tall1y > Accounting Vouchers > F5: Payment

4. Debit the Cost of Expenses ledger and enter the amount as ₹ 1,50,000, and you will get
the Cost Allocation for, screen now allocate the costs as shown in the figure 9.6:
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The Cost Centre Allocations screen appears as shown in the figure 9.6:
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AN
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Figure 9.6 Cost Centre Allocation Screen

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5. Credit the SBI Bank ledger, and the amount field will get updated automatically
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6. Enter the bank details like Instrument no: 000004 and date 13-09-2017
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The Payment Voucher screen appears as shown in the figure 9.7:

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9.3 Automation of Cost Centre and Cost ED

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Categories while recording transactions
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In this section, we will learn to automate cost centre and cost categories while recording the
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transactions. This is done when the percentage of allocation is fixed.

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9.3.1 Cost Centre Classes

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Cost Centre Classes are used to automate cost centre allocations in transactions, i.e., while
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recording the transactions, we have assigned the amount to cost centers manually but with Cost
Centre Classes the same will be done automatically. On creating a Cost Centre Class, you need to
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select it in the voucher screen before making the entry. You can also use Cost Centre Classes when
voucher classes are being used.
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Illustration 3: Using cost centre class in the transaction

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Date Particulars
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20-010- Voucher: Sales

2017
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The company has pre-allocated the sales percentage to its employee as, 35% to
Salesman Manish and 65% to Salesman Jemil. Sold 2,000 Nos, of Booklets @ ₹
5/ Nos and 40 Nos of Antivirus CD’s @ ₹ 750 each
Name of Stock Quantity Rate/Nos Amount
Booklets 2,000 5/No 10,000
Antivirus CD’s 40 750 30,000
Table 9.20
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To record the transaction of table 9.20 in the books of account, first ensure that the required
Step 1: Configuration of Cost Centre Classes

1. Go to Gateway of Tally > F11: Company Features > F1: Accounting Features
2. Set the option Use pre-defined cost centre allocations in transactions to Yes, and then
Cost Centre Classes screen is displayed
3. Type Class Name as CC Class
4. Press enter and select Cost Category as Employees
5. Select the Cost Centres and enter the percentage of allocation as follows:
 Salesman Manish 30%
 Salesman Jemil 70%
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The Auto Cost Allocations screen appears as shown in the figure 9.8:
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AN
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Figure 9.8 Auto Cost Allocations Screen

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6. Accept the screen and save the details

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Ledgers
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Sales A/c
Under Select Sales Accounts
Inventory values are affected? Set to Yes
Cost Centres Applicable? Set to Yes
Table 9.21
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Stock Item
Booklets
Name Enter as Booklets
Units Select Nos
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(Bring the cursor in the units field and press
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Alt+C to create Units of Measure)
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Opening Enter Quantity as 2,000 – Rate as 4
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Table 9.22
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Antivirus CD
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Name Enter as Antivirus CD
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Units Select Nos

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Opening Enter Quantity as 400 – Rate as 500

Table 9.23
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Step 3: Recording Sales Voucher

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

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2. Press F2:Date, change the date to 20-010-2017

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3. Enter the Reference no.: 1

4. Select the Cost centre/classes as CC Class
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The Sales Voucher Creation screen with cost center class selection appears as shown in the
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figure 9.9:
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Figure 9.9 Selection of CC Classes
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5. In the Party A/c name field select the ledger SBI Bank
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6. In Sales ledger field select Sales A/c
7. Select the stock items, 2,000 Nos of Booklet @ ₹ 5/ Nos and 40 Nos of Antivirus CD
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@ ₹ 750 each.
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The Sales Voucher Creation screen appears as shown in the figure 9.10
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Figure 9.10 Sales Voucher Screen
Observation: Once after recording the entry check the ledger break-up report. To do so, go to Gateway of Tally
> Display > Statements of Accounts > Cost Centres > Ledger Break-up > Select Sales A/c ledger. In Cost
Breakup of Ledger, we can observe that the amount is allocated to their respective cost centres based on the percentages
defined at the cost centre classes.
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9.4 Cost Centre Reports
Cost centre reports are primarily performance reports. To access Cost Centre reports,
Go to Gateway of Tally > Display > Statements of Accounts > Cost Centres
The Cost Centres Menu comprises of the following options:

 Category Summary
 Cost Centre Break-up
 Ledger Break-up
 Group Break-up
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Let us discuss each report in detail.
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9.4.1 Category Summary
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This report lists out all cost categories for which transactions have been allocated. Below each cost
category, all the cost centres under the cost category are also listed, with the sub-cost centres, if
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any.
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Go to Gateway of Tally > Display > Statements of Accounts > Cost Centres > Category
Summary
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The Cost Category Summary report for the period 01-07-2017 to 20-10-2017 appears as shown
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in the figure 9.11:

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Figure 9.11 Cost Category Summary Report
Observation: In figure 9.11, we can observe that the values falling under credit column indicates the income
generated by the unit and the value falling under debit column indicates the expenses incurred by the unit.
From the report of figure 9.11, we can drill down to the transaction level.
Month-wise Cost Centre Summary
Selecting a cost centre, and pressing Enter leads to the Month-wise Cost Centre report. You can
add new column and select another cost centre to view the details. This helps in analysing the
performance of cost centres month-wise.
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Select Junior and press Enter, to get the Month-wise Cost Centre Monthly Summary of
Junior will appear
You have the option to add a new column and select another cost centre.
Cost Centre Vouchers Report
All transactions pertaining to a cost centre will be displayed in this report.
 Press Enter on the required option and you will get the Cost Centre Vouchers report
 The Cost Centre Vouchers screen is also accessible from all other Cost Centre Reports but
the vouchers displayed are only those that relate to the currently selected cost centre.
9.4.2 Cost Centre Break-up

We noticed that transactions were allocated to cost centres. A list of all ledger accounts used in
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these transactions, with details of the transaction values and balance are displayed here.
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1. Go to Gateway of Tally > Display >. Statements of Accounts > Cost Centres
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2. Select Cost Centre Break-up
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3. Select Salesman Manish, from the List of Cost Centres
4. Press F2:Period and change the period 1-07-2017 to 20-10-2017
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5. Press Alt+F1
The Breakup of Cost Centres screen appears as shown in the figure 9.12:
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Figure 9.12 Breakup of Cost Centres Screen

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9.4.3 Ledger Break-up

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One ledger can be allocated to different cost centres. For example, the ledger Cost of expenses is
allocated to Junior and senior. We can view a comparative report of conveyance expenditures
incurred by the two cost centres using the Ledger Break-up report.
2. Select Cost of Expenses
The Cost Breakup of Ledger screen appears as shown in the figure 9.13:
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Figure 9.13 Cost Breakup of Ledger Screen
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9.4.4 Group Break-up ED
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This report displays the summarised information of all Cost Centres for the selected Group. We
can drill down to the list of vouchers.
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2. Select Group Break-up

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3. Select Indirect Expenses

The Cost Breakup of Group screen appears as shown in the figure 9.14:
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Figure 9.14 Cost Breakup of Group Screen

Conclusion
In this chapter, we have learnt to allocate the expenses and incomes to different cost unit of the
organisation and also we have automated the allocation of cost centre by creating cost centre
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classes in Tally.ERP 9. We have seen how these cost centers values will get updated in the report
instantly, once after recording the transactions.
Key Takeaways
 A Cost Centre is a unit of an organisation to which expenses as well as incomes are
allocated.
 Cost Categories are used when the organisations have to allocate resources to parallel
sets of cost centres.
 Cost Centre Classes are used to automate the allocation of cost centre and cost
categories.
 In Tally.ERP 9 we can allocate expenses to multiple cost centre
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Shortcut Keys
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F2  From voucher creation screen
 To change the date
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F4  From cost centre voucher report
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 To select the required cost centre
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F6  From cost centre voucher report
 To navigate to daily breakup of cost
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centre
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Alt+F5  From CC Monthly Summary report

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 To view quarterly Breakup of Cost

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centre and vice versa.

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Practice Exercises
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1. Cost Centre allocation does not affect books of accounts.

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a. True
b. False
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2. Is it mandatory to create cost category in order to use cost centres

a. True
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b. False
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3. Match the following items and select the appropriate answer from the given response
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sheet.
a Cost Centre 1 Parallel Allocation

b Cost Categories 2 Cost unit of Organisation
c Cost Centre Classs 3 Report
d Group Break-up 4 Automatic Allocation
a. a-2, b-1, c-4, d-3

b. a-1, b-3, c-4, d-2
c. a-4, b-3, c-2, d-1
d. a-1, b-2, c-3, d-4
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4. Cost Category is used for ______.
a. Making accounting impact of Cost Centres
b. To enable parallel allocation of costs
c. To automate allocation of costs in transaction
d. None of these
5. Cost Centres are enabled from ______.

a. Gateway of Tally > F11 > F1(Accounting Features)
b. Gateway of Tally > F11 > F2(Inventory Features)
c. Gateway of Tally > F12 > General Configuration
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d. Gateway of Tally > Accounts Info. > Ledger > Create > F12
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6. From the below given, Figure 9.15 find the total expense amount incurred by junior and
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senior level employees
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Figure 9.15 Cost Category Summary Screen
a. ₹ 1,50,000
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b. ₹ 75,000
c. ₹ 2,25,000
d. ₹ 3,00,000
7. Which of the following reports is not available in Tally.ERP 9 for Cost Centres?
a. Category Summary
b. Cost Centre Break-up
c. Ledger Break-up
d. Stock Item Break-up
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8. In the below given Figure 9.16, the cost of expenses of ₹ 40,000/- is allocated to _____
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Cost Centre
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Figure 9.16 Cost Centre Vouchers Screen
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a. Salesman Jemil
b. Salesman Manish
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c. Senior Grade
d. Junior
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9. Cost Centre can be grouped under cost centre
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a. True
b. False
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10. Cost Category can be grouped with other cost category

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a. True
b. False
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Chapter 10
MIS Reports
Learning Objectives
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 Identify and list the purpose of different MIS reports
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 Generate MIS reports in Tally.ERP 9
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 Customize and analyse MIS reports in Tally.ERP 9
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10.1 Introduction
Management Information Systems, commonly referred by its acronym MIS. It is an information
system designed to provide management with accurate and timely information necessary for
evaluating business activities, tracking progress and decision making.
Based on the nature of business, MIS reports differ from organisation to organisation and division
to division. For example, the daily MIS report of a customer call-center, will include reports that
capture detail like total number of calls received from customers, total number calls received for
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new sales, total number of calls for complaints, etc. At the same time, for a company that deals in
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buying and selling of products to the customers on credit and cash basis, would maintain periodic
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MIS reports that reflect details like total number of purchases and sales made by the company,
total bills payables, total bills receivables, etc.
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Similarly, within the same organisation different divisions/departments require different types of
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MIS Reports for arriving at business decisions related to their functional area. Thus, a revenue and
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expenses reports will be useful for an Accounts manager whereas reports related to inventory and
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goods inflow/outflow report, will be useful to a Production manager.
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At the same time, every business organisation is required to prepare certain financial reports that
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should the business profit or loss (Profit and Loss account) and financial position of the company
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(Balance Sheet) at the end of a financial period

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10.2 Advantages of Management Information

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Systems
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MIS Reports comes with many advantages, few of which are listed below:
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 Aids in Faster Decision Making: MIS reports provide instant and accurate data which
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help the management in taking right decisions at the right time i.e., supports the
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management in taking faster and accurate business decisions.

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 Aids in Planning: It provides information based on which managers can plan business
activities.
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 Collection and Storage of Information: The bigger an organisation, bigger the problem
of collecting and maintaining data and information. MIS helps handle large volumes of
data with ease.
 Evaluation of Performance: MIS help in setting performance standards, monitoring
performance, taking corrective measures in case of deviations in plans, etc.
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10.3 Types of MIS Reports in Tally.ERP 9
Accounting Reports: To obtain information on the financial position, operational performance
and economic activities of the business.
Financial Reports: To determine the financial condition of an organisation as required by
shareholders, creditors and government units.
Inventory Reports: To manage the Inventory effectively since the actual status of stock items is
obtained.
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Management Control Reports: To utilise budgets, cost centre reports, scenario reports etc. for
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controlling activities.
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10.4 MIS Reports in Tally. ERP 9
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Tally.ERP 9 facilitates instant generation of MIS Reports. A few types of commonly used MIS
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Reports, which can be generated using Tally.ERP 9 are discussed below:
 Trial Balance ED
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 Profit and Loss A/c
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 Balance Sheet
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 Cash Flow Statement

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 Funds Flow Statement


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Ratio Analysis
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Books and Registers

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 Day Book
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 Receipts & Payments

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 Bills Receivables
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 Bills Payables
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 Purchase Register
 Sales Register
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 Exception Report
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Let us understand the use of MIS Reports with the help of a business scenario.
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Business Scenario
Mark Brothers started a company namely Mark Traders dealing in Mobile Phones. The company’s
business operations extended to dealers in India and Japan.
 Company Name: Mark Traders
 Address: No 505, 18th Cross VTR Park, Begur Main Road, Bengaluru.
 Country: India
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 State: Karnataka
 Financial Year: 01-04-2017 to 31-03-2018
The details of the company’s transactions during the first six months of operations are given below:
Create necessary masters and record the below transactions in said vouchers.
Date Particulars
Mark Traders invested ₹ 20, 00,000 as Capital in their company Mark Traders.
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They deposited the amount in the company bank account in SBI through a DD.
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Purchased the following stock item from AK Traders; domestic trader on credit
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with the Bill Ref No.01
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Name of the Stock Godown Quantity Rate per (₹) Amount
Item
ED (₹)
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K5 Mobile Phones Main 100 Nos 1,000 1,00,000
Location
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Paid ₹50,000 to AK Traders through SBI cheque.

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Sold the following Stock Item to ATN Traders; domestic trader on credit with
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the Bill Ref No. SA/01

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Item (₹)
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Location
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Received an amount of ₹ 70,000 from ATN Traders through cheque
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Purchased the following stock item from PIP Traders; International trader from
Japan on credit with the Bill Ref No.02

Item (₹)
Location
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Sold the following Stock Item to ST Traders; domestic trader on credit with the
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Bill Ref No. SA/02
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Item (₹)
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ED
Location
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Sold the following Stock Item to the domestic customer on cash with the Bill
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Ref No. SA/03

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Item (₹)
K5 Mobile Phones Main 10 Nos 2,000 20,000
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Location
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Purchased following stock item from the domestic trader on cash with the Bill
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Ref No.03
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Item (₹)
K6 Mobile Phones Main 20 Nos 1,000 20,000
Location
Table 10.1
To record the above transactions in Tally.ERP 9.
Create the necessary ledgers before recording the above given transactions.
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Note
1) Create two separate purchase ledgers
 International Purchases
 Domestic Purchases
2) Create two separate sales ledgers
 International Sales
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 Domestic Sales
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3) Create PIP Traders party ledgers selecting country as Japan.
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AN
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The management is interested in receiving information related to Sales Revenue generated within
the country and outside the country, Cash and Fund Flow details, Payable and Receivable
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details and the Financial Performance of the company in the first 6 months of business.
Now, let us see how different reports can be generated from Tally.ERP 9 to meet the ED
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management’s information needs.
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10.4.1 Trial Balance

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A trial balance is a statement showing the balances or total of debits and credits of all the accounts
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in the ledger. It helps in the preparation of financial statements such as Profit & Loss account,
Balance Sheet and Cash Flow statements. In a Trial Balance, the balances of various accounts
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(debit balances and credit balances) are listed in a sheet or a statement at the end of the accounting
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period.
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All revenue and expense accounts appearing in the trial balance are transferred to the trading and
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profit and loss accounts and all liabilities, capital, and asset accounts are transferred to the balance
sheet
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Illustration 1: Generation of trial balance using Tally.ERP 9

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To generate Trial Balance for Mark Traders, follow the steps given below:
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1. Go to Gateway of Tally > Display > Trial Balance

2. Click F1: Detailed, to view the Trial Balance in the detailed format
The Trial Balance Report screen appears as shown in the figure 10.1:
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Figure 10.1 Trial Balance Screen
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10.4.2 Balance Sheet
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A Balance Sheet is a financial statement that reports a business’ financial position as on a specific
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date. The term balance sheet implies that the report shows the balance between two figures. It
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shows a balance between the assets and liabilities of a business. The fundamental accounting
equation is,
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Assets = Liabilities + Owner’s Equity

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The accounting equation is inbuilt in Tally.ERP 9. It takes information from the Chart of Accounts
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created and transactions entered to create the Balance Sheet automatically. No extra processing is
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required by the user to generate the Balance Sheet.

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Illustration 2: Generation of balance sheet and applying configurations to get reports in

desired formats using Tally.ERP 9
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To generate Balance Sheet for Mark Traders, follow the steps given below:
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1. Go to Gateway of Tally > Balance Sheet

2. Click F1: Detailed, to view the Balance Sheet in the detailed format
The Balance Sheet Report screen appears as shown in the figure 10.2:
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Figure 10.2 Balance Sheet Screen
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The Balance Sheet in Tally.ERP 9, gets updated automatically with every transaction that is
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recorded. Notice the first line on the left shows the Capital Account information as an impact of
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the first transaction. A Balance Sheet is always prepared as on a particular date; in this case it is
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shown as on the last voucher entry date.

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From the above report we can get the details of Liabilities and Assets, from which the financial
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position of a company can be analyzed.

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The Button Bar can be used to view additional information or toggle to another report.
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From the options available in the Button Bar, you can:

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 Select F1: Detailed/Condensed to explore the summarized information

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 Change the date of the Balance Sheet using F2: Period

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 Add new columns to:

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o Display the Balance Sheet for a different date and compare with the current one
o Display the Balance Sheet of another company when more than one company is open
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o Display the Balance Sheet with multiple stock valuation methods

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 Press F12: Configure and set the required parameters such as

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o Enable the option Show Vertical Balance Sheet to view the Balance Sheet in Vertical
format
o Enable the option Show Percentages to view the amounts as a percentage of total in
a separate column
10.4.3 Profit and Loss Account

Profit and Loss account or Income Statement is a periodic statement, which shows the nett result
of a business’ operations for a specified period. All the expenses incurred and incomes earned
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during the reporting period are recorded in the Profit and Loss account or Income and
Expenditure account.
The Profit and Loss account in Tally.ERP 9 displays the information based on the default primary
groups. It is updated instantly with every transaction/voucher that is entered and saved. No special
processing is required to produce a Profit and Loss account in Tally.ERP 9.
Illustration 3: Generation of profit and loss account and applying configurations to get
reports in desired formats using Tally.ERP 9
To generate Profit & Loss A/c for Mark Traders, follow the steps given below:
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1. Go to Gateway of Tally > Profit and Loss Account
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2. Click F1: Detailed, to view the Profit and Loss Account in the detailed format
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The Profit and Loss Account screen appears as shown in the figure 10.3:
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Figure 10.3 Profit and Loss Account Screen

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Note: If gross profit and loss is not displayed in the above report, press F12: Configure and enable the option
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show with gross profit.

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The Profit & Loss account is generated and updated immediately from the date of opening of
books till the date of last entry. It is displayed according to the configurations set in the F12:
Configure menu.
The Profit & Loss account, by default is displayed in the horizontal format. However, this can be
configured to display the same in a vertical format by selecting the option in F12: Configure.
Some of the Button Bar options are:
 Select F1: Detailed/Condensed to display more information or see the summarized

format
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 Change the date of the Profit & Loss account using F2: Period
 Add new columns to:
o Display the Profit & Loss account for a different period to compare with the current
one
o See the effect of different Stock Valuations on the Profit & Loss account
o Select and compare Profit & Loss accounts of different companies
 Press F12: Configure and set the required parameters such as:
o Enable the option Show Vertical Profit & Loss Account, to view the profit and loss
account in vertical format
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a separate column
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o Enable the option Show with Gross Profit to view the Gross Profit along with the
Nett Profit
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10.4.4 Cash Flow Statement
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A Cash Flow Statement is a record of the amounts in cash and cash equivalents entering and
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leaving a company. It complements the Balance Sheet and Profit and Loss Account. A Cash Flow
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Statement helps a business owner (and other stakeholders) understand how or from where the
company’s money is coming, and where it is being spent.
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A Cash Flow Statement shows only the actual cash inflows and outflows of a company, unlike a
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Balance Sheet or Profit and Loss account which also show future cash incomings and outgoings
(i.e, credit transactions). Based on the grouping of ledgers and transactions entered, Tally.ERP 9
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prepares the Cash Flow Statement automatically.

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Cash flow statements can also be used as receipts and payments statement. This is particularly
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useful for businesses such as non-profit organizations where receipts and payments statements
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need to be generated.
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Illustration 4: Generation of cash flow statement and applying configurations to get reports
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in desired formats using Tally.ERP 9

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To generate Cash Flow Statement for Mark Traders, follow the steps given below:
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1. Go to Gateway of Tally > Display>Cash/Funds Flow > Cash Flow

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The Cash Flow Statement screen appears as shown in the figure 10.4:
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Figure 10.4 Cash Flow Statement Screen
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The Cash Flow statement is displayed in terms of monthly break-up for the financial year. For the
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month of May Mark Traders’ Net Flow shows a negative balance, because in that month the
company has had only cash outflows but no cash inflows.
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Tally.ERP 9 also provides a graphical presentation of monthly cash inflows and outflows at the
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bottom of the report. To view the details of any particular month, move the cursor to the
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respective line and press the Enter key.

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2. Press Enter on required month

3. Press F2: Period and enter the date from 01-07-2017 to 31-12-2017.
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4. Now, click F1: Detailed, to view the Cash Flow Statement in detailed format:
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The Cash Flow Summary screen appears as shown in the figure 10.5:
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Figure 10.5 Cash Flow Summary from July to December 2017 Screen
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The Cash Flow Statement for a particular month shows the inflow details on the left pane and the
outflow details on the right pane. It also highlights the Net inflow at the bottom centre of the
screen.
Additionally the following actions can be performed to customize the report as per requirements:
 Press F4 to view the Daily Flow

 Press F12:Configure to enable the following:
o Enable the option Show Vertical Cash Flow Summary to view the report in vertical
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format
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a separate column
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10.4.5 Funds Flow Statement
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A Fund Flow statement is a report, which explains the movement of funds during an accounting
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period. The statement consists of Sources of funds and Application of funds.
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The difference between the two shows the net change in the working capital during the period.
Only those transactions that affect the net working capital of the firm, find place in this statement.
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Illustration 5: Generation of funds flow statement and applying configurations to get

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reports in desired formats using Tally.ERP 9

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To generate Funds Flow Statement for Mark Traders, follow the steps given below:
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1. Go to Gateway of Tally > Display>Cash/Funds Flow> Funds Flow

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The Funds Flow Statement screen appears as shown in the figure 10.6:
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Figure 10.6 Funds Flow Statement Screen
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The Funds Flow statement is displayed in terms of monthly break-up for the financial year.
Tally.ERP 9 also provides a graphical presentation of monthly cash inflow and outflow at the
bottom of the report. To view the details of any particular month, move the cursor to the
respective line and press the Enter key.
2. Press F2: Period and enter the date from 01-07-2017 to 31-12-2017
3. Now, click F1: Detailed, to view the Cash Flow Statement in detailed format:
The Funds Flow Summary screen appears as shown in the figure 10.7:
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Figure 10.7 Funds Flow Summary from July to December 2017 Screen
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Additionally the following actions can be performed to customise the report as per requirements:
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 Press F12:Configure to configure the following:

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o Enable the option Show Vertical Funds Flow Summary to view the report in vertical
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format
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a separate column
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10.4.6 Ratio Analysis

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Ratio express numerical relationship between two numbers. The relationship of one item to
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another is expressed in simple mathematical form known as a ratio. Accounting ratios are
expressed in the form of time proportion, percentage or per one rupee.
The Ratio Analysis report provides a critical overview of a company’s performance in the form of
ratios. Not only does this report provide an instant understanding of the Working Capital, the
Operating Cost percentage and Gross Profit percentage, but also gives information about the
payment performance of debtors. The return on investment percentage and the return on working
capital percentage are other critical ratios available in this report. Tally.ERP 9 uses the data from
transactions to arrive at the ratios. The report is generated automatically.
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Illustration 6: Generation of ratio analysis report and applying configurations to get reports
in desired formats using Tally.ERP 9
To generate Ratio Analysis Report for Mark Traders, follow the steps given below:
1. Go to Gateway of Tally > Ratio Analysis
The Ratio Analysis report screen appears as shown in the figure 10.8:
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Figure 10.8 Ratio Analysis Report Screen

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The Ratio Analysis report has two primary parts: Principal Groups and Principal Ratios. Each
line item on both sections provide unique insights into a company’s financial status.
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Financial MIS Reports are very important for a business, not only for legal purposes but also for
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ensuring good health of the business. Tally.ERP 9 generates all the financial MIS Reports instantly
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thus saving a lot of time for the business and helps it prosper by providing key information at the
right time.
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10.4.7 Books and Accounting Reports

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In Tally.ERP 9, as soon as transactions are entered they are immediately posted to the respective
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ledgers, books and registers, thereby facilitating instant generation of report and faster decision
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making.
Books of Account is a record of the commercial accounts of a company and consolidates the
transaction details as they are entered. Although the elements of a transaction are posted into many
different ledgers simultaneously. Tally.ERP 9 brings all the transactions of a particular type
together into relevant books of account for viewing and printing. For example, Cash Book records
all the transactions affecting cash and the Sales Book records all sales transactions
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10.4.7.1 Day Book
The Day Book contains a record of all transactions made by a business, irrespective of the type of
transaction. By default the display is set to the date of the last voucher entry made, but this can be
set to list all the transactions made over a certain period.
Transactions include all financial vouchers, reversing and memorandum journals as well as
inventory vouchers.
Illustration 7: Understanding how to generate Day Book in Tally.ERP 9
To generate Day Book for Mark Traders for the period 01-07-2017 to 31-12-2017, follow the steps
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given below:
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1. Go to Gateway of Tally > Display>Day Book
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2. Click F2: Period on the button bar and specify the period as from 01-07-2017 to 31-12-
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2017
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The Day Book screen appears as shown in the figure 10.9:
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Figure 10.9 Day Book Screen

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The report of figure 10.9 displays the details of day to day transactions recorded from 01-04-
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2017 to 30-09-2017 in the books of Mark Traders.

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From the report of figure 10.9, press F4: Change Voucher, to view the transactions related to a
particular voucher type.
10.4.7.2 Receipts and Payments

Receipts and Payments account is a report of Cash and Bank transactions. . It is used in place of
an Income and Expenditure Statement when it is not considered appropriate to distinguish
between Capital and Revenue transactions or to include accruals. In other words,
 It is a consolidated summary of Cash Book, prepared for the required period.
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 It starts with the opening balance of Cash and Bank and ends with the closing balance of
Cash and Bank.
 It does not take into account outstanding receivables and payables.
 It may be Capital or Revenue in nature, relating to the current, previous or subsequent
year; as long as they are actually received or paid, they must appear in this account
No special processing is required to produce a Receipts and Payments account in Tally.ERP 9,
once the transactions are recorded then the report will be updated automatically.
Illustration 8: Generation of receipts and payments report and applying configurations to
get reports in desired formats using Tally.ERP 9
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To generate Receipts and Payments report of Mark Traders for the period 01-07-2017 to 31-12-
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2017, follow the steps given below:
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1. Go to Gateway of Tally > Display> Receipts and Payments.
2. Press F1: Detailed, to view the Receipts and Payments report in the detailed format
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3. Press F2:Period and enter the period as 01-07-2017 to 31-12-2017
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The Receipts and Payments report screen appears as shown in the figure 10.10:
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Figure 10.10 Receipts and Payments Screen

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The report of figure 10.10, can be viewed in Vertical format by enabling the option Show Vertical
Receipts & Payments to Yes in F12: Configure.
10.4.7.3 Purchase Register

A Purchase Register contains information related to all purchases made by a business concern. It
helps in tracking the details of movement of purchased goods to various godowns, which in turn,
helps in analysing stock movement at each godown.
Illustration 9: Generation of purchase register using Tally.ERP 9
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To generate Purchase Register report of Mark Traders for the period 01-04-2017 to 31-12-2017,
follow the steps given below:
1. Go to Gateway of Tally > Display> Account Books>Purchase Register
The Purchase Register report screen appears as shown in the figure 10.11:
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Figure 10.11 Purchase Register Screen

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The report of figure 10.11, display the details of total monthly purchases made by the company
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for the specified period, along with a graphical representation of the same information at the
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bottom of the screen.

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Further, you can press Enter from monthly summary to get Voucher Register. It shows all the
purchase transactions made for the specified period.
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10.4.7.4 Sales Register

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A Sales Register displays the monthly summary of all sales transactions and the closing balances at
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the end of each month, for the selected period. The list of transactions pertaining to any month
can be viewed by selecting the required month. Tally.ERP 9 enables change of display according
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to the information required.

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Illustration 10: Generation of sales register using Tally.ERP 9

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To generate Sales Register report of Mark Traders for the period 01-04-2017 to 31-12-2017, follow
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the steps given below:

1. Go to Gateway of Tally > Display> Account Books>Sales Register
The Sales Register report screen appears as shown in the figure 10.12:
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Figure 10.12 Sales Register Screen
The report of figure 10.12, display the details of total monthly Sales of the company for the
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specified period, along with a graphical representation of the same information at the bottom of
the screen.
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Further, you can press Enter from monthly summary to get Voucher Register. It shows all the
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sales transactions made for the specified period.

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10.4.7.5 Bills Receivable and Bills Payable

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Efficient management of business requires systematic maintenance of all transactions. With

increase in the number of transactions, keeping a track of the details of creditors, debtors, pending
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bills and over dues becomes complicated. The Bill-wise details feature in Tally.ERP 9, will enable
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the tracking of each transaction and efficient management of payables and receivables.
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In Tally.ERP 9, once the transactions are recorded using Bill wise details, the receivable and
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payable reports are generated instantly.

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Illustration 11: Generation of bills receivable report using Tally.ERP 9

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The Bills Receivable report in Tally.ERP 9 displays all the outstanding receivables for a company
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during a specified period.

To generate Bills Receivable report of Mark Traders, follow the steps given below:
1. Go to Gateway of Tally > Display> Statement of Accounts >Outstandings>
Receivables
2. Click F1: Detailed, to view the Bills Receivable Report in the detailed format
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The Bills Receivable report screen appears as shown in the figure 10.13:
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Figure 10.13 Bills Receivable Report Screen
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The report of figure 10.13, displays all outstanding receivables of Mark Traders invoice-by-invoice,
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for the period specified. This report takes into consideration only those party ledgers for which
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the option Maintain balances Bill-by-Bill option is enabled.

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Note: In the Bills Receivables report, we are getting the details of stock items, because we have enabled the
option Show Qty Info in Detailed Format in F12: Configure option.
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Illustration 12: Generation of bills payable report using Tally.ERP 9

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The Bills Payable report in Tally.ERP 9, displays all the outstanding payables of the company
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during a specified period.

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To generate Bills Payable report of Mark Traders, follow the steps given below:
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1. Go to Gateway of Tally > Display> Statement of Accounts >Outstandings>

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Payables
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2. Click F1: Detailed, to view the Bills Payables Report in the detailed format
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The Bills Payables report screen appears as shown in the figure 10.14:
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Figure 10.14 Bills Payable Report Screen
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The report of figure 10.14, displays all outstanding payables of Mark Traders invoice-by-invoice,
for the period specified.
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10.4.8 Inventory Reports

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An organization, which is dealing with inventory, it becomes very important to track the details
of inventories like the stock available in the organisation, details of transferred stock from one
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godown to another, details of dead stock, details of ageing of goods etc. Instant delivery of
these information will help an organisation to make business decision faster and this in turn
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helps the organisation to grow.

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Inventory in Tally.ERP 9 operates in the same way as accounting with regard to displaying,
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modifying and printing reports. Tally.ERP 9 generates inventory reports based on the vouchers
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entered till date. You can use the customised reports to compare inventory data between
different companies, periods of the financial year, and so on.
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10.4.8.1 Stock Summary

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A Stock Summary is a statement of the stock-in-hand on a particular date. It is one of the primary
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inventory statements that is generated in Tally.ERP 9 .This report updates the stock record in real
time as and when transactions are entered. Stock Summary provides information on stock groups
and shows the quantity details, rate and closing value of the stock items under them.
Illustration 12: Generation of stock summary report using Tally.ERP 9
To view a Stock Summary Report,
1. Go to Gateway of Tally > Stock Summary > Press Alt+F1 for detailed mode
2. Press F12: Configure and enable Show All Items (incl. zero balance) and Expand all
levels in detailed format and accept the configuration screen.
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The Stock Summary screen appears as shown in the figure 10.15:
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Figure 10.15 Stock Summary Report
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Further, you can press Enter on Stock Group and Stock Item to get the Monthly Summary and
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Stock Vouchers Screen.

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3. Press Enter on K5 Mobile Phones

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4. You will get Stock Item Monthly Summary

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5. Press Enter on any month to view the Stock Vouchers

6. Press F2 and enter the period as 01-04-2017 to 31-12-2017
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The Stock Vouchers screen appears as shown in the figure 10.16:

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Figure 10.16 Stock Vouchers Report

This Stock Voucher report displays all the inventory transactions done for the particular stock
item along with the opening balance, inwards, outwards and closing balance.
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10.4.8.2 Stock Transfer
Stock Transfer report displays the details of stock items which are transferred from one godown
to another godown along with quantity rate, closing balance details etc.
Illustration 13: Recording stock journal voucher and generation of stock transfer analysis
report using Tally.ERP 9
Activity
 In F11: Company Features >F2: Inventory Features > Enable the option Maintain
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multiple Godowns
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 Create a godown as Branch Location-Mysore
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 Record the following transaction in the books of Mark Traders
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Mark Traders transferred 20 Nos of K6 Mobile Phones from Main Location to Branch
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Location located in Mysore city
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K6 Mobile Phones 20 Nos 2,000 40,000

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Table 10.2
Step 1: Recording Stock Journal Voucher
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To record the Stock Journal voucher in Tally.ERP 9, follow the steps given below:
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3. Under Source (Consumption) field, select K6 Mobile Phones under Name of Item,
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which needs to be transferred

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4. Select the Godown as Main Location from the List of Godowns

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5. Enter Quantity as 20 Nos, Rate ₹ 2,000 and the Amount ₹ 40,000 will capture
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automatically.
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6. Press Enter till the cursor moves to Destination (Production) field

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7. Under Destination (Production) field select K6 Mobile Phones under Name of Item
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field, to which goods are being transferred

8. Select the Godown as Branch Location-Mysore from the List of Godowns
9. Enter Quantity as 20 Nos, Rate ₹ 2,000 and the amount ₹ 40,000 will get captured
automatically
The completed Stock Journal Voucher Creation screen appears as shown in the figure 10.17:
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Figure 10.17 Stock Journal Voucher Creation Screen
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The Stock Journal transaction will impact the Stock Summary report and all inventory books. If
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the option integrate accounts with inventory is enabled in F11:F1:Accounting feature, then the
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stock value will reflect in accounting reports like balance sheet, profit & loss account, trial balance
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etc.
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Step 2: Viewing Stock Transfer Analysis

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To view the Stock Transfer/Movement Analysis report, follow the steps given below
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1. Go to Gateway of Tally > Display > Inventory Books > Movement Analysis>
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Transfer Analysis > Select Stock Journal from the List of Voucher Types
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The Transfer Analysis report screen appears as shown in the figure 10.18:
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Figure 10.18 Transfer Analysis Report Screen
2. Press Enter to get the Item Voucher Analysis screen
The Item Voucher Analysis screen appears as shown in the figure 10.19:
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Figure 10.19 Item Voucher Analysis Screen
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This report of figure 10.19, displays the Goods Out and Goods In against the particular stock
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item.
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Once the inventory masters are set in Tally.ERP 9, Mark Traders can track the movement of
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stock items from one location to another location, keep count of stock items available with them,
and track the number of stock items available in different locations. This will help in faster process
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of invoices and placing of orders based on requirement from locations.

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10.4.8.3 Movement Analysis

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Movement analysis shows the analysis of only those inventory transactions which are integrated
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with the accounts, i.e. inventories which are also recorded in the books of accounts.
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Movement analysis report is used for comparative studies. They give an insight into the flow
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characteristics of the stock in an organization. It also helps in finding out the slow moving items
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which cause blockages in the flow of the working capital of the organization.
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Illustration 14: Generation of movement analysis report using Tally.ERP 9

1. Go to Gateway of Tally > Display > Inventory Books > Movement Analysis.
The Movement Analysis menu screen displays as shown in the figure 10.20:
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Figure 10.20 Movement Analysis Menu Screen
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Stock Group Analysis
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Stock Group Analysis report can be viewed and configured depending on your business
requirements. You can effectively analyse the movement of stocks by using the various
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configuration options.
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This report shows the details of inward and outward transactions carried out for all the stock items
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in that group.
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To view the Stock Group Analysis for a specific stock group, follow the steps given below:
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1. Press Enter on Stock Group Analysis > Select Name of the group from the List of
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Stock Groups
2. Press Alt+F1 for Detailed
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The Stock Group Analysis report displays as shown in the figure 10.21:
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Figure 10.21 Stock Group Analysis Screen
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Stock Item Analysis
Stock item movement analysis report provides supplier wise, buyer wise and consumption wise
details of stock item movement. Purchase cost comparison for the item across suppliers and sale
value comparison across buyers can be viewed here.
To view Stock Item Analysis for a specific stock item, follow the steps given below:
1. Press Enter on Stock Item Analysis > Select K6 Mobile Phones from the List of Stock
Items
The Stock Item Analysis report displays as shown in the figure 10.22:
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Figure 10.22 Stock Item Analysis Screen

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Group Analysis
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Group Analysis report contains information about items transacted in vouchers for the Ledgers
created under the selected group.
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To view Group Analysis for a specific Group, follow the steps given below:
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1. Press Enter on Group Analysis > Select Sundry Debtors from the List of Groups
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The Group Analysis report displays as shown in the figure 10.23:

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Ledger Analysis
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Ledger Analysis is similar to Group Movement Analysis, where sales and purchases of stock items
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involving the selected ledger can be viewed. The next level of information brings up the
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transaction-level details.
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To view Ledger Analysis for a specific Group, follow the steps given below:
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1. Press Enter on Ledger Analysis > Select AK Traders from the List of Ledgers.
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The Ledger Analysis report displays as shown in the figure 10.24:

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Further drill down in reports will display the Item Voucher Analysis from Stock Group
Analysis, Stock Item Analysis, Group Analysis and Ledger Analysis.
The Item Voucher Analysis screen displays as shown in the figure 10.25:
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Figure 10.25 Item Voucher Analysis Screen
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10.4.8.4 Ageing Analysis
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Ageing Analysis Report, displays the age of the stock in hand. This report lists the age-wise
break-up of inventory to point out old stock. From this report we will get the details of dead stock
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i.e. the stock which is lying from long period.
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Ageing Analysis lists out the batch details that have already expired or may expire in the near
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future. This information will help you in keeping track of the age of stock and also quick moving
inventory, since the older stock may depreciate in value or become obsolete and result in a loss.
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The Ageing Analysis report will help you find out which batches have already expired, which
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batches are going to expire or you can even list them as per Manufactured or Purchased Date. It
is very useful for industries dealing with perishable goods where goods past the expiry date are of
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no value.
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Illustration 15: Generation of ageing analysis report using Tally.ERP 9

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To view the Ageing Analysis Report, follow the steps given below:
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1. Go to Gateway of Tally > Display > Inventory Books > Ageing Analysis > Select
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the group for which Ageing Analysis is required from the List of Stock Groups
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2. Press Alt+F2 and enter the period as 01-07-2017 to 31-12-2017

3. Press F6:Ageing Periods
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4. Enter the Ageing Period as shown in the figure 10.26

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Figure 10.26 Ageing Period Screen
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Note: The Ageing Analysis report produces a default ageing period of <45 days, 45-90 days, 90-180 days
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and >180 days. Depending on requirement, the ageing slabs can be defined by you.
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The Stock Ageing Analysis Report screen appears as shown in the figure 10.27:
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Figure 10.27 Stock Ageing Analysis Screen
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Conclusion
In this chapter, we have learnt, how MIS reports helps in the management of business organisation
in tracking business daily activities, analyzing problems, and evaluating performance thereby
hastening the decision making process. We have experienced the efficiency of Tally.ERP 9 in
generating reports based on transaction entries.
Key Takeaways
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 MIS is an acronym for Management Information Systems
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 MIS is an information system designed to provide management with accurate and timely
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information necessary for evaluating business activities, tracking progress and decision
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making.
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 MIS Reports facilitate faster decision making.
 A Balance Sheet is a financial statement that reports a firm’s financial position at a specific
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time. The fundamental accounting equation is: Assets = Liabilities + Owner’s Equity
 Profit and Loss Account or Income Statement is a periodic statement, which shows the
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net result of business operations for a specified period.
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 The Day Book lists all transactions made on a particular day.

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 A Purchase Register displays information on the purchases made by the business concern.
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 A Sales Register displays the monthly summary of sales transactions and closing balances.
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 A Stock Summary is a statement of the stock-in-hand on a particular date.

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 Transfer Analysis report displays the details of stock items which are transferred from one
godown to another godown.
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 An Ageing Analysis report displays the age of the stock in hand.

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Shortcut Keys
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Shortcut Keys Description

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F12  From any reports

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 To access configuration
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Alt + F1  From any reports

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 To view in detailed/condensed mode

F4  From Daybook
 To change the voucher types
F6  From Stock Ageing Analysis report
 To change he Ageing Periods
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Practise Exercises
1. ___________ is a statement showing the balances or total of debits and credits of all the
accounts.
a. Balance Sheet
b. Profit & Loss Account
c. Trading Account
d. Trial Balance
2. __________ is a financial statement that reports a business’ financial position as on a
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specific date.
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a. Balance Sheet
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c. Trading Account
d. Trial Balance
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3. Liabilities plus Owners Equity = __________.
a. Income
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b. Expense
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c. Current Liability
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d. Assets
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4. __________ is a record of the amounts of cash and cash equivalents entering and leaving
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a company.
a. Cash Flow Statement
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c. Balance Sheet
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d. Trial Balance
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5. Which of following reports shows the Nett Profit/Loss of the company?

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11

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c. Balance Sheet
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d. Trial Balance
6. Which of the following is not a Financial Statement?

c. Balance Sheet
d. Ledger
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7. The _______ contains all the transactions made by a business, irrespective of the type of
transaction.
a. Day Book
b. Payables
c. Receivables
d. Payable
8. ___________ refers to a payment expected to be received at a later date.

a. Bills Payable
b. Cash Purchase
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c. Cash Sales
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d. Bills Receivable
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9. _____________ is a liability to a Company.
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a. Bills Payable
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b. Cash Purchase
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c. Cash Sales
d. Bills Receivable
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10. Which of the following reports displays the performance of the company in the form of
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ratio?
a. Balance Sheet
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b. Profit & Loss A/c

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c. Ratio Analysis
d. Trial Balance
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11. Match the following:

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Given below are names of different types of reports and an explanation of each in a
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jumbled format.
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1 Trial Balance a It is a periodic statement, which

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shows the nett result of a

business’ operations for a
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specified period.
2 Balance Sheet b It is a record of the amounts
of cash and cash
equivalents entering and leaving a
company.
3 Profit and Loss Account c It reports a business’ financial
position as on a specific date.
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4 Cash Flow Statement d The balances of various accounts
(debit balances and credit
balances) are listed in a sheet or a
statement at the end of the
accounting period.
a. 1-a, 2-b, 3-c, 4-d

b. 1-b, 2-b, 3-c, 4-a
c. 1-a, 2-c, 3-b, 4-d
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d. 1-d, 2-c, 3-a, 4-b
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12. The head Current Asset is shown in a Profit & Loss Account.
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a. True
b. False
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13. The Capital Account head comes under the Balance Sheet.
a. True
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b. False
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14. Financial Statements are prepared after preparing a Trial Balance.

a. True
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b. False
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15. ________________displays the summary of inventory.

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a. Stock Summary
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b. Ledger Summary
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c. Group Summary
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d. Transfer Summary
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16. Which of the following report will help in knowing the dead stock in Tally.ERP 9.
a. Stock Summary
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b. Ageing Analysis
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c. Transfer Analysis
d. Movement Analysis
17. Which voucher is used to record transfer of goods from one location to another?
a. Purchase Voucher
b. Sales Voucher
c. Stock Journal
d. Contra Voucher
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18. Refer to the figure 10.28
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Figure 10.28 Cash Flow Report Screen
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Why is the Nett Flow showing a negative balance in the above screenshot?
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a. Because Nett Flows are always shown as a negative amount

b. Because Cash Inflow is more than Cash Outflow
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c. Because Cash Outflow is always shown as a negative amount

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d. Because there is an Outflow of Cash without an Inflow

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TallyPRO - Part II
Chapter 11
Storage and Classification of
Inventory
Learning Objectives
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 Godowns management

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Creation & storing inventories in godowns
 Recording purchase voucher with godown
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 Recording sales voucher with godown
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 Stock categories & summary reports
 Create and maintain batch-wise details
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 Record transaction by honouring the expiry date of batches
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11.1 Introduction
It is very important to keep the track of goods manufactured or received in batches with expiry
details and also storage of the same is very crucial for an organisation, which is dealing in
manufacturing or trading of goods. A good storing and classification details will help a business to
move out the stock on time.
In Tally.ERP 9, we can maintain storage details by activating godown feature and also classification
or grouping of stock can be maintained by enabling the option stock category and stock group.
We can also maintain the details of perishable goods, batch details, manufacturing and expiry
details in Tally.ERP 9 by enabling the option batch wise details.
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AI
Godown is a place where inventories/ stocks are stored. You can specify the stock item to a
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particular Godown. The user can get the reports of movement of stocks between different
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locations/ Godowns and inward and outward of stock items for each Godown.
Stock Category offers a parallel classification of stock items. Like stock Groups, classification is
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done based on similarity in behaviour
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Business Scenario 1
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Sharp-Soft Industries, is into trading business of Bicycles, the Bicycles are purchased and placed
in multiple warehouses and used accordingly during sales. Sometime as per requirement the
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bicycles may be moved/ transferred from one warehouse to another for effective sales
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management
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Activity: Create a company with the following details:

Company Name: Sharp-Soft Industries
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Address: S-Block No: 154, Kosapet, Rama Nagar Square, Bengaluru,

Country: India
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State: Karnataka
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Pin: 560001
Financial year: 01-04-2017 to 31-03-2018
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11.2 Godown Management

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Godown is a place where inventories/ stocks are stored. You can specify the stock item to a
particular godown. The user can get the reports of movement of stocks between different
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locations/ godowns and inward and outward details of stock items for each godown.
11
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In Tally.ERP 9, we have provided the feature to create godown in single mode and multiple mode
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and also we can provide address for created godown. Stock transfers between several locations
and warehouses can be easily tracked. Based on the godown types, you can view the stock summary
from the stock summary report.
Note: In case of Job work or outsourcing, we even maintain the details of stock lying with third party
or third party stock lying with us (company), these details can be efficiently managed.
11.2.1 Activating Godown
To enable the order processing, follow the steps given below:

1. Go to Gateway of Tally > Press F11: Company Features > F2: Inventory Features
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2. Set the option – Maintain multiple Godowns to Yes
The Inventory Features screen appears as shown in the figure 11.1
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Figure 11.1 Inventory Features Screen
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11.2.2 Creating a Godown

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In Tally.ERP 9, we can create the godown from the inventory info menu screen. We have the
option to create a single godown at a time or multiple godowns at one go.
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Illustration 1: Creation of godown in Tally.ERP 9

Date Particulars
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01-07-2017 The company stores the goods in the following godown

 Local Warehouse – In this godown newly purchased goods are
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landed
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 Showroom stores – In this godown new stocks will be bought from

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local warehouse.
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 Scrap Warehouse- In this godown scarp/old/damaged goods are

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stored
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To maintain the godown in Tally.ERP 9, follow the steps given below:
Creating Single Godown
Go to Gateway of Tally > Inventory Info > Godowns > Single Godown > Create
Local Warehouse
Name Enter as Local Warehouse
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Use For
Our stock with third party Set to No
Third party stock with us Set to No
Our stock with third party: Set this option to Yes, if you want to keep the track of goods sent to third
party, this option will be enabled by the principal manufacturer (the person who will outsource the work to job
worker)
Third party stock with us: Set this option to Yes, if you want to keep the track of goods received from
third party, this option will be enabled by the job worker (the person who is undertaking the outsourcing work)
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Activity: Similarly create the following godowns in Tally.ERP 9
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 Showroom Stores
 Scrap Godown
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Note: We can create multiple godown at once from Gateway of Tally > Inventory Info > Under
Multiple Godown > Create > Select All Items
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11.2.3 Allocation of Stock to Particular Godown while Defining Opening ED
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Balance
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In Tally.ERP 9, we can define the details of godown even at the time of providing stock opening
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balance.
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Illustration 2: Defining stock opening balance along with godown in Tally.ERP 9

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Pass the following transaction in the book of Sharp-Soft Industries:

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Date Particulars
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31-03-2017 Sharp-Soft Industries has the following stock with them in local
warehouse godown
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Name of Stock Quantity Rate per (₹) Amount (₹)

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Item
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Bicycle 15 Nos 4800/ Nos 72,000

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To record the above transaction, in the books of account, first ensure that the required ledgers are
Creation of Inventory Masters
Unit of Measure
Go to Gateway of Tally> Inventory Info> Units of Measure

Nos
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Type Let it be Simple
Symbol Enter as Nos
Number of decimal places Let it be as 0
Stock Item
Go to Gateway of Tally> Inventory Info> Stock Items > Under Single Stock Item > Create
Bicycle
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Against the Field Actions to be Performed
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Name Enter as Bicycle
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Units Select as Nos
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Opening Balance Enter as 15 Nos @ ₹ 4800
Godown
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Select as Local Warehouse
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The Stock Item Allocation screen appears as shown in the figure 11.2
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Figure 11.2 Stock Item Allocation with Godown details screen
In the stock item allocation screen, we are storing the stock items in local warehouse.
11.2.4 Recording of Purchase, Sales and Stock Transfers with Godown Details
In this section, we will learn to record purchase, sales and stock transfers details along with godown
and also we will be checking the impact of the recorded transaction in the godown summary and
stock summary report.
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11.2.4.1 Purchase of Inventory
Illustration 3: Accounting of purchase, sales and stock transfer details in Tally.ERP 9

Date Particulars
To avoid shortage of bicycle supply, Sharp-Soft Industries purchased the
Bicycle from Atlas Global, and kept it in local warehouse
Item
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Bicycle 70 Nos 4,900/ Nos 3,43,,000
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To record the above transactions, in the books of account, first ensure that the required ledgers
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AN
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Party Ledger
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Go to Gateway of Tally> Accounts Info.> Ledgers> Create LE
Atlas Global
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Name Enter as Atlas Global

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Under Select Sundry Creditors

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Default Credit Period Leave it Blank

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Purchase Ledger
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Purchase A/c
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Step 2: Recording Purchase Voucher

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3.
Enter the Supplier invoice no.: PUR01
4.
In the Party A/c name field select the ledger Atlas Global
5.
In Purchase ledger field select Purchase A/c
6.
Under Name of Item, select Bicycle, and enter the details as shown in the figure no 11.
2:
The Stock Item Allocations screen with godown appears as shown in the figure 11.2:
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Figure 11.3 Inventory Allocation for Screen

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7. Accept the Stock Item Allocations screen

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The Purchase Voucher appears as shown in the figure 11.3:

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Figure 11.4 Purchase Voucher Screen
Once after recording the entry, go to Gateway of Tally > Stock Summary > Press Alt+F1, to
get the details of godown in which the stock is stored.
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11.2.4.2 Recording stock transfer entry using stock journal
In this section, we will learn to transfer the stock from one godown to another godown and also
transferring of goods from multiple godowns to one godown.
Illustration 4: Transferring of stock from one godown to another in Tally.ERP 9
Date Particulars
On the same day, 55 Nos of Bicycle was transferred from local warehouse
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to showroom stores
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Item
Bicycle 55 Nos 4882.35/ Nos 2,68,529.25
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Recording Stock Journal Voucher
1. Go to Gateway of Tally > Inventory Vouchers > Alt+F7: Stock Journal ED

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2. Press F2: Date and change the date to 01-07-2017
3. Enter the details as shown in the figure 11.5:
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The Stock journal Voucher Creation screen appears as shown in the figure 11.5:
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FF
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Figure 11.5 Stock Journal Screen

Note: In the Source (Consumption) side, select the Godown from which the stock will be moved out and in
the Destination (Production) select the Godown in which the stock will be moved in.
Activity: Record the following stock transfer

Date Particulars
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01‐07‐2017 The company has opened a new showroom and transferred the following
stock items from local warehouse to jayanagar stores.
Name of Item Quantity Rate Amount
Bicycle 10 Nos 4,882.35/ Nos 48,823.50
Illustration 5: Transferring of stock from multiple godowns to one godown by using a

class in Tally.ERP 9
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Date Particulars
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The following stock items were transferred to locale warehouse from
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jayanagar stores and showroom stores.
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Godown Name of Quantity Rate per (₹) Amount (₹)
Stock Item
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Jayanagar Bicycle 2 Nos 4,882.35/ 9,764.70
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stores Nos
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Showroom Bicycle 5 Nos 4,882.35/ 2,4411.75
Stores Nos
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Step 1: Setting of Class in Stock Journal Voucher

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Note: The class is created in order to transfer the stock items to multiple godowns at once from a single voucher.
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1. Go to Gateway of Tally > Inventory Info > Voucher Types > Alter > Stock
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Journal.
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2. Under Name of Class, type Godown Transfer

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The Voucher Type Alteration screen with class appears as shown in the figure 11.6:
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Figure 11.6 Stock Journal-Name of Class Screen
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3. Set the option – Use Class for Inter-Godown Transfers to Yes
The Voucher Type Class screen appears as shown in the figure 11.7:
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Figure 11.7 Class Godown Transfer Screen
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Step 2: Recording of Stock Journal Voucher with Class

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2. Select the class from Voucher Class List
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The Voucher Class List appears as shown in the figure 11.8:

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Figure 11.8 Voucher Class List Screen

4. Select Showroom Stores in Destination Godown
5. Under Name of Item, select Bicycle
6. In Godown field, select the Jayanagar Stores
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The Stock Journal Voucher Creation screen with godown transfer class appears as shown in the
figure 11.9:
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Figure 11.9 Stock Journal – Godown Transfer Class Screen ED
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11.2.4.3 Sale of Inventory

In this section, we will learn to record the sales transactions with inventory and godown details
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in Tally.ERP 9.
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Illustration 6: Recording of sales transaction with inventory and godown details.

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Sold Bicycle to Mega Cycle Mart, the stock was dispatch from showroom
stores godown
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Item
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Bicycle 45 Nos 5,500/ Nos 2,47,500

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Party Ledger
Mega Cycle Mart

Name Enter as Mega Cycle Mart
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Sales Ledger
Sales A/c
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Step 2: Recording Sales Voucher LE
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3. Enter the Reference no.: SAL01

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4. In the Party A/c name field select the ledger Mega Cycle Mart
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6. Under Name of Item, select Bicycle, and enter the details as shown in the figure 11.10:
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The Stock Item Allocations screen appears as shown in the figure 11.10:
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Figure 11.10 Item Allocations for Screen

7. Accept the Stock Items Allocations screen
Note: In the stock items allocations screen, we can define the details of godown.
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Figure 11.11 Sales Voucher Screen
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11.2.5 Maintaining Damaged Goods

Damaged goods are the goods which cannot be sold to the customer. The business will send these
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goods for reprocessing or sell it as a scrap. In Tally.ERP 9, we can maintain a damaged goods
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details.
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Illustration 7: Maintaining Damaged Goods

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Date Particulars
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Sharp-Soft Industries identified that the Bicycle which is kept in Local
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Warehouse, has got damaged and they transferred it to Scrap Warehouse.

Name of Stock Item Quantity Rate per (₹) Amount (₹)
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Bicycle 2 Nos 4900/ Nos 9,800

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Recording Stock Journal without Using Class

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The Stock Journal Voucher Creation screen appears as shown in the figure 11.12:
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Figure 11.12 Stock Journal Screen
4. Press Ctrl+A to accept the screen
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Observation: Once after recording the entry of figure 11.12, go to Gateway of Tally > Stock Summary
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> Press Alt+F1, the details of the above quantity will reflect under scrap warehouse
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11.2.6 Analysing Godown Summary and Stock Movement Reports

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In this section, we will learn to generate godown summary and stock movement details in
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Tally.ERP 9. Godown summary report displays the details of godown-wise stock item details along
with quantity, rate and amount information. This report helps to understand the total quantity
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available in particular godown. Stock Movement report gives the details of the stock inward and
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stock outward.
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Godown Summary
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To view godown summary report follow the steps given below:

1. Go to Gateway of Tally > Display > Statements of Inventory > Godowns
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2. Select Primary
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3. Press Alt+F1, to view in detailed mode

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The Godown Summary report appears as shown in the figure 11.13:

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Figure 11.13 Godown Summary Screen
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Observation: From the report of figure 11.13, we can observe the godown-wise details of stock item, by this
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information we will come to know the total number of stock available in particular godown.
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Movement Analysis
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1. Go to Gateway of Tally > Display > Inventory Books > Movement Analysis> Stock
Group Analysis
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2. Select Primary
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The Movement Analysis report appears as shown in the figure 11.14:
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Figure 11.14 Movement Analysis Screen

Observation: In the report of figure 11.14, we can observe the details of stock inward and outward along with
godown information.
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11.3 Stock Category
Stock Category offers a parallel classification of stock items. Like stock Groups, classification is
done based on similarity in behaviour.
Business Scenario
Sharp-Soft Industries deals in weather cover of different brands like Hercules and Sharp with 10
& 12, size. Now the company wants to know the availability of stock items based on sizes and
irrespective of their brand.
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11.3.1 Activation of Stock Categories
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In order to set the parallel classification for stock item, stock category feature should be activated
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in Tally.ERP 9.
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To enable the stock categories, follow the steps given below:
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2. Set the option – Maintain stock categories to Yes
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The Inventory Features screen appears as shown in the figure 11.15: LE
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11.3.2 Creating Stock Categories

In this section, we will learn to create and set the stock categories for stock items in Tally.ERP 9.
Illustration 8: Creation of Stock Category

Maintain the following stock category in the books of sharp-soft industries:
Name of Stock Item Stock Category
Bicycle Cover (Hercules‐10) Size 10
Bicycle Cover (Sharp‐10)
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Bicycle Cover (Sharp‐12)
Once after enabling the stock category in Tally.ERP 9, next steps is to create the stock category,
to do so, follow the steps given below:
Step 1: Creation of Stock Categories
Go to Gateway of Tally > Inventory Info > Stock Categories > Create
Size 10
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Name Enter as Size 10
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The Stock Category Creation screen appears as shown in the figure 11.16
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Figure 11.16 Stock Category Creation Screen

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Activity: Similarly, create the following stock categories

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Stock Category
Size 12
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Step 2: Creation of Stock Items
Go to Gateway of Tally> Inventory Info> Stock Items > Create

Bicycle Cover (Hercules-10)
Name Enter as Bicycle Cover
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Category Select as Size 10
Units Select as Nos
The Stock Item Creation with stock category appears as shown in the figure 11.17:
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Figure 11.17 Stock Item Creation Screen

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Activity: Create the following stock items

Name of Stock Item Stock Category
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Bicycle Cover (Sharp‐10) Size 10
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Bicycle Cover (Sharp‐12) Size 12
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the stock items in which the stock category is defined, the reports related to stock categories will
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get updated automatically.

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11.3.3 Recording of Transactions

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In this section, we will learn to record the transactions with stock items in which stock category
is defined.
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Illustration 9: Recording of Transaction

Pass the following transaction in the book of Sharp-Soft Industries
Date Particulars
Sharp-Soft Industries purchased the following stock from Atlas Global, the
stocks are kept in Local Warehouse
Item
Bicycle Cover 100 Nos 125/ Nos 12,500
(Hercules-10)
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Bicycle Cover 100 Nos 125/Nos 12,500
(Sharp-10)
(Hercules -12)
(Sharp -12)
Recording Purchase Voucher
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3. Enter the Supplier invoice no.: PUR02
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4. In the Party A/c name field select the ledger Atlas Global
5. In Purchase ledger field select Purchase A/c
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6. Under Name of Item, select Bicycle Cover (Hercules -10)
7. In the Stock Item Allocations screen, enter the godown as local warehouse, quantity as
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100 Nos and rate as ₹125 details
8. Similarly select the other stock items as shown in the figure 11.18:
The Purchase Voucher appears as shown in the figure 11.18: ED
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Figure 11.18 Purchase Voucher Creation Screen

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Once after recording the transaction the details will be updated in stock category summary report.
To check Stock Category Summary report, follow the steps given below:
1. Go to Gateway of Tally > Display > Statements of Inventory > Categories > Select
Size 10
2. Press Alt+F2, enter the period as 01-07-2017 – 31-07-2017
The Stock Category Summary report appears as shown in the figure 11.19:
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Figure 11.19 Stock Category Summary Screen
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In the report of figure 11.19, we are getting the total quantity of stock items falling under stock
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category - size 10 irrespective of their brand – hercules and sharp. Similarly we can check the
details of other stock category.
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11.4 Movements of Goods in Batches/Lots -

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Batch wise details

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Batch details are used to identify the movement of inventory in batches or lots. Although this is a
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requirement primarily of the pharmaceutical industry, the same can be used by other industries
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that maintain or manufacture perishable goods. Many organizations also purchase in batches in
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order to monitor the result of the batch purchased individually. Hence, Tally.ERP 9 has used the
term Batch/Lot.
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Batches/Lots are also often used to monitor the date of manufacture, date of receipt and the date
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of expiry. Tally.ERP 9 makes provisions to enter both the manufacturing date and the expiry date
to take decisions as required.
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Batch-wise details are given for maintaining batch information pertaining to stock items. The
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Manufacturing date and expiry date can be set for the batches.
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Let us understand how to use the batch-wise details feature in Tally.ERP 9 through the below
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given scenario
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Business Scenario
Sharp-Soft Industries diversified its business and now started dealing in medicines which is
traded in lots/batches. It has two Godowns, namely Onsite and Stores and it wants to keep the
track of the expiry and manufacturing dates.
11.4.1 Activating Batch-wise Details in Tally.ERP 9

In order to maintain the details of manufacturing date, expiry date and batch details, we need to
first activate the Batch-wise Details in Tally.ERP 9.
To activate Batch-wise Details feature in Tally.ERP 9, follow the steps given below:
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2. Set the option – Maintain batch-wise details to Yes
3. Set expiry dates for batches to Yes
The Inventory Features screen appears as shown in the figure 11.20:
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11.4.2 Using Batch-wise Details in Purchase Invoice

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In this section, we will learn to set manufacturing and expiry details and set batch wise details while
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recording the purchase transaction.

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Illustration 10: Purchase of goods with Batch details

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Date Particulars
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Sharp-Soft Industries, purchased medicinal drugs from Timela Pharmaceuticals.
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One Box contains 100 blister packs of tablets; with Batch No. RGBP-001 and
manufacturing and expiry dates are 31-07-2017 and 31-12-2017 respectively
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Reginseng-10mg 1200 Box ₹ 200/Box 2,40,000
To record the above transactions in the books of account, first ensure that the required masters
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Party Ledger
Timela Pharmaceuticals
Name Enter as Timela Pharmaceuticals
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Maintain balances bill by bill Set to Yes
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Purchase Ledger
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Purchase of Medicines
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Name Enter as Purchase of Medicines
Under Select Purchase Accounts
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Stock Group
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Go to Gateway of Tally > Inventory Info > Stock Groups > Create
Antioxidant
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Name Enter as Antioxidant

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Should quantities of Items be added? Set to Yes

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Units of Measure
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Go to Gateway of Tally > Inventory Info > Unit of Measure > Create
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Simple Unit
Blister Packs
Against the field Name Action to be performed
Type Select Simple
Symbol Enter as Bpks
Formal name Enter as Blister Packs
Number of decimal places Let it be as 0
Activity: Similarly create the other simple unit by Box.
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Compound Unit
A Compound Unit is a relation between two Simple Units. Hence, before you create a Compound
Unit, ensure that you have already created the required Simple Units.
Compound Type
Box of 100 Bpks
Against the field Name Action to be performed
Type Select as Compound
First Unit Enter as Bx
Conversion Factor Enter 100
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Second Unit Enter as Nos
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The Completed Unit Creation screen appears as shown in the figure 11.21:
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Figure 11.21 Unit Creation Screen

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Godown
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Go to Gateway of Tally > Inventory Info > Godowns > Create

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Onsite
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Name Enter as Onsite
Use For:
Our Stock with third party Set to No
Third party stock with us Set to No
Activity: Similarly create one more Godown by name Stores
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Stock Item
Reginseng-10mg
Name Enter as Reginseng-10mg
Under Select as Antioxidant
Category Select as Not Applicable
Units Select as Box of 100 Bpks
Maintain in batches Set to Yes
Track date of manufacturing? Set to Yes
Use expiry dates? Set to Yes
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The Completed Stock Item Creation screen with batch details appears as shown in the figure
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11.22:
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Step 3: Recording Purchase Voucher

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2. Press F12: Configure > Press F12: Advance Configuration and set the option Allow
use of expired batches for all stock items to No
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5. In the Party A/c name field select the ledger Timela Pharmaceuticals
6. In Purchase ledger field select Purchase of Medicines
7. Under Name of Item, select Reginseng-10mg, and press Enter the Stock Item
Allocations screen will appear
8. Select Onsite in the Godown field
9. Under Batch/ Lot No. select New Number and enter as RGBP-001
10. Enter Quantity as 1200 Box, Rate @ ₹ 200/ Box and amount will be calculated
automatically
11. Enter the Manufacturing Date as 01-07-2017 and Expiry Date as 31-12-2017
The Stock Item Allocation screen appears as shown in the figure 11.23:
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Figure 11.23 Stock Item Allocations Screen
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12. Press enter and End of List
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13. Enter the Bill wise Details and accept the screen
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The Purchase Voucher Creation screen appears as shown in the figure 11.24:
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Figure 11.24 Purchase Voucher Screen

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Activity: Record the following transaction:

Date Particulars
26-10-2017 Sharp-soft Industries, purchased the following goods from Timela Pharmaceuticals with
Batch No. RGBP-002, manufactured date - 01-10-2017 and expiry date - 31-03- 2017
respectively, select Godown as Onsite.
Item
Reginseng-10mg 50 Box ₹ 200/Box 10,000
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Once after recording the purchase entry, go to Gateway of Tally > Display > Inventory Books
> Batch, select the item and batch number, to view batch wise details. In Batch voucher report,
the purchase details will be captured under Inward column.
11.4.3 Using Batch-wise Details in Sales Invoice

In this section, we will learn to set manufacturing and expiry details and set batch wise details while
recording the sales transaction.
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Illustration 11: Sales of goods with Batch details
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Date Particulars
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Sold goods on cash and generated Cash Invoice for Batch No RGBP-001
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Recording Sales Voucher

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4. In the Party A/c name field select Cash ledger
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6. Under Name of Item, select the Stock Item, Reginseng-10mg and press enter
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7. The Item Allocations for screen will appear

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8. Select the Godown as Onsite

9. From the List of Active Batches, select the Batch/ Lot No. RGBP-001
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The Stock Item Allocations with batch wise details appears as shown in the figure 11.25:
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Figure 11.25 List of Active Batches
10. Enter the Quantity as 200 Box and ₹ 250 Rate fields respectively
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Illustration 12: Handling of expired batches in Tally.ERP 9

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Date Particulars
Made cash sales and generated Cash Invoice for Batch No RGBP-001
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Recording Sales Voucher

2. Press F12:Configure > F12:Advanced and disable the option Allow use of expired
batches for all stock items
5. In the Party A/c name field select Cash ledger
7. Under Name of Item, select Reginseng-10mg and press enter
8. The Item Allocations for screen will appear
9. Select the Godown as Onsite
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10. From the List of Active Batches, select the Batch No. RGBP-001
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The Stock Item Allocations screen with batch no. details appears as shown in the figure 11.27:
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Figure 11.27 List of Active Batches Screen

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Note:
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 As shown in the figure 11.27, the Batch No. RGBP-001 is not appearing because the batch has expired
on 31-12-2017. Hence, it is not made available in the List of Active Batches.
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 If you want the expired batches to be displayed in the List of Active Batches, then the same can be achieved
by enabling the option Allow use of expired batches for all stock items in F12: Advanced
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Configuration.
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 Similarly, you have the option of Show batches with zero quantity in the List of Active
Batches from F12: Advanced Configuration.
11. To Record the entry use the batch number RGBP-002

12. Enter the quantity as 30 and rate as 250, the amount will get captured automatically
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Figure 11.28 Stock Item Allocation Screen
13. Press Enter to accept
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Figure 11.29 Sales Invoice

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11.4.4 Expired Batch/Stock Transfer

Transfer of stock item from one location to another location is recorded in the Stock Journal
voucher. In this section, we will learn to transfer the expired batches or stocks from one location
to another.
Illustration 13: Transfer of expired batch/stock from one location to another

Date Particulars
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Sharp-Shop Industries, transferred expired stock of Batch No. RGBP-001,
from the Onsite Godown to the Scrap Warehouse, since the stock items got
expired
Reginseng-10mg 1,000 Box ₹ 200/Box 2,00,000
Recording Stock transfer details using Stock Journal
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1. Go to Gateway of Tally > Inventory Vouchers > Press Alt+F7: Stock Journal
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2. Press F12: Configure and set the option Allow use of expired batches for all stock
items to Yes
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The Stock Journal Configuration screen appears as shown in the figure 11.30:
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Figure 11.30 Stock Journal Configuration Screen

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Note: Set the option - Allow use of expired batches for all stock items must be Yes, this option is
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enabled to get the expired batch listed in the List of Active Batches. If the option is set to No, then the expired
batch RGBP-001 will not get listed in the List of Active Batches)
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5. Under Name of Item select as Reginseng-10mg, select the godown as Onsite, you will
get the Stock Item Allocations screen with batch details
The Stock Item Allocations screen with expired batch details appears as shown in the figure
11.31:
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Figure 11.31 List of Active Batches in the Stock Journal
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7. Select the batch number from which you want to transfer the goods select RGBP-001
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8. Enter the Quantity as 1,000 Nos @ Rate as 200/ Nos, the amount will be calculated
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automatically.
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Note: Do not change the manufacturing date and expiry date while recoding stock journal voucher
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9.
Under the Destination (Production) column select the following details
10.
Under Name of Item select the stock item - Reginseng-10mg
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11.
Select the Godown as Scrap Warehouse
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12.
Enter the new Batch number as RGBP/EXP/RNV – 001
13.
Enter the Quantity as 1,000 and Rate @ 200/ Nos, the amount will be captured
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automatically
14. Enter the Manufacturing Date as 01-07-2017 and Expiry Date as 31-12-2017.
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The Stock Item Allocations screen with expired batch details appears as shown in the figure
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11.32:
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Figure 11.32 Item Allocation Screen
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15. Press Enter to accept
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The Completed Stock Journal Voucher Creation screen appears as shown in the figure 11.33:
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Figure 11.33 Stock Journal – Transfer of Materials screen

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Note: Stock Journal voucher can also be used to record the details of manufacturing process in Tally.ERP 9.
Once after recording the entry go to Gateway of Tally > Display > Inventory >Statements
of Inventory > Godowns > Select Scrap Warehouse
The Godown Summary report of scrap warehouse appears as shown in the figure 11.34:
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Figure 11.34 Godown Summary Report Screen
In the Godown Summary report, we are getting the details of stock item available in scrap
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warehouse. This report indicates the total value of scrap lying with us, in this case it is ₹ 2,
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09,800.
11.4.5 Batch Reports
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In this section, we will learn to generate and analyse the details available in batch reports like batch
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voucher, batch summary and transfer analysis.

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11.4.5.1 Batch Vouchers Report

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Batch Vouchers is a list of all vouchers for a particular stock item of the same batch for a given
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period. This report comprises of both inwards and outwards transactions along with Quantity,
Rate and Closing Value details for the selected batch.
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To view batch vouchers report, follow the steps given below:

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1. Go to Gateway of Tally > Display > Inventory Books > Batch and press enter
2. Select the required Stock Item and Batch from the List of Batches
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The Batch Items screen with list of batches appears as shown in the figure 11.35:
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Figure 11.35 Selection of Batch of Stock Item screen
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3. Select the Batch No. RGBP-001
4. Press F2: Period and set the period from 01-07-2017 to 31-03-2018
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The Batch Voucher report appears as shown in the figure 11.36:
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Figure 11.36 Batch Vouchers Report Screen

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Note: The report of figure 11.36, shows that one purchase, one sales have been made using Batch no. RGBP-
001 and also it displays the details of stock transfer. It is displays the details of batch manufactured date and expiry
date.
Activity: The same report can be generated from the Stock Summary report. To generate the same, go to
Gateway of Tally > Stock summary > Select the Group Antioxidant> Select the Stock Item Reginseng-10mg >
Bring the cursor in the May month > Press Enter > Press F5: Batch > Select the Name of Item and Batch to
view the Batch Vouchers report.
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11.4.5.2 Batch Summary Report
Batch Summary is a summary of all the batches of a particular stock item for a given period. We
can select the required batch and further drill down to view the Batch Monthly Summary and
then further to the batch voucher report of the selected batch of an item.
To view the batch summary report, follow the steps given below:
1. Go to Gateway of Tally > Display > Inventory Books > Batch
2. Select the required Stock Item and select the Batch from the List of Batches
3. Select the required Batch number
4. Press F2: Period and set the period from 01-07-2017 to 31-03-2018
5. Press F6: Batch Summary and then press Alt+F1: Detailed
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The Batch Summary report appears as shown in the figure 11.37:
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Figure 11.37 Batch Summary Report Screen

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Note: Press F12: Configure from the above screen and enable the options Show Mfg date and Show exp
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date and check the Batch Summary report. It will display the expiry and manufacturing date details.
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From the report of figure 11.37, we will get the details of the stock available in the selected
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batch/lot. It displays the details of stock quantity and godown details.

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11.4.5.3 Transfer Analysis report

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Transfer analysis report gives you the details of stock transferred from one location to another
with quantity, rate and additional cost details, it will also give you the details of Batches/Lots.
To view transfer analysis report, follow the steps given below:

1. Go to Gateway of Tally > Display > Inventory books > Movement Analysis >
Transfer Analysis > Select Stock Journal > Select the Stock Item
2. Press F12: Configure and set the below options enabled
 Show Batch Details to Yes
 Show Batch Mfg. and Expiry Date to Yes
The Transfer Analysis report, appears as shown in the figure 11.38:
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Figure 11.38 Transfer Analysis Report - with Batch Manufacturing & Expiry Details
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In the transfer analysis report, we will get the transfer details like goods in, goods out and other
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inventory information like quantity, value, additional cost etc.
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11.5 Stock Valuation Methods
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Important goal of accounting for inventory is to have accurate information about the costs and
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sales. Stock valuation allows a company to provide a monetary value for stock items lying in their
inventory. This information allows a company to properly evaluate expenses and revenues on their
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financial statements so that they can make correct business decisions.

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There are different types of stock valuation methods that can be used for accurate stock valuations
based on the nature of business.
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Different types of stock valuation methods available in Tally.ERP 9 are listed below:
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1. At Zero Cost
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2. Average Cost
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3. FIFO (First in, First out)

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4. FIFO Perpetual
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5. Last Purchase Cost

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6. LIFO Annual (Last-in, First-Out)

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7. LIFO Perpetual
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8. Monthly Average Cost

9. Standard Cost
Stock Valuation Methods

The cost of goods sold is largely based on the cost assigned to Closing stock (Ending inventory).
Cost of goods sold = Opening stock (Beginning Inventory) + Purchases made during the
reporting period – Closing Stock (Ending Inventory)
Note: Similarly, Gross Profit = Net sales – Cost of goods sold
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There are different types of stock valuation methods available for calculating the recorded value
of closing stock (ending inventory) in Tally.ERP 9.
Business Scenario
Sharp-Shop Industries, diversified its business and now deals in buying and selling of Mobile
phones like TK-4 and Techno TK-5. The company wants to calculate its closing stock value based
on FIFO method
11.5.1 Configuration of Stock Valuation Method

In this section, we will learn to configure stock valuation method while creating the stock item in
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Tally.ERP 9.
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Illustration 14: Creation of stock items with their respective stock valuation method
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Name of Stock Item Stock Valuation Method
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KT-4 FIFO Perpetual
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KT-5 FIFO Perpetual
MK-4
ED LIFO Perpetual
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To configuration of stock valuation method for given stock items, follow the steps given below:
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1. Go to Gateway of Tally > Inventory Info. >Stock Item > Create, you will get the
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following screen:
The Stock Item Creation screen appears as shown in the figure 11.39:
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Figure 11.39 Item Creation screen

2. Enter the Name of stock item as KT- 4
3. Select Primary in the Under field
4. Bring the cursor to the Units field and press Alt+C to create the Unit of measure as
Nos
5. Do not enable Maintain in batches option
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The Stock Item Creation screen with F12: Configure appears as shown in the figure 11.40:
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Figure 11.40 Stock Item Creation (Filled) screen
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6. Press F12: Configure from the figure 11.40 and set the option Allow advance entries in
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Masters to Yes, as shown in the figure 11.41:
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The Stock Item Configuration screen appears as shown in the figure 11.41:
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Figure 11.41 Master Configuration Screen

7. Press Enter and accept the configuration screen; you will come back to the item creation
screen with a behaviour column, as shown in the figure 11.42:
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Figure 11.42 Stock Item Creation with Behaviour Column
8. By default, the costing method selected is the Average Cost Method
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Note: In Tally.ERP 9 stock valuation methods are displayed under Costing Method
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9. Bring the cursor in the Costing method field and press Space bar button to get the list
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of costing methods, as shown in figure 11.43:

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The Stock Item Creation screen with costing method appears as shown in the figure 11.43
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Figure 11.43 List of Costing Methods

10. You can select the required costing method like FIFO, LIFO, Standard cost, Average
cost etc.
11. In this case, select FIFO Perpetual
12. In the Market Valuation Method field select as Avg. Price
The Completed Stock Item Creation screen appears as shown in the figure 11.44:
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Figure 11.44 Completed Stock Item Creation screen
Note: The stock valuation method can be defined even at the time of alteration of stock items. However, if the
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stock item is altered after recording the transaction then the changes made in the costing method will not be applicable
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for transactions already recorded. Hence, to make the costing method applicable all the entries have to be reaccepted
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(i.e., alter the entries and press enter till the vouchers are accepted).
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13. Ignore Difference due to Physical Counting? : In Tally.ERP 9, you can record the
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physical stock as counted, using a physical stock voucher. If you wish to ignore the
difference and continue with the stock as per books, set this option to Yes.
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14. Ignore Negative Balances?: If you set this option to Yes, Tally.ERP 9 ignores the item
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in the stock reports, in case it has a negative balance.

15. Treat all Sales as New Manufacture?: If you set this option to Yes, whenever a sales
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entry is made, Tally.ERP 9 automatically updates the quantity and value in inward by
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treating the same entry as a New manufacture or purchase.

16. Treat all Purchases as Consumed? If you set this option to Yes, then, whenever a
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purchase entry is made, Tally.ERP 9 automatically updates the quantity and value in
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outward by treating the same entry as consumed.

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17. Treat all Rejections inward as Scrap?: If you set this option to Yes, then, whenever a
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rejection inward entry has been made [without tracking number], Tally.ERP 9
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automatically reduces the amount from the closing stock balance. In this case, you need
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not pass the credit note for reducing the value against rejection inward. This is used for
defective items returned by the customer.
18. Press Enter or Y to accept/save the stock item.
Activity:
1. Create the following stock items
Name of Stock Item Stock Valuation Method
KT - 5 FIFO Perpetual
MK- 4 LIFO Perpetual
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11.5.2 Different Types of Costing Methods
In this section we will learn about the different types of costing methods available in Tally.ERP
9. Stock valuation methods are displayed under the Costing Methods menu:
The Costing Method menu appears as shown in the figure 11.45:
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Figure 11.45 List of Costing Methods
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1. At Zero Cost: Cost of an item is considered as zero. For example, for defective items that
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have no commercial value and also when the stock is used for own consumption this
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method is selected. For example, any purchases made for own consumption, like purchase
of furniture, plant and machinery etc., this valuation method is selected.
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2. Avg. Cost: This method is used to assign the average cost of production to a product.
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This method is commonly used in the following situations:

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 Inventory items are piled and combined together in such a way that they cannot
be separated to assign a specific cost to the individual units within it. For example,
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chemicals and oils, etc. -- chemicals bought 2 weeks ago cannot be differentiated
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from those bought yesterday because they all are mixed together.
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 The accounting system of the company is not advanced to track FIFO or LIFO
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inventory details.
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They are two types of Avg. Cost

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 Periodic System (Yearly bases): This is also known as Weighted Average Cost.
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The weighted average cost for the whole year is computed as below:
Average cost = Total Inward value for the Year
Total Inward Quantity for the year
 Monthly system: In monthly average cost, average cost is determined on a

monthly basis instead of annual. The average cost for a month is computed as
shown below:
Average cost = Total Inward Value for the Month
Total Inward Quantity for the Month
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3. FIFO (First-in, First-Out): This method is used when the first Stock items bought are
the first ones to be sold and the stock items bought later are sold later.
It is commonly used by the business that trades in food stuff or any other goods that have
a limited shelf life.
They are two types of FIFO Costing Methods:

 Annual Periodic System (Current financial year): Under the FIFO Periodic
System, it is assumed that items purchased first are sold first under the current
financial year (i.e., first lot from the opening stock of current year).
 Perpetual System (Across the financial year): Under the FIFO Perpetual
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system, it is assumed that items purchased first are sold first across the financial
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year (i.e., first lot may be from previous year entry).
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4. Last Purchase Cost: Last Purchase Cost is the Last Purchase Rate. Cost of Goods Sold
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and Cost of Inventory are based on the Last Purchase Rate.
5. LIFO (Last-in, First-Out): This method is used when the Last Stock items bought are
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the first ones to be sold and the stock items bought first are sold last.
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They are two types of LIFO Costing methods:
 LIFO Annual: Under the LIFO Annual method, it is assumed that items
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purchased last are sold first under the current financial year (i.e., first lot from the
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opening stock of the current year).

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 LIFO Perpetual: Under the LIFO Perpetual method, it is assumed that items
purchased last are sold first across the financial year (i.e., first lot may be from
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the previous year’s entry).

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6. Standard Cost: Standard Cost is Standard Rates specified in the Inventory Master. Cost
of Goods Sold and Cost of Inventory are based on the Standard Rates.
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7. Market Valuation Method: The Market Valuation Method is used to determine the
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realisable worth of an Item. Unrealised Profit of an Item = Closing Value as per Costing
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Method – Closing Value as per Market Valuation Method.

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Select the appropriate method applicable for the Item from the Valuation Methods List,
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Figure 11.46 List of Market Valuation Methods

The different types of valuation methods are:
 At Zero Price: Realisable price of an item is considered as zero
 Average price: Item is values at average price
 Last Sale Price: Item is valued at the last sale price
 Standard Price: The user specified rate applicable on the current date specified
in the Item Master under Standard Rate is taken as the realizable rate.
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11.5.3 Recording of Purchase and Sales Transactions
In this section, we will learn to record the transaction with stock items in which the costing
method is configured

Date Particulars
Purchased the following goods from Mohandas and the cash payment was made
immediately. Store the goods in local warehouse.
Item
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KT - 4 100 Nos 2,000/ Nos 2,00,000
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KT - 5 100 Nos 3,000/Nos 3,00,000
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MK - 4 100 Nos 4,000/Nos 4,00,000
Voucher: Purchase
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05-12-2017
Purchased the following goods from Karamchand and the cash payment was made
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immediately. Select the godown as local warehouse
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Item
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KT - 4 50 Nos 1,500/ Nos 75,000
KT - 5 50 Nos 2,500/Nos 1,25,000
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MK - 4 50 Nos 3,5000/Nos 1,75,000
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Purchased the following goods from Karamchand and the cash payment was made
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immediately. Select the godown as local warehouse

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Item
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KT - 4 10 Nos 1,600/ Nos 16,000

KT - 5 10 Nos 2,600/Nos 26,000
6 -S
00

Sold the following goods from Mohandas and the cash payment was made
00
immediately by the customer.

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8
Item
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KT - 4 120 Nos 2,500/ Nos 3,00,000

KT - 5 120 Nos 3,500/Nos 4,20,000
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MK - 4 40 Nos 4,500/Nos 1,80,000

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Once after recording the transaction let us c heck how the stock valuation is done in case of
FIFO and LIFO Perpetual methods.
11.5.4 Stock Valuation based on FIFO Perpetual Method

To check the stock valuation based on FIFO Perpetual method, follow the steps given below:
1. Go to Gateway of Tally > Stock Summary, in this report the stock value of KT -4 is
displaying as 61,000, to check the calculation details, bring the cursor on KT – 4 stock
item and press Enter
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2. Press Enter on December Month from Stock Item Monthly summary
The Stock Voucher report appears as shown in the figure 11.47:
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Figure 11.47 Stock Voucher Report Screen ED
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Let us check the calculation based on FIFO Perpetual method:
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 First lot purchase details = 100 Qty at 2,000/No, total Value = 200,000
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 Second lot purchase details = 50 Qty at 1,500/No, total value = 75,000

 Third lot purchase details = 10 Qty at 1,600/No, total value = 16,000
FF
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When 120 Nos of goods we sold, the quantity were first taken from first lot of purchase i.e. 100
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quantity and the remaining 20 quantity were taken from second slot of purchase
6
00
Remaining quantity after recording sales transaction:

 First lot purchase details
00
= Total quantity is sold

 Second lot purchase details = 30 quantity is remaining, total value = 30 * 1500 = 45,000
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 Third lot purchase details = 10 quantity is remaining, total value = 10*1600 = 16,000
8
11
Therefore the total stock value of KT – 4 is 61,000 as per FIFO Perpetual method
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Activity: Similarly check the calculation of KT – 5 and MK – 4 Stock Items
In Tally.ERP 9, we have a facility to view the stock valuation of all stock items with different
costing methods, to do so follow the steps given below:
1. Go to Gateway of Tally > Stock Summary > Press Alt+N

The Auto Repeat Column screen appears as shown in the figure 11.48:
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Figure 11.48 Auto Repeat Column Screen
2. Select Stock Valuation Method option from Column Details list
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3. Press Enter, you will get the following screen with all stock valuation as shown in figure
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11.49: LE
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Figure 11.49 Stock Summary Report with all stock valuation

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Figure 11.50 Stock Summary Report with all stock valuation (Continued)
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In the figure 11.49 and 11.50, we can view the stock valuations of different costing methods like
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FIFO, LIFO, Average Cost, Standard cost etc.
Conclusion
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In this chapter, we have learnt to configure godown, stock category, batch details and also we have
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learnt to record different business transaction involving inventory in Tally.ERP 9. Generated

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specific reports and checked how instantly the inventory reports like batch summary, godown
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summary, transfer analysis and stock summary with stock valuation gets updated.
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Key Takeaways
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 Godown is a place where inventories/ stocks are stored

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 Multiple Godowns can be maintained in Tally.ERP 9

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 Stock Category offers a parallel classification of stock items

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 Multiple Stock categories can be created in Tally.ERP 9

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 Batch-wise details are extremely beneficial for perishable goods.

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 Manufacturing and expiry dates can be set for batch-wise details.


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Tally.ERP 9 has an option to display only those batches which have not expired and hide
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the expired batches.


21
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 FIFO stands for First In First Out

 LIFO stands for Last In First Out
Shortcut Keys
Alt+F6  From the Batch Voucher report
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 To navigate to the Daily Breakup of
batch Items report.
F4  From godown summary report
 To select the godown from the list of
godown
Ctrl+S  From batch voucher report
 To navigate to the stock item alteration
screen.
F6  From batch voucher report
 To navigate to the batch summary
report.
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Practice Exercises
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1. Manufacturing and expiry dates can also be set for batch-wise details.
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a. True
b. False
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2. With default settings, Tally does not allow selection of batches for which Expiry dates fall
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before Voucher date.
a. True
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b. False
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3. Match the following items and select the appropriate answer from the given response
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sheet.
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a Storage of Material 1 Stock journal

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b Transfer of Material 2 Batch wise

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c Parallel allocation if stock items 3 Godown

d Stock Item with Manufacturing & Expiry Details 4 Stock Category
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a. a-1, b-2, c-3, d-4

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b. a-3, b-1, c-4, d-2

c. a-4, b-3, c-2, d-1
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d. a-2, b-1, c-3, d-4

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4. Where can we find the option to ‘Allow use of expired batches for all stock items’ be set
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to ‘Yes’?
a. F11 > Inventory Features
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b. F12 >Advanced Configuration

c. F11 > Accounting Features
d. F11 >Statutory Features
5. Batch wise details come under which section in F2: Inventory Features
a. General
b. Storage & Classification
c. Order Processing
d. Other Features
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6. From the below given Figure 11.39, the voucher class is used for_________
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AN
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Figure 11.51 Stock Journal Voucher
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a. Transfer of Ledger Closing Balances
b. Inter-Godown Stock Transfers
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c. Physical Verification of Stocks
d. None of These
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7. Maintain multiple Godowns come under which section in F2: Inventory Features?
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a. Storage & Classification

b. General
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c. Purchase Management
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d. Sales Management
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8. We can track the Manufacturing date without maintaining batches.

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a. True
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b. False
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9. From the below given Figure 11.32, ______voucher is used for Transfer Analysis
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Figure 11.52 Transfer Analysis
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a. Journal
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b. Physical Stock
c. Stock Journal
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d. Bicycle
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10. Payment voucher is recorded to transfer the stock from one godown to another godown
a. True
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b. False
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460

Chapter 12
Management of Purchase and Sales
Cycle
Learning Objectives
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 Handling of complete sales order processing.
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 Handling of complete purchase order processing.
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 View order details and outstanding reports
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 Close orders due to cancellation, lack of stocks or return of goods etc.
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12.1 Introduction
It is very important for any organization who are dealing in inventory to maintain the track of
order received/placed. Proper tracking of orders (sales/purchase order) leads to on time delivery
of goods to customer place and also it leads to track the details of goods which are yet to be
received from suppliers.
In Tally.ERP 9, management of purchase and sales cycle is very simple and easy to maintain. We
can track the sales order till it reaches to the customers place, similarly we track the purchase order
till we receive the goods from suppliers. This helps in analysing the reason for outstanding order
details like delivered on time or not and the reason for delay.
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12.2 Purchase Order Processing
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Purchase order processing is the process of placing the order with suppliers for the supply of
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goods. The purchase order contains the following details:
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Supplier Name
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 Name of Stock Item
 Quantity and Rate Details
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 Date of Order etc.
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Later, when the ordered goods are received, the Purchase Order is tracked/maintained in the
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receipt note or in the purchase invoice.

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Following are the steps involved in purchase order processing.

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Step 1: Recording Purchase Order Voucher: It is an order placed by the business entity to a
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supplier for the delivery of specified goods at a given price and at a predetermined time.
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Step 2: Recording of Receipt Note Voucher: Receipt note voucher is used for recording goods
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received from the supplier against the purchase order.

00
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Step 3: Recording of Rejection Out Voucher: Rejections Out voucher records the details of
goods that are rejected and sent back the a supplier. (This voucher is recorded only in case of
8
rejection out, if there are no rejections then the following step should be followed)
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21
Step 4: Recording Purchase Invoice: Purchase invoice is used to record the purchase
transactions of the company (Once after recording this transaction the purchase value will get
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reflected in accounting reports)
Step 5: Recording of Debit Note Voucher: Debit Note is a document issued to a party stating
that the company is debiting their account in company’s books of account for the stated reason
or vice-versa. This voucher is recorded only in case of purchase return or when the goods are
rejected after recording purchase invoice.
Step 6: Recording of Payment Voucher: Once the order is completed, then the payment is
made to the supplier.
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Note: To return the damaged goods we have used the vouchers Rejection out and Debit Note, the difference is when
the goods are rejected before recording the purchase invoice, the details should be accounted in rejection out voucher
(Because it will affect only the inventory reports).
When the goods are rejected after recording the purchase invoice, then the rejection details should be accounted in
Debit Note voucher (Because it will impact both accounting and inventory reports).
Business Scenario
Pearlshine Traders are into wholesale trading of Furniture’s, and they deal in Chairs, Tables and
Cabinets, they receive order from customers and place orders to suppliers. Pearlshine Traders want
to track order processing details for smooth functioning of business.
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To understand Order Processing in Tally.ERP 9, let us consider that Pearlshine Traders placed an
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order for Chairs from Realto Furniture’s and then sold it to SeaSagar Distributors after they
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received the order.
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To maintain the books of accounts in Tally.ERP 9, the user must create the company to record
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the transactions.
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Company Name: Pearlshine Traders.
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Address: Block No: 111, Near High Court Road, Sampangi Rama Nagar, Bengaluru,
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Country: India
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State: Karnataka
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Pin: 560001
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Financial Year: 2017-18

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12.2.1 Activating Order Processing in Tally.ERP

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9
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In Tally.ERP 9, we need to activate the Order Processing feature, in order to manage the complete
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order processing cycle like sales and purchase cycle.

To enable the order processing, follow the steps given below:

2. Set the option – Enable purchase order processing to Yes
3. Set the option – Enable sales order processing to Yes
4. Set the option – Use tracking numbers (enables delivery and receipt notes) to Yes
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5. Set the option – Use rejection inward and outward notes to Yes
The Inventory Features screen appears as shown in the figure 12.1
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ED
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Once after activating the order details, let us learn to record the transactions involved in complete
order processing using Tally.ERP 9.
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Illustration 1: Raising an purchase order to a vendor in Tally.ERP 9

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Date Particulars
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01-07-2017 Voucher: Purchase Order

6
Raised an order on Realto Furniture’s for purchasing Chairs and it incurred

00
additional Packaging & Handling Charges of 1%. The Chairs are due on 06-07-
00
2017 and will be stored in Warehouse (Godown).

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Chairs 200 Pcs 510/Pcs 1,02,000

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Table No 12.1
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To record the above transactions in the books of accounts, first ensure that the required masters
Party Ledger
Go to Gateway of Tally> Accounts Info.> Ledgers> Create
Realto Furniture’s
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Name Enter as Realto Furniture’s
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Table No 12.2
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Purchase Ledger
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Purchase A/c
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Against the Field Name Actions to be performed
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ED
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Table No 12.3
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Expense Ledger
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Packaging & Handling Charges

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Against the Field Name Actions to be performed

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Enter as Packaging & Handling

Name
Charges
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Table No 12.4
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Stock Group
Go to Gateway of Tally> Inventory Info> Stock Groups> Create
Wooden Furniture’s
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Name Enter as Wooden furniture’s
Should Quantities of items be Added Set to Yes
Table No 12.5
Unit of Measure
Go to Gateway of Tally > Inventory Info. > Unit of Measure > Create
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Pcs
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N
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Type Let it be Simple
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Symbol Enter as Pcs
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Formal Name Select as Pieces
Number of decimal places Set as 0
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Table No 12.6
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Stock Item
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Go to Gateway of Tally > Inventory Info.> Stock Items > Create

Chairs
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Name Enter as Chairs

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Under Select as Wooden furniture’s

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Unit Select as Pcs

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Table No 12.7
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Activity: Go to Gateway of Tally > Press F11: Company Features >F2: Inventory features
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and enable the option Maintain multiple Godowns.

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Godown
Warehouse
Name Enter as Warehouse
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Table No 12.8
Step 3: Recording Purchase Order
To record the purchase order, follow the steps given below:
1. Go to Gateway of Tally > Order Vouchers > Alt+F4: Purchase Order
2. Click F12: Configure:
 Set the option Use common ledger account for item allocation to Yes
 Set the option – Provide complete accounting allocations in order/ delivery note
to Yes. (Enabling this option will allow you to select accounting masters (Purchase
ledgers) in the order voucher)
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4. Select Realto furniture’s in the Party A/c name field
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5. Once after selecting the party ledger, you will get the supplementary details screen, in
which you can define the supplier’s details, order details and receipt details.
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6. The voucher number will be displayed in the Order no.: field by default, change it to
PO_001
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ED
8. Under Name of Item, select Chairs and press Enter, the Stock Item Allocations screen
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appears
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9. Enter 06-07-2017 in the Due on field.

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(This is the due date for the delivery of the item. This will enable the monitoring of
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outstanding deliveries. The order can be split for delivery on different dates)
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10. Select Warehouse in the Godown field.

(Only when the multiple Godown feature is enabled, this field will be displayed)
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11. Enter 200 in the Quantity field and ₹ 510 in the Rate field, the amount field will be
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calculated automatically.
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The Completed Stock Item Allocations screen appears as shown in the figure 12.2
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Figure 12.2 Item Allocation for Chairs
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12. Accept the Stock Item Allocations screen to return to the Purchase Order screen
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13. Press enter and take the selection to List of Ledger Accounts field
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14. From List of Ledger Accounts, select Packaging & Handling Charges at 1% on the
item value
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The Purchase Order Creation screen appears as shown in the figure 12.3
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Figure 12.3 Purchase Order Screen
Note: Altering a Purchase Order, once after recording the purchase order one can alter the voucher. To alter a
Purchase Order, go to Gateway of Tally > Display > Day Book > F4: Chg Vch and select Purchase
Orders or Go to Gateway of Tally > Display > Inventory Books > Purchase Orders Book and
select the required Purchase Order to open the Order Voucher Alteration screen.
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Receipt Note.
Receipt Note is recorded against respective purchase orders i.e., when goods are received from
supplier against the placed order, receipt note is recorded. The entry will reflect in the stock
summary report.
Illustration 2: Recording receipt note for received goods
Date Particulars
06-07-2017 Voucher: Receipt Note
Record a receipt note on Realto furniture’s, the received goods are stored in
Warehouse (Godown). This receipt note will be linked to the purchase order -
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PO_001 that was recorded on 01-07-2017
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Chairs 200 Pcs ₹ 510/Pcs 1,02,000
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Table No 12.9
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Step 1: Record Receipt Note Voucher
To record the receipt note voucher, follow the steps given below: ED
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1. Go to Gateway of Tally > Inventory Vouchers > Alt+F9: Receipt Note.
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2. Click F12: Configure button and set the following option to Yes
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 Enable supplementary details

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(Enabling this option will allow you to select the order number against which the
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Receipt Note is being raised.)

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 Use common ledger account for item allocation

3. (By enabling this option, you will get the sales ledger field in the sales voucher
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screen.)Press F2:Date, change the date to 06-07-2017

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4. In the Reference no. field enter RN-01

5. Select Realto furniture’s in the Party A/c name field and press Enter, the Party
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Details screen will appear

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6. Select PO_001 in the Order No(s) field from the Party Details screen:
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The Party Details screen appears as shown in the figure 12.4:

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Figure 12.4 Party Details Screen
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7. Accept the screen to return to the voucher creation screen
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8. The stock item will appear automatically, press enter and the Stock Item Allocations
screen will appear with the quantity details
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9. By default, Tracking No will capture the Reference no.: RN-01
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10. From List of Orders select PO_001 in the Order No.: and accept the Stock Item
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Allocations screen
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11. Godown, Quantity, Rate and Amount will get captured as per the purchase order, if
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required, we can alter the details.

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12. Packaging & Handling Charges details will be automatically captured

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The Receipt Note Voucher Creation screen appears as shown in the figure 12.5:
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Figure 12.5 Receipt Note Voucher Screen

13. Press Ctrl+A to accept the screen.
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Activity:
1. Go to Gateway of Tally > Stock Summary > Select Wooden furniture’s > you will get the
stock item Chairs >Press Alt+F1, to view in detailed mode > Press enter on stock item, to get the stock
item monthly summary> Select the required month> you will get the message as Purchase bill
pending. By this we will come to know that the goods are received against the order but bill is not raised
on the same.
2. Check the balance sheet you will get the value in current asset and current liabilities. This shows that the
inventory details are integrated with accounts. If you don’t want to integrate, then the same can be achieved
by following the below given procedure.
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Go to Gateway of Tally > F11: Features >F1: Accounting Features /F2: Inventory
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features > Disable the option “Integrate accounts and inventory”. Now check the balance
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sheet report you will observe that the report is blank. In Tally.ERP 9, we have the option to integrate
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accounts with inventory.
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3. Check the Profit and Loss account report and then enable the option “Integrate accounts
with inventory” and check the same report once again. The Purchase and closing stock value will
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appear in profit and loss account report
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Rejection Out voucher
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The Rejections Out voucher is used to record the details of goods that are rejected and sent back
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to the supplier.
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Illustration 3: Recording rejection note for damaged goods

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Date Particulars
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07-07-2017 Voucher: Rejection Out

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Pearlshine Traders rejected damaged Chairs to Realto furniture’s traders.

00

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Chairs 5 Pcs ₹ 510/Pcs 2,550

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Table No 12.10
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Now to record the rejection out voucher in the books of Pearlshine Traders, follow the steps given
below:
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Step 1: Recording Rejection Out Voucher
1. Go to Gateway of Tally > Inventory Vouchers > Press Alt+F6: Rejections Out
2. Press F2:Date, and change the date to 07-07-2017
3. Under Ledger account field, select the party Realto furniture’s and the same ledger
name will be captured in Supplier’s Name and Address field.
4. Select the stock item Chairs that is returned/ rejected, you will get the following Stock
item allocation screen.
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ED
5. Select the Tracking No.: RN01.
6. Enter the returned Quantity as 5, Rate and the amount will get captured automatically.
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The Rejection Out Voucher Creation screen appears as shown in the figure 12.7
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Figure 12.7 Rejections Out Voucher Screen

Activity: Check the stock summary report and observe the available stock quantity details, it will display as 195
instead of 200.
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Recording Purchase Invoice.

Purchase Invoice can be recorded against previously recorded receipt note voucher, once after
recording purchase invoice the details will reflect in the accounting reports.
Illustration 4: Recording purchase invoice against receipt note

Date Particulars
Raise a purchase invoice on Realto furniture’s for the following stock items, the
purchase invoice will be linked to the receipt note voucher RN01 that was
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recorded on 06-07-2017.
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Chairs 195 Pcs ₹ 510/Pcs 99,450
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Table No 12.11
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Step 1: Recording Purchase Transaction.
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ED
1. Go to Gateway of Tally > Accounting Vouchers > Press F9: Purchase
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4. Select the Party A/c name: Realto furniture’s, you will get the Party Details screen.
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The Party Details appears as shown in the figure 12.8

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5. Select the Receipt Note No(s) as RN01, Oder No(s) will get captured automatically.
6. Accept the screen to return to the Accounting Voucher Creation screen
7. The stock item Chairs will filled automatically, press Enter and the Stock Item
Allocations screen will appear with the relevant details, accept the screen as it is.
8. Packaging & Handling Charges will get captured automatically
9. In the Bill-wise Details screen, select the following details:
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 Type of Ref as New Ref.

 In the Name field Supplier invoice no.: PUR01
 Due Date, or Credit Days field enter as 15-07-2017 (5 Days).
 Amount field will get captured automatically.
The Purchase Voucher appears as shown in the figure 12.9
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ED
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10. Press Ctrl+ A to accept the screen

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Debit Note
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It is commonly used in case of Purchase Returns, Escalation/De-escalation in price, any other

expenses incurred by you on behalf of the party etc.
6 -S
Note: Debit Note can be entered in Voucher or Invoice mode.

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Illustration 5: Recording debit note for goods return

Date Particulars
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15-07-2017 Voucher: Debit Note

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Pearlshine Traders returned Damaged Chairs to Realto furniture’s

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Table No 12.12
To record Debit Note follow the steps given below:
Step 1: Recording Debit Note
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Activity:
 Go to Gateway of Tally > Press F11: Company Features > F1 Accounting or F2

Inventory Features. Enable the option – Use debit and credit notes to Yes
 To make the entry in Invoice mode. Enable the option – Record debit notes in invoice mode
to Yes
Note: In case the goods are returned after recording the purchase invoice then the details have to be recorded in the
debit note voucher as the rejected goods value should reflect in inventory reports as well as in accounting reports.
If goods are rejected before recording purchase invoice then the rejected details should be recorded in the Rejection out
voucher, because the value should reflect only in the inventory books.
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Now to record the debit note in the books of Pearlshine Traders, follow the steps given below:
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1. Go to Gateway of Tally> Accounting Vouchers > Press Ctrl+F9
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3. Enter the Original invoice no.: PUR01, this is the supplier invoice number of purchase
against which is goods are returned
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ED
4. Enter the Original Invoice Dt.: 10-07-2017, this is the Supplier invoice date of the
purchase which is returned
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5. In the Party A/c name field select the party ledger Realto furniture’s, you will get the
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Party Details screen

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The Party Details screen appears as shown in the figure 12.10

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6. In the Tracking No(s) select End of List
7. In the Order No(s) field select PO_001 from List of Orders.
8. Accept the Party Details screen
9. Stock Item will get captured automatically, enter the returned Quantity 500 Pcs, Rate
and the amount will get captured automatically.
10. Remove the Packaging & Handling Charges
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11. In the Bill-wise Details for screen follow the below given details.
 In Type of Ref field select Against Ref
 In the Name field select PUR01 from Pending Bills
 In the Due Date, or Credit Days field, it will capture as 15-07-2017(5 Days).
 Amount will get captured automatically.
The Debit Note appears as shown in the figure 12.11
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ED
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Figure 12.11 Debit Note Voucher Screen

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Note: Make sure in the above entry the packing and handling charges are not selected, if gets selected remove the
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same.
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Activity: Go to Gateway of Tally > Display > Statements of Account > Outstandings > Select
Ledger > Select Realto furniture’s Check the Bills outstanding report payable to Realto furniture’s and
6
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make a full payment.

00
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12.3 Sales Order Processing

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When the order is received from a customer for supply of goods,, then in the sales order voucher,
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items, quantities, date of delivery, etc., details are given with sales order number. Later when these
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goods are delivered, the sales order is tracked for the order details either in the delivery note or in
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the sales invoice.

Following are the steps Involved in sales order processing.
Step 1: Recording Sales Order Voucher: Sales Order is an order placed by a customer, It is also
known as confirmation document which contains the details of goods, price details and time.
Step 2: Recording of Delivery Note Voucher: Delivery Note voucher is used for recording the
details of goods delivered/supplied to a customer.
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Step 3: Recording of Rejection In Voucher: Rejection In voucher is used to record goods that
are rejected and sent back by the customer. (This voucher is recorded only in case of rejections, if
there are no rejections then next step should be followed)
Step 4: Recording Sales Invoice: Sales invoice is used to record the sales transactions of the
company (Once after recording this transaction the sales value will get reflected in accounting
reports like balance sheet and profit and loss account)
Step 5: Recording of Credit Note Voucher: Credit Note is a document issued to a party stating
that you are crediting their account in company’s books of account for the stated reason or vice-
versa. This voucher is recorded only in case of sales return and when the goods are returned after
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recording sales invoice.
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Step 6: Recording of Receipt Voucher: Once the order is completed then the payment is
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received from the Customer.
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Note:
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 For returning the damaged goods, we have used the vouchers Rejection In and Credit Note, the difference
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is, when the goods are rejected before recording the sales invoice, the details should be accounted in Rejection
In voucher (Because it will effect only the inventory reports).
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 When the goods are rejected by the customer after recording the sales invoice, then the rejection details should
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be accounted/ recorded in Credit Note voucher (Because it will affect both accounting and inventory reports).
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Illustration 6: Recording Sales Order received from the customer

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Date Particulars
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29-07-2017 Voucher: Sales Order

Order received from SeaSagar Distributors for Chairs (vide Order No
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SSD_001). The due date for delivering the goods is 04-08-2017 and select
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appropriate godown with 1% Delivery Charges

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Chairs 150 Pcs ₹ 690/Pcs 1,03,500

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Table No 12.13
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To record the above transactions in the books of accounts, first ensure that the required masters
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Party Ledger
Go to Gateway of Tally> Accounts Info.> Ledgers> Create

SeaSagar Distributors
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Name Enter as SeaSagar Distributors

Table No 12.14
Sales Ledger
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Sales A/c
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Maintain balances bill-by-bill Set to No
Inventory values are affected
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Set to Yes
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Table No 12.15
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Delivery Charges
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Name Enter as Delivery Charges

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Table No 12.16
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Step 2: Recording Sales Order

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1. Go to Gateway of Tally > Order Vouchers > Alt+F5: Sales Order

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3. Select SeaSagar Distributors in the Party A/c name field

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SSD_001.
5. In the Sales ledger select Sales A/c
6. Under Name of the Item, select Chairs and press enter, the Stock Item Allocations
screen will appear
7. Enter 04-08-2017 in the Due on field, this is the due date for the delivering the item to
the customer
8. Select Warehouse in the Godown field. (Only when the Multiple Godown feature is
enabled, this field will be displayed)
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9. Enter 150 in the Quantity field, and ₹ 690/Pcs in the Rate field, the amount will be
calculated automatically
10. Press enter and take the selection to List of Ledger Accounts field
11. From List of Ledger Accounts, select Delivery Charges at 1% on the item value
The Sales Order Voucher appears as shown in the figure 12.12
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Figure 12.12 Sales Order Screen

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Activity: Altering a Sales Order

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To alter any details like party name, order no, voucher date etc., you can follow the below given path.
Go to Gateway of Tally > Display > Day Book > F4: Chg Vch and select Sales Orders
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or
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Go to Gateway of Tally > Display > Inventory Books > Sales Order Book select the required
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Sales Order to open the Order Voucher Alteration screen

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Delivery Note
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The Delivery Note is used for recording goods delivered to a customer, it can be raised against
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previously recorded sales orders

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Illustration 7: Recording delivery note for the goods delivered

Date Particulars
04-08-2017 Voucher: Delivery Note
Goods were delivered to SeaSagar Distributors against the order no: SSD_001.
Chairs 150 Pcs ₹ 690/Pcs 1,03,500
Table No 12.17
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Step 1: Recording Delivery Note

1. Go to Gateway of Tally > Inventory Vouchers > Press Alt+F8: Delivery Note
2. Press F2:Dateand change the date 04-08-2017
3. Enter the Reference no as DN01
4. In the Party A/c name select SeaSagar Distributors, you will get the Party Details screen
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5. In the Party Details screen select the Order No(s) SSD_001

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6. Accept the Party Details screen

7. Press enter on the stock item, you will get the Stock Item Allocations screen
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The Stock Item Allocations appears as shown in the figure 12.14

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8. Select the Tracking No. DN01 and the Order No. SSD_001 and rest details will get
captured automatically
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The Delivery Note appears as shown in the figure 12.15
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Figure 12.15 Delivery Note Voucher Screen
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Rejections In voucher
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A Rejections In voucher is used to record goods that are rejected and returned by the customer.
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Illustration 8: Recording rejection note for accounting the details of goods rejected
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by the customer
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Date Particulars
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18-08-2017 Voucher: Rejection In

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SeaSagar Distributors rejected Chairs, reasoning inferior quality

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Table No 12.18
Step 1: Recording Rejection In voucher
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1. Go to Gateway of Tally > Inventory Vouchers > Press Ctrl+F6: Rejections In

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3. Select the party under Ledger Account field and the same will be captured in
Customer’s Name and Address field
4. Select Chairs under Name of Item, which is returned by the customer, you will get the
Stock Item Allocations screen
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The Stock Item Allocations appears as shown in the figure 12.16
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5. Select the Tracking No.: DN01.
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6. Enter the returned Quantity as 2, rate and amount will get captured automatically.
The Rejection In appears as shown in the figure 12.17
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Figure 12.17 Rejections In Voucher Screen

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Activity: Check the stock summary report and observe the available stock quantity details.
Sales Invoice
Sales Invoice can be recorded against the Delivery Note Voucher.
Illustration 9: Recording sales and raised invoice to customer
Date Particulars
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Raise a sales invoice on SeaSagar Distributors, the sales will be against the
delivery note voucher DN01 that was recorded on 04-08-2017
Chairs 148 Pcs ₹ 690/Pcs 1,02,120
Table No 12.19
Step 1: Recording Sales invoice.
1. Go to Gateway of Tally > Accounting Vouchers > Press F8: Sales
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4. Select SeaSagar Distributors in the Party A/c name field, you will get the Party Details
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screen
The Party Details appears as shown in the figure 12.18:
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5. Select the Delivery Note No(s): DN 01, the Order No(s) will get captured automatically.
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6. Accept the Party Details screen to return to the Accounting Voucher Creation screen
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7. The stock item Chairs will captured automatically, press enter on the stock item and the
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Stock Item Allocations screen will appear, accept the screen as it is.
8. In the Bill-wise Details for screen select the following details:
 Type of Ref as New Ref.
 In the Name field enter invoice number SAL01
 Due Date, or Credit Days field enter as 27-08-2017(7 Days).
The Sales Voucher Screen appears as shown in the figure 12.19
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Credit Note voucher ED
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Credit Note is a document issued to a party stating that you are crediting their account in your
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books of accounts for the stated reason or vice versa. It is commonly used in case of sales returns,
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escalation/de-escalation in price etc.

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Illustration 10: Recording sales voucher and raised invoice to the customer
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Date Particulars
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SeaSagar Distributors returned Chairs which were damaged in transit

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Table No 12.20
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Step 1: Recording Credit Note

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Activity:
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 Go to Gateway of Tally > Press F11: Company Features > F1 Accounting or F2

Inventory Features and enable the option – Use debit and credit notes to Yes
 To make the entry in Invoice mode, enable the option – Record credit notes in invoice mode
to Yes
Note:
 If the goods are rejected after recording sales invoice then the details have to be recorded in the Credit note
voucher as the value should reflect in inventory reports as well as in accounting reports.
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 If goods are rejected before recording sales invoice then the rejected details should be recorded in the Rejection
In voucher, because the value should reflect only in the inventory books.
Now to record the credit note in the books of Pearlshine Traders, follow the steps given below:
1. Go to Gateway of Tally> Accounting Vouchers > Press Ctrl+F8 Credit Note
3. Enter the Original invoice no.: SAL01, this is the sales invoice number against which the
goods are returned
4. Enter the Original Invoice Dt.: 20-08-2017, this is date of sales invoice
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5. In the Party A/c name field select SeaSagar Distributors, you will get the Party Details
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screen
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The Party Details appears as shown in the figure 12.20:
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6. In the Tracking No(s) field select End of list
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7. In the Order No(s) field select SSD_001

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8. Press enter and accept the Party Details screen

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9. Press enter on the stock item to get Stock Item Allocations, enter the returned Quantity,
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Rate and Amount will get captured automatically

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10. Remove Delivery Charges Ledger

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11. In the Bill-wise Details for screen follow the below given details.
 In Type of Ref field select Agst Ref
 In the Name field select SAL01 from Pending Bills
 In the Due Date, or Credit Days field, it will capture as 27-08-2017 (7 Days).
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Figure 12.21 Credit Note Voucher Screen
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Note: Do not select the Delivery Charge ledger while recording the credit note entry
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Activity: Go to Gateway of Tally > Display > Statements of Account > Outstandings > Select
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Ledger > Select SeaSagar Distributors, Check the Bills outstanding report receivable from SeaSagar
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Distributors.
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Received the full pending amount from SeaSagar Distributors on 23-08-2017

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12.4 Viewing Order Details

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After recording purchase and sales orders, you can view the details of the orders to know the
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amount of stock that needs to be processed for the order, (before recording invoices for the order)
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both inward and outward.

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To view Order Details, follow the steps given below:

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1. Go to Gateway of Tally > Stock Summary

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2. Press the F7: Orders button or press Alt+F7

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3. Select Sales Orders Outstanding, and set use due orders only to No
4. Select Wooden Furniture’s and drill down to the Order Details screen
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5. In the Order Details screen, press Alt+F1 to view the report in detailed format
The Order Details Screen appears as shown below:
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Figure 12.22 Order Details screen
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The Order Details report is generated as on 22nd August, 2017. Based on the period of the report
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and the due date of the order, the report will display the outstanding status of the order.
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Click F12: Configure button and set the following to yes:
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 Show Outstanding Purchase Orders

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 Show Cleared Purchase Orders

The Order Details report now shows the outstanding positions of the Sales and Purchase Orders
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for the stock item Chairs.

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The Order Details screen appears as shown in the figure 12.23:

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Figure 12.23 Order Details Screen

Note: The information changes instantly depending on the date filter you use. This is Tally.ERP's power of real
time report generation
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12.5 Display Columnar Orders & Stock Details

To view Columnar Order details, return to the Stock Summary screen:
 Click F1: Detailed and view the report as on 31-08-2017

 Press Alt+N or click Auto-Column Button, select Orders & Stock Details
 Remove Rate and Value from display, by configuring it in F12: Configuration (This
will enable all the columns to fit in one screen)
The Sales Order Outstandings (Stock group wise) Screen appears as shown in the figure
12.24:
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Figure 12.24 Stock Summary Columnar Report

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12.6 Sales order outstanding.

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Sales Order Summary statement gives detailed information on outstanding sales orders. The
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outstanding orders can be viewed Stock Group wise, Stock Category wise, Stock Item wise,
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Account Group wise, Ledger wise or All Orders.

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To view Sales order outstanding, follow the steps given below:

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1. Go to Gateway of Tally> Display > Statements of Inventory > Select Sales Order
Outstandings> Select All orders > Press Alt+F1: Detailed
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The Sales Order Outstanding report appears as in the figure 12.25:
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Figure 12.25 Sales Order Outstanding Report
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The report of figure 12.25, displays the details of ordered quantity and the balance quantity details.
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Activity: Similarly check the purchase order outstanding report.
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12.7 Pre-closure of Order

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Pre-closing of order is required when there are order cancellations, lack of stocks, goods returned
due to defects, etc. For this, Pre-closure of Orders option is given in Tally.ERP 9 and pre-closing
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orders affect the inventory report.

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Illustration 11: Handling cancellation of received orders from customers.

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Date Particulars
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31-08-2017 Pearlshine Traders decided to close the complete pending sales order raised in
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the name of SeaSagar Distributors. Reason for Closure: Out of Stock.12

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Table No 12.21
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Pre-close Order
To pre-close the Sales Order, follow the steps given below:
1. Go to Gateway of Tally > Display > Statements of Inventory > Sales
Order Outstandings
2. Select All Orders
The Order Details screen appears as shown in the figure 12.26:
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Figure 12.26 Order Pre-Closure Details
3. Press Ctrl+C Pre-Close
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4. Enter the Pre-Close Quantity as 10 Pcs, enter the reason for pre-close, and enter
Closed on Date
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Note: In case of partial closure of order, enter the quantity details in Pre-close quantity column, for example: in
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the figure 12.27 , the balance quantity is displaying as 10 now if you want to close order only for 5 quantities,
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then enter 5 Pcs, under Pre-Close Quantity field.

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The Order Pre-Closure Details screen appears as shown in figure 12.27:

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Figure 12.27 Order Pre-Closure Details
Note: Pre-closure of order will also be available in Daybook report.

To Pre-Close, Go to Gateway of Tally > Display > Daybook > enter the complete period > select the
Required Order voucher >Press Ctrl+C: Pre-Close
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12.8 Reorder Level

Reorder Level is the inventory level at which the company has to place an order for the stock item.
The importance of a reorder level arises from the need to have sufficient stocks to service customer
orders and at the same time not to have unnecessarily high stocks. Therefore, the points to be
considered while deciding reorder levels are:
 Lead time for suppliers to deliver stock

 Delivery time specified by the customer
 The stock in hand to satisfy orders in the meantime
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Note: Lead Time is the time taken by the supplier to supply the goods once the order is placed
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Illustration 1: Defining reorder level for stock items
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Date Particulars
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01-07-2017 Pearlshine Traders setup the reorder level for the following stock items
Name of
Reorder Usage Criteria Minimum Usage Criteria ED
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Item
Quantity Pattern Order Pattern
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Quantity
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Chairs 40 5 Days Higher 20 5 Days Higher

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Tables 15 5 Days Higher 10 5 Days Higher

Cabinets 25 5 Days Higher 15 5 Days Higher
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Table No 12.22
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To do the above illustration in the books of accounts, first ensure that necessary masters and
required setup are made in Tally.ERP 9:
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Note: Before setting Re-order level, we need to enable the option Enable purchase order processing in
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F11 > F2: Inventory Features screen. If this option is set to No, then we will not be able to set re-order level
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in Tally.ERP 9.
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Stock items
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Gateway of Tally > Inventory Info > Stock Items > Create
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Tables
Name Enter as Tables
Under Select as Wooden Furniture’s
Units Select as Pcs
Opening Balance 15 Pcs,
(Do not enter rate)
Godown Warehouse
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Table No 12.23
Activity: Similarly, create one more stock items by name Cabinets and enter opening quantities as 20 Pcs Store
in warehouse
Step 2: Setting Re-order levels for stock items.
1. Go to Gateway of Tally > Inventory Info. > Reorder Levels
The Reorder Levels Menu screen appears as shown in the figure 12.28:
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Figure 12.28 Reorder Level Menu Screen

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From the figure 12.28, we can define the reorder level from Stock Groups option or the same
can be defined at the Stock Item option. If you select Stock Group, then at one go you can
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define the Reorder Levels for all the stock items, if you select Stock Item, then the Reorder
Levels need to be define one by one to all the available stock items.
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2. Select Stock Groups > Wooden Furniture’s and press enter

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Note: The Specify Reorder Levels screen appears, where all the Stock Items (Chairs, Tables, Cabinets
and Tile) under the Stock Group - Wooden Furniture’s are displayed
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Reorder Levels can be defined in either Simple Mode or Advanced Mode.

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The Simple Reorder Level screen appears as shown in the figure 12.29:
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Figure 12.29 Simple Reorder Level Screen
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Note: The Reorder Level screen appears based on the books beginning from to the date of last entry.
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3. Click Alt+R: Adv Reorder button to record the reorder level in advanced mode
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4. Click Alt+M: Adv. Min Qty button to record the minimum quantity in advanced mode
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TIP:
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The buttons, R: Adv Reorder and M: Adv Min Qty, can be used to toggle between advanced mode and simple
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mode of defining reorder level and minimum order quantity

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The Specify Reorder Level screen in advanced mode appears as shown in the figure 12.30
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Figure 12.30 Specify Reorder Level in Advanced Mode Screen
Note: The reorder and minimum order quantity is defined based on consumption patterns. The consumption
patterns are decided based on a stipulated time period. Tally.ERP 9 allows you to choose from the time parameters
of Days, Weeks, Months and even Years.
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5. Set the Reorder Level and Minimum Order Quantity for the particular stock items
using advanced parameters as shown in figure 12.31:
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Figure 12.31 Completed Specify Reorder Level Screen in Advanced Mode
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6. Set the Reorder level to given units (user-defined) or you may also consider the
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consumption pattern for the period and accept the value computed as the Reorder Level
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7. Set the Minimum Order Quantity to given units or you may also consider the
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consumption pattern for the period and accept the value computed as the Reorder Level
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Note: Consumption patterns can be given only if you specify a user-defined quantity to the Reorder level and
Minimum Order quantity. Tally.ERP 9 then compares the two values and considers the lower or higher of the two
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figures as per your specifications.

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Illustration 2: Raised an purchase order to supplier for materials

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Date Particulars
22-08-2017 Voucher: Purchase Order
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Placed an order for the following products to Realto Furniture’s with the order
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number stating RFPO_002

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Chairs 70 Pcs ₹ 510/ Pcs 35,700/-
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Tables 45 Pcs ₹ 600/ Pcs 27,000/-

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Cabinets 60 Pcs ₹ 890/ Pcs 53,400/-

Table No 12.24
To record the illustration of table 12.24, in the books of accounts, first ensure that necessary
masters and required setup are made in Tally.ERP 9:
Step 1: Recording Transactions
Purchase Order
1. Go to Gateway of Tally > Order Vouchers > Press Alt+F4
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3. Select Realto Furniture’s in the Party A/c name field

(Once after selecting the party ledger, you will get the supplementary details screen, in
which you can define the Suppliers details, Order Details and Receipt Details.)
PUR_002
6. Fill in the details as shown in the figure 12.32figu
The Purchase Order Voucher Creation screen appears as shown in the figure 12.32:
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Figure 12.32 Purchase Order Voucher Screen with filled details

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Illustration 3: Received order for sales of materials

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23-08-2017 Voucher: Sales Order

Received an order from Ashwin Interior Designers & Renovators for the
following products with order number AISO/002

Chairs 105 ₹ 690/ Pcs 72,450/-
Tables 50 ₹ 900/ Pcs 45,000/-
Cabinets 75 ₹ 1,400/ Pcs 1,05,000/-
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Table No 12.25
To record the illustration of figure 12.25, in the books of accounts, first ensure that necessary
masters and required setup are made in Tally.ERP 9
Step 1: Creation of Accounting Maters
Ledgers
Go to > Gateway of Tally > Accounts Info > Ledgers > Create
Ashwin Interior Designers & Renovators
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Name Enter as Ashwin Interior Designers &
Renovators
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Inventory values are affected
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Set to No
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Table No 12.26
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Step 2: Recording Transactions

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Sales Order
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1. Go to Gateway of Tally > Order Vouchers > Press Alt+F5

2. Press F2:Date change the date to 23-08-2017
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3. Select Ashwin Interior Designers & Renovators in the Party A/c name field
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(Once after selecting the party ledger, you will get the supplementary details screen, in
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which you can define the Suppliers details, Order Details and Receipt Details.)
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a. The voucher number will be displayed in the Order no.: field by default, change
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it to SAL/002
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5. Fill in the details as shown in the figure 12.33

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Figure 12.33 Sales Order Voucher Screen with filled details
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12.9 Display Reorder Status ED
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After specifying the reorder levels, we can use the Reorder Status report to do an analysis of the
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inventory.
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To view the Reorder Status report, follow the steps given below:
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Go to Gateway of Tally > Display > Statements of Inventory > Reorder Status
1. Select Wooden Furniture’s
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2. Press F2: Date an change the date to 01-04-2017 to 31-08-2017

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The Inventory Reorder Status screen appears as shown in the figure 12.34:
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Figure 12.34 Inventory Reorder Status

To analyse the Inventory Reorder Status report, place the cursor on any of the columns in the
Inventory Reorder Status report and press Enter. You can view the details to verify its
correctness.
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The explanation of each column and what happens when you drill down is as given below:
 Name of Item: The list of stock items that belong to the Stock Group selected are
displayed. Highlight the required item and press Enter to arrive at the Movement Inward
details. This gives you Party-wise/Transfer-wise details of movements for the Stock item.
The Inward details display the Basic Invoice Rate and Effective Rate. You can drill
down to the last level of voucher details.
 Closing Stock: This column displays the Closing quantity of the item as per the date
specified in the report.
 Purchase Orders Pending: This column displays the total quantity of stock item pending
from purchase orders.
 Sales Orders Due: This column displays the total quantity of stock items due for sales
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based on the sales orders raised.
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 When you drill down from this column, the Sales Orders Outstanding report will appear.
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 Nett Available: The quantity given here is arrived at, based on the formula: Nett
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Available = Closing Stock + Purchase Orders Pending - Sales Orders Due.
 Reorder Level: The Reorder Level defined for the stock item will be displayed here. When
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you drill down from this column, the Specify Reorder Level screen will appear.
 Shortfall: Shortfall is displayed as on 31-08-2017 with the specifications:
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 Reorder level quantity or consumption of the last 5 days whichever is higher
 Minimum order quantity or consumption of last 5 days whichever is higher
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 Minimum Order Quantity: This indicates the minimum quantity that has to be ordered
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in each order raised for that stock item, even though the required quantity is less than the
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minimum reorder quantity.

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 Order to be placed: The numbers falling under this option indicated the order to be
placed.
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Note: While defining the Minimum order quantity, we have defined the criteria as Higher, hence the order to be
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placed is displaying as 2,000 quantity instead of 1,500 quantities.

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Conclusion
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In this chapter, we have learnt about the management of sales and purchase cycle in Tally.ERP 9, we
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have raised the order, handled rejections, raised an invoice against the order and completed it with
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receipts and payments. We have also seen how easy it is to maintain reorder level for any given stock
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item in Tally.ERP 9. This chapter handled
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Key Takeaways
 Order processing includes purchase and sales order processing. Here the details of
purchase orders placed and sales orders received can be obtained.
 Pre-closure of order is done when orders need to be closed due to cancellation of order,
lack of stocks, and delay in acceptance etc.
 When goods are rejected before raising a purchase or sale invoice then the details are
recorded in rejection in or rejection out vouchers.
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 When goods are rejected after raising a purchase or sale invoice then the details are
recorded in debit note or credit note vouchers.
 Reorder Level is the inventory level at which the company has to place an order for the
stock item.
Shortcut Keys
Alt+F4  From Order Vouchers menu
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 To record Purchase Order
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Alt+F5  From Order Vouchers menu
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 To record Sales Order
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Alt+F6  From Inventory Vouchers menu
 To record Rejections Out
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Ctrl+F6  From Inventory Vouchers menu
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 To record Rejections In
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 To record Delivery Note
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 To record Receipt Note

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Practise Exercises
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1. What is the shortcut key for Purchase Order? Identify from the following.
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a. Alt+F5
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b. Alt+F4
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c. Ctrl+F5
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d. Ctrl+F4
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2. We can a pass Receipt Note entry without passing an order entry.

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a. True
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b. False
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3. From the below Figure 12.35, the Rejection Out voucher is recorded to account the
details of _________.
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Figure 12.35 Inventory Voucher Creation Screen
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a. Sales Order Details
b. Purchase Order Details
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c. Rejection Details
d. Payment Details
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4. From where can we activate Order Processing Feature? Identify from the following.
a. Gateway of Tally> F12> Inventory Configuration
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b. F11 > F2
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c. F12 > Order Configuration

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d. F11 > F1
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5. Tracking number activation is required for which of the following.

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a. Order Entry
b. Sales Entry
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c. Rejection Entry
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d. Challan Entry
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6. From the below given Figure 12.36 Rejection In voucher is used to record ___________
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Figure 12.36 Rejection In Voucher Screen
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a. Defective goods rejected by the customer
b.
c.
Damaged goods rejected by the customer
Inferior goods rejected by the customer ED
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d. All of the above
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7. From where can we see the outstanding orders details? Identify from the following
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a. Gateway Of Tally> Stock Summery

b. Display> Statement of Accounts> Outstanding Reports
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c. Display> Inventory Books> Outstanding Orders
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d. Display> Statement of Inventory > Purchase or Sales Outstanding Orders

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8. From the below given figure 12.37 Purchase Order voucher is issued to _______
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Figure 12.37 Purchase Order Screen
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a. Customer
b. Bank
c. Supplier
d. None of these
9. The delivery of goods can be less than the required order, it is subjected to availability of
goods with the supplier
a. True
b. False
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Chapter 13
Price Levels and Price Lists
Learning Objectives
 Create and maintain price levels and price lists
 Use price lists while passing invoice
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13.1 Introduction
A Price List refers to a list of items maintained by an organisation along with their price
details. It is generally used by organisations which deal in multiple products.
Price Lists are maintained in various structures for different types of buyers (customers),
viz., Wholesalers, Dealers, Retailers, etc. It is structured based on the classification of
buyers and is referred at the time of making sales. Whenever the sale prices change (on the
basis of time), the changes are reflected in the Price List also. In case of bulk sales, discounts
can also be given to the buyers.
Tally.ERP 9 permits you to create any number of price lists & Price levels, based on the
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Stock Group and Stock Category to match the required structure.
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Business Scenario:
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Emerald-Shine Makers are into manufacturing of mobile phones and they sell the goods
to wholesalers and retailers at different prices to each level of customers, the com pany have
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decided to fix the price of the products for different kinds of buyers based on time periods
and size of order and also the discount rate varies based on the size of the order. The
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company wants to predefine the price list for each and every stock items.
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Let us now see how Tally.ERP 9 handles such a situation through the Price List
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feature.
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Activity: Create a company with the following details:

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Company Name: Emerald-Shine Makers

Address: M-Block No: 534, Kosapet, Lumbini Square, Chennai,
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Country:India
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State: Tamil Nadu

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Pin: 600001
Financial year: 01-04-2017 to 31-03-
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2018
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13.2 Activating Price Lists and Defining of Price

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Levels
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We can define the classification of buyers like wholesalers, retailers etc. in the Price Level and
stock items prices can be defined in the Price List.
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Illustration 1: Defining price levels for different buyers
Pass the following transaction in the book of Emerald-Shine Makers
01-07-2017 Price List
The Emerald-Shine Company, wants to define price levels for its buyer
Classification like:
 Wholesale PL
 Retail PL
Table 13.1
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To maintain the price levels in the books of accounts, first ensure that the required
configurations are made in Tally.ERP 9.
Follow the below given steps to create the Price Levels (Classification of Buyers) in Tally.ERP
9.
Step 1: Activation of Price List, and Defining the Price level:
1. Go to Gateway of Tally > F11: Company Features> F2: Inventory Features

2. Set the option Use multiple price levels to Yes. (This option will be accessible
only if the feature Enable invoicing is set to Yes.)
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3. Press enter and the Company Price Levels screen will appear.
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4. Define the price levels for Emerald-Shine Makers as:
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 Retail PL-1
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 Wholesale PL-1
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The Price Levels Screen appears as shown in the figure 13.1:
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Figure 13.1 Company Price Level Screen

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6. Save the Inventory Features screen
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13.2.1 Creation of Price List

In this section, we will learn how to define price list for different stock items.
Illustration 2: Defining price list for different stock items of the company in Tally.ERP 9
Price List of Emerald-Shine Makers for the Month of July

Wholesale PL-1
Stock Group Name of the Stock Number of Rate Discount
Item Quantities Rate
From: Less
than
Mobile Phones OMED - GEN_1 Basic 100 5,000 --
Phone
100 200 5,000 1%
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200 above 5,000 5%
Mobile Phones OMED - GEN_4 Smart 100 10,000 1%

Phone
100 200 10,000 5%
200 above 9,500 5%
Mobile Phones OMED - GEN_5 Smart 100 15,000 1%

Phone
100 200 14,000 --
200 above 14,000 5%
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Table 13.2 Wholesale PL-1 Price List
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Retail PL-1
Stock Group Name of the Stock Quantities Rate Discount
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Item Rate
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From: Less
than
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Mobile Phones OMED - GEN_1 50 6,000 --
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Basic Phone
50 100 6,000 5%
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100 150 5,500 1%
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150 above 5,500 5%

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Mobile Phones OMED - GEN_4 50 12,000 1%

Smart Phone
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50 100 12,000 5%
100 150 11,500 --
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150 above 11,500 10%

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Mobile Phones OMED - GEN_5 50 16,000 1%

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Smart Phone
50 100 16,000 5%
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100 150 15,500 5%

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150 above 15,000 10%

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Table 13.3 Retail PL-1 Price List

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Note: Emerald-Shine Makers doesn’t sell, mid-range mobile phones GEN_2 and GEN_3.
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To maintain the price levels in the books of accounts, first ensure that the required masters are
Step 1: Creation of Inventory Masters Stock Groups

Go to Gateway of Tally > Inventory Info > Stock Groups > Create
Mobile Phones
Name Enter as Mobile Phones
Should quantities of Items be added? Set to Yes
Units of Measure
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Table 13.4
Go to Gateway of Tally > Inventory Info > Units of Measure > Create
Nos.
Type Let it be as Simple
Symbol Enter as Nos
Number of decimal places Enter as 0
Table 13.5
Stock items
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OMED - GEN_1 Basic Phone
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Name Enter as OMED - GEN_1 Basic Phone
Under Select Mobile Phones
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Units Select Nos
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Note: Minimum one stock item must be created in Tally to enable the Price List option.
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Table 13.6
Activity: Similarly, create two items by name:
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 OMED - GEN_4 Smart Phone
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 OMED - GEN_5 Smart Phone

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Step 2: Creation of Price List

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Price List
To create price list follow the steps given below:
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1. Go to Gateway of Tally > Inventory Info. > Price List

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2. In Stock Group Name, select All Items from List of Stock Groups
3. Select Wholesale PL-1 in Price Level and specify Applicable From date 01-07-2017
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4. Under Particulars, select the applicable stock items, refer the Table 13.2 Wholesale
PL-1 Price List and fill the details
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The Price List appears as shown in the figure 13.2
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Figure 13.2 Defining Wholesale PL-1 Price List details
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Activity: ED
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 Similarly, create the price list for Retail PL-1 as on 01-07-2017, refer Table 13.3 Retail PL-1.
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 Additionally enable the feature Use separate discount column in invoices from Gateway of Tally >
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F11: Company Features> F2: Inventory Features (This is enabled to record the transaction
with discount details)
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Note:
 From the figure 13.2 screen, we can revise the price list i.e. if there is any change or variation in the price or
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discount then the same can be revised using Alt+R: Revise Price option.
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 In Under group field, you can even select the particular group, in this case you can select Mobile Phones as stock group.
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The explanation of the fields appearing in the Price List is given below:
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 Under Group – The selected Stock Group will be displayed.

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 Price Level – The Price Levels selected will be displayed here (the priced levels defined
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in the F11: Features (Inventory Features) of Tally.ERP 9 will be available for selection)
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 Applicable from – The date from which the Price List will be applicable is displayed here.
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 Quantities – There are two columns: From and Less than. Here, the user can define the
quantity range of the items as per requirement.
 Rate – This is the rate for the item based on the quantity range given.
 Disc% (if any) – You can define a discount percentage in the Price List which will be
taken automatically in the sales invoice.
 Historical Details – There are two columns: Rate and Disc%. Tally.ERP 9 provides
the historical details of the sale rate and discount percentage of any previously created
Price Lists. Therefore, you can define the current price details based on the information
given in the historical details.
 Cost price – In this column, Tally.ERP 9 displays the cost price (Purchase) of the item
calculated based on the stock valuation method given in the item master. This has been
provided to assist the user in giving the appropriate sale price. By viewing the historical
price details and the cost price of an item, the sale price for the new Price List can be
defined accordingly.
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Manually it is very difficult to remember the price list of multiple stock items based on different
classification of buyers. We have used only two classification of buyers for illustration purpose
only, but in real business scenarios the classification of buyers varies in size and it becomes very
difficult to maintain the inventory data with its price list for any organisation.
In Tally.ERP 9, once the price levels and price list are defined, then while recording the
transactions the price, discount details will get captured automatically and the information will be
accurate.
13.2.2 Using Price List
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The following illustrations will demonstrate how price lists can be used in a sales invoice.
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Illustration 3: Recording Purchase Voucher
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Date Particulars
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Emerald-Shine Makers purchased the following mobile phones from
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Daffodil Gadgets
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OMED - GEN_1 Basic 900 Nos 4,500/Nos 40,50,000
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Phone
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OMED - GEN_4 Smart 900 Nos 8,500/Nos 76,50,000

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Phone
OMED - GEN_5 Smart 900 Nos 13,000/Nos 1,17,00,000
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Phone
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Emerald-Shine Makers sold the following mobile phones to Magnum Stores at

Wholesale PL-1 price
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Name of Stock Quantity Rate per Discount Amount

Item (₹) (₹)
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OMED - GEN_1 150 Nos ₹ 5000/Nos 1% 7,42,500

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Basic Phone
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Table 13.7
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To record the transactions of table 13.7, in the books of accounts, first ensure that the required
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Party Ledgers
Daffodil Gadgets
Name Enter as Daffodil Gadgets
Under Select Sundry Creditors
Price level applicable Select Not Applicable
Table 13.8
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Magnum Stores
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Name Enter as Magnum Stores
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Price level applicable Select Wholesale PL-1
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Price Level Applicable: If we select any specific price level, then while recording the entry it will
capture the prices of stock item based on specific price level selected here.
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Table 13.9
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Purchase Ledger
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Purchase A/c
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Table 13.10
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Sales A/c
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Table 13.11
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Step 2: Recording Purchase Invoice

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1. Go to Gateway of Tally > Accounting vouchers > Press F9: Purchase

2. Press F2:Date, change the date to 31-07-2017
4. Select Daffodil Gadgets in Party A/c name field
5. Select Purchase A/c in Purchase ledger
6. Under Name of Stock Item field, select the stock items, 900 Nos of OMED -
GEN_1 Basic Phone, OMED - GEN_4 Smart Phone and OMED - GEN_5 Smart
Phone at ₹ 4500, ₹ 8,500 and ₹ 13,000 respectively
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The Purchase Voucher appears as shown in the figure 13.3
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Note: In case of Purchases, Price List will not be applicable since prices are declared/fixed by the
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Supplier.
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Step 3: Recording Sales Invoice

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4. In Party A/c name select Magnum Stores

5. Select Sales A/c in Sales ledger field.
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6. Select the stock item OMED - GEN_1 Basic Phone and enter quantity as 150 Nos.
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7. Rate and Discount automatically appear as ₹ 5,000 and 1% respectively

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(Hence the required price level is selected in the ledger master of Magnum Stores)
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8. Enter the Bill-wise Details as required

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The Sales Voucher appears as shown in the figure 13.4
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Observation:
 In the sales invoice as shown in figure 13.4, we can observe how the rate and
discount appeared automatically, this is because we have defined the price list
details for all the stock items.
 Tally.ERP 9 provides you the flexibility to select items with and without the Price
List in the same invoice.
Activity: Record the following transaction:
Date Particulars
06-08-2016 Sold the following stock item to Variety Infocom at Retail Price.
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Name of Stock Quantity Rate per (₹) Discount Amount (₹)
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Item
OMED - GEN_1 100 Nos ₹ 5,500/Nos 1% 5,44,500
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Basic Phone
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Table 13.12 LE
13.3 Revise Price List

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The price of stock items vary from time to time, the price may increase or decrease based on the
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market condition, then as per the latest prices of stock items.. The price list defined in Tally.ERP
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9 can be revised.
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Illustration 4: Revising of price list in Tally.ERP 9.

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10-08-2017 Revise Price List

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Emerald-Shine Makers wants to revise the Wholesale PL-1 price list as the
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rate of stock items are increased by ₹ 100 and the discount rate is fixed.
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Table 13.13
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To Revise the Price List, follow the steps given below:

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Step 1: Revising Price List

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1. Go to Gate way of Tally > Inventory Info. > Price List

2. Press Alt+R: Revise Price Key
3. Enter the Stock Group Name as All Items.
4. Select the Price level as Wholesale PL-1
5. Enter the Applicable From Date as 10-08-2017
The Price List screen appears as shown in the figure 13.5:
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Figure 13.5 Revision of Price List Screen
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1. In the Revise Price field select Increase by amount (Because the price is increased by
100 ₹)
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2. Enter the Amount as ₹ 100
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Note: If the price are decreased, select decrease by amount or percentage, if the prices are increased, then select
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Increase by amount , if no variation in the price ,select as Not applicable (Not applicable can be selected when
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there is a change in the discount rate only)

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3. In the Revise Discount field select as Not Applicable.

4. Press enter, you will get the following Revise Price updated Message
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The Price List with revise price updated message appears as shown in the figure 13.6
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Figure 13.6 Revision Price Message Popup
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5. Press Enter from the Price List screen, you will get the Price List with revised rates.
The Price List with Revised Price screen appears as shown in the figure 13.7
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Figure 13.7 Price List with Revised Price Screen
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Observation: On the left hand side in the under rate column, you are getting the revise price of
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all the stock items (It is increased by ₹ 100)

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6. Press Enter from the figure 13.7 screen and save the Price List screen.
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Once after revising the price for stock items let us record the sales transaction with revised price
list in Tally.ERP 9.
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Illustration 5: Recording sales voucher with revised price list in Tally.ERP 9

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Date Particulars
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Sold the following phones to Magnum Stores at Wholesale PL-1 price

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Table 13.14
Step 1: Recording Sales Invoice
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4. In Party A/c name select Magnum Stores
5. Select Sales A/c in Sales ledger field
6. Select the stock item OMED - GEN_1 Basic Phone and enter quantity as 200 Nos.
7. Rate and Discount automatically appear as ₹ 5,100 and 5% respectively (As it was defined
in the updated Price List 10-08-2017)
8. Enter the Bill-wise Details as required
The Sales Voucher screen appears as shown in the figure 13.8
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Figure 13.8 Sales Invoice with Revise Price

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Activity: Go to Gateway of Tally > Display > Statement of inventory > Stock query > Select
OMED - GEN_1 Basic Phone >Press F7, to view the price list details and then press F10: Show
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Latest Price, to get the latest price list.

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Conclusion
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In this chapter, we have learnt how to define the different types of price levels for an organisation
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using Tally.ERP 9 application. Apart from different price levels, we have learnt how price list for
multiple stock items are defined from the single screen and how these details reflect while
recording sales transactions.
Key Takeaways
 Price list is generally used by organizations which require to set and change prices over a
period of time.
 Price List can be maintained for different kinds/classifications of buyers.
 Tally.ERP 9 facilitates the setting of different price levels while creating price lists for
multiple stock items.
 Price list can be revised as per organisations requirement.
 We can define the discount details while defining the price list
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Shortcut Keys
Key Combination Functionality
F2  From voucher creation screen

 To change the date
Alt+R  From price list screen

 To revise the price
Alt+F2  From Gateway of Tally
 To change the period
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F7  From Stock Query report
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 To get the Price List
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F10  From Stock Query >Price List report
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 To get the Latest Price
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Practice Exercises ED
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1. Tally.ERP 9 requires you to enter Price List details at the time of defining Price Level s
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itself.
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a. True
b. False
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2. From the below given Figure 13.9, the price list is defined for _______________
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Figure 13.9 Price List Screen

a. Stock Items
b. Ledgers
c. Godowns
d. None of These
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3. Match the following items and select the appropriate answer from the given
response sheet
a Defining Price Levels 1 Invoices

b Defining Price List 2 Inventory Features > Sales Management
c Separate Discount Column shown 3 Inventory Info > Price List
a. a-2, b-3, c-1

b. a -3, b-1, c-2
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c. a-1, b-3, c-2
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d. a-1, b-2, c-3
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4. You can create new price list, but can’t revise the price list.
a. True
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b. False
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5. To create Price Lists in Tally, Go to ______.
a. Gateway of Tally > Accounting Info > Stock Category > Stock Item > Create
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b. Gateway of Tally > Inventory Info > Stock Group > Stock item > Create
c. Gateway of Tally > Inventory Info > Voucher types > Stock Item > Create
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d. Gateway of Tally > Inventory Info > Price List > Create
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6. Multiple Price Levels can be maintained in Tally ____ .

a. True
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b. False
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7. The date from which the Price List will be applicable cannot be set in the Price List.
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a. True
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b. False
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8. For the discount percentage to be taken in the Price List, Separate Discount Column on
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Invoices option should be activated in the ______.

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a. F11: Features: Inventory Features > General

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b. F11: Features: Inventory Features> Invoicing

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c. F11: Features: Inventory Features > Order Processing

d. F11: Features: Inventory Features > Other Features
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9. It is not possible to delete price list

a. True
b. False
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Chapter 14
Manufacturing Process
Learning Objectives
 Understanding of manufacturing process
 Creation of manufacturing journal voucher
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 Accounting of manufacturing entry in Tally.ERP 9
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 Recording stock journal voucher
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 Checking of reports like cost estimation and transfer analysis
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14.1 Introduction
Manufacturing Processes is the process of conversion of raw materials/components into
finished goods. A Bill of Materials is a list of constituent items along with quantity details
that can be allotted for the manufacture of a certain product, by-product or likewise. This
facilitates immediate reduction in stock of the item automatically and also it saves time by
automatically allocating the components while recording Manufacturing entry. This process
of listing the items that make up another item is made possible in Tally.ERP 9 by enabling
the Bill of Materials feature.
Business Scenario
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DDL Manufactures are engaged in the business of assembling and manufacturing DDL
Laptops. For this the company maintains a Bill of Materials and record manufacturing
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journals using the BoM.
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Activity: Create the following Company
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Company Name: DDL Manufactures
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Address: No 209, 19 cross, twin tower New Delhi 110034
Financial Year: 01-04-2017
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14.2 Activating of Bill of Materials

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To activate bills of Materials in Tally.ERP 9, follow the steps given below:

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1. Go to Gateway of Tally > F12: Configure > Accts/Inventory Info.

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2. Set Enable component list details (Bill of Materials) to Yes

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Option.
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14.3 Auto Listing of Components Using Bill of

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Materials
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Bill of Materials (BoM) is created only for those items that are being assembled in-house.
Therefore, you need to specify a BoM at the time of creating a Stock Item or while altering
the stock item. For trading items, you do not need a BoM.
Once after activating Bill of Materials, we can define the components while creating finished
good as stock item in Tally.ERP 9.
Illustration 1: Listing of Components using Bill of Materials in Finished goods.

The following is the list of components which will be used to manufacture 1 unit of
DDL Laptop
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List of Components Units used for manufacturing 1 unit of
Finished goods (DDL Laptop)
Display Screen 1
Hard Disk Drive 1
Internal Battery 1
Keyboard 1
Speakers 2
Touch Pad 1
Table 14.1
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To define the list of components using Bill of Materials in Tally.ERP 9, follow the
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procedure given below:
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Creation of Inventory Masters
Stock Groups
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1. Go to Gateway of Tally > Inventory Info > Stock Groups > Create
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Name Enter as Raw Materials
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Should quantities of items be added? Set to Yes

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Table 14.2
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Activity: Similarly create the stock group by name Finished Goods under Primary and set yes to
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“Should quantities of items to be added”

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Stock Item – Raw Material/Components

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1. Go to Gateway of Tally > Inventory Info > Stock Items > Under Multi Stock Items
> Select Create > Select All Items, then create all the stock items given in Table 14.1
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at one go
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The Multi Stock Item Creation screen appears as shown in the figure 14.1
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Figure 14.1 Multi Stock Item Creation Screen

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Activity: While creating the stock item, bring the cursor in the unit’s field and press Alt+C from the unit’s
field and create the unit of measure.
Stock Item - Finished Goods
1. Go to Gateway of Tally > Inventory Info. > Stock Items > Create
2. Enter the details as shown in the figure 14.2
The Stock Item Creation screen appears as shown in the figure 14.2
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3. Enable the option Set components (BoM), the BoM List screen will appear as
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shown in the figure 14.3.

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The Stock Item Multi Components (M BoM) appears as shown in the figure 14.3
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Figure 14.3 Stock Item Multi Components (M BoM)

Screen
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4. Enter DDL Pearl Black Laptop Bold in the Name of BoM field and press
Enter to get the Stock Item components (BoM) screen where we can define the
details of components
The Stock Item Components (BoM) screen appears as shown in the figure
14.4
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Figure 14.4 Stock Item Components (BoM) Screen

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5. Enter the Unit of manufacture as 1

6. Press F12: Configure and set the option Define Type of Components for
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BoM to Yes, you will get the Type of Item column to select the component type
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from the List of Component Type

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Note: In some of the manufacturing processes along with the Finished Goods, Co-Products or By-Products
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or Scrap may be produced. We can define the Stock Item Type by enabling the option Define Type
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of Components for BoM

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7. Enter the components name one by one as shown in the figure 14.5
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The Stock Item Components (BoM) screen of DDL Laptop appears as shown in the
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figure 14.5:
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Figure 14.5 Stock Item Components (BoM)
8. Once after listing all the components as shown in the figure 14.5, select End of
List
and save the Stock Item Creation screen.
The purpose of creating a bill of material is to enable the auto consumption of the
materials in the ratio specified, when the product is manufactured. Tally.ERP 9 allows us
to use a Manufacturing Journal to enter the goods manufactured with the bill of materials.
Note: Tally.ERP 9 supports multiple BoM creation and copying of one BoM details to another. Ctrl+C
Copy BoM option will be highlighted, if more than one BoM is created.
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14.4 Accounting of Manufacturing Process in
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Tally.ERP 9
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Manufacturing Journal is the place where the manufactured inventory is accounted and
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recorded since is not a default Voucher Type in Tally.ERP 9. A new voucher type has to be
created in Tally.ERP 9, for accounting manufacturing process.
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Illustration 2: Creation of Manufacturing journal voucher and Accounting of
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Manufacturing process in Tally.ERP 9

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Pass the following transaction in the book of DDL Manufactures

FF
Date Particulars
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01-07-2017 Purchase the following components from Mohan Traders on credit and
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store it in Jayanagar Godown.

6
Name of the Quantity Rate per (₹) Amount (₹)

00
Stock Item
00
Display Screen 500 1,000/Nos. 5,00,000

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Hard Disk 500 1,000/Nos. 5,00,000

8
Drive
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Internal 500 2,000/Nos. 10,00,000

21
Battery
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Keyboard 500 500/Nos. 2,50,000

Speakers 500 500/Nos. 2,50,000
Touch Pad 500 300/Nos. 1,50,000
02-07-2017 As per the order received for 50 Quantity of DLL Laptops,
manufactured 50 Quantity of DLL Laptops.
While Manufacturing following expenses/cost were incurred.
 Labour Charge – ₹ 2,000
 Packing Charge – ₹ 1,000
526
10-07-2017 Sold the following stock items to Sona Computers on credit
Name of the Quantity Rate per (₹) Amount (₹)
stock item
DDL Laptop 50 10,000/Nos. 50,000
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00
00
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21
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527
Table 14.3
To record the transactions of table 14.3, in the books of DDL Manufacturers, first ensure
that the required ledgers are created in Tally.ERP 9.
Step 1: Activation and Creation of Godown in Tally.ERP 9

Create the Godown as Jayanagar Storehouse, by following the steps given below:
1. Go to Gateway of Tally > Press F11: Company Features > F2: Inventory Features >
Set the option Maintain multiple Godowns to Yes, and save the Inventory Features
screen
2. Go to Gateway of Tally > Inventory Info. > Godowns > Create > Enter the Name as
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AI
Jayanagar Store house
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3. Accept the Godown Creation screen
AN
Step 2: Creation of Manufacturing Journal Voucher Type
To create a new Manufacturing Journal voucher type, follow the steps given below:
AR
H
1. Go to Gateway of Tally > Accounts Info. > Voucher Types > Create
ED
2. In the Name field Type Manufacturing Journal
3. In Select Type of Voucher field, select Stock Journal, by doing this the
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manufacturing journal voucher type will inherit the properties of predefined stock
journal voucher type
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4. In Abbreviation field Type as Mfg. Jrnl

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5. In Method of Vouchering field, select Automatic

6. Set the option Use advanced configuration to No
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7. Set Use as Manufacturing Journal to Yes

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The Manufacturing Journal Voucher Type creation screen appears as shown in the figure
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14.6:
6
00
00
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11
21
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Figure 14.6 Voucher Type Creation — Manufacturing Journal
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Note: The Manufacturing Journal is a variant of the Stock Journal, where the Bill of Material will be
captured automatically and where the purpose is to record a manufacturing activity. Hence, the manufacturing
journal should be used where a stock item is manufactured using a BoM. And also in manufacturing
journal, we can define the expenses incurred details in manufacturing voucher.

Party Ledgers
Mohan Traders
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Name Enter as Mohan Traders
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Default credit period ED Leave it Blank

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Check for credit days during voucher Set to No

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entry?
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Inventory Values are effected? Set to No

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Table 14.4
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Activity: Create the following ledgers:

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 Sona Computers under Sundry

00
Debtors
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 Purchase A/c under Purchase

Accounts
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 Sale of Computers under Sales

8
Accounts
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 Labour Charges under Direct

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Expenses
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 Packing Charges under Direct

Expenses
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Step 4: Recording of Purchase Voucher
To record purchase voucher, follow the steps given below:
1. Go to Gateway of Tally > Accounting Vouchers > Press F9:Purchase

3. In Supplier invoice no: field enter as 1
4. In Party A/c name field select Mohan Traders party ledger
5. In Purchase ledger field select Purchase A/c ledger
6. Under Name of Item field select all the stock items as shown in the transaction dated
01-07- 2017 as per table 14.3
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7. Enter Godown as Jayanagar Storehouse and Quantity, Rate and Amount will get
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captured automatically in Item Allocation screen
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The Purchase Voucher screen appears as shown in the figure 14.7
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Figure 14.7 Purchase Voucher Creation Screen

21
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Note: All the raw materials is stored in Godown by name Jayanagar Location
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Observation: Once after recording the transaction go to Gateway of Tally > Stock Summary > Press
Enter on Raw Materials, we will get the details of purchased stock.
Step 5: Recording of Manufacturing Journal Voucher
1. Go to Gateway of Tally > Inventory Vouchers > Press Alt+F7 > Select
Manufacturing Journal
3. In the Name of product field select DDL Laptops (Finished Goods)
4. Once after selecting finished good, Name of BOM & Components(Consumption)
details will get captured automatically, if required one can change the Name of BOM by
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pressing Backspace
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The Manufacturing Journal Voucher screen with BOM appears as shown in the figure 14.8:
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Figure 14.8 Manufacturing Journal Voucher Screen - BOM

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5. In Godown field select Jayanagar Storehouse, this is location where a finished goods
8
11
will be stored after manufacturing.

6. In Qty field enter the quantity to be manufactured. Once after proving the quantity
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details the Quantity, Rate and Amount will get captured automatically for component.
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The Manufacturing Journal Voucher screen with components appears as shown in the figure
14.9:
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Figure 14.9 Manufacturing Journal Voucher Screen - Components
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Note:
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 Once after defining the quantity to be manufactured in manufacturing journal voucher, the
components will get automatically listed along with the required quantity to make a finished goods.
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This is happening because we have created BoM and selected the same while recording the
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Manufacturing Journal Voucher.

 It is not mandatory to select BoM while recording manufacturing journal voucher, if required we can
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record the entry without selecting BoM. If BoM is not selected, then we need to allocate the required
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components manually.
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7. Under Components (Consumption) column enter the godown details as Jayanagar

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Storehouse
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8. Under Co-Product/By-Product/Scrap select End of List (While manufacturing if

00
scrap or co-products or by-products are produced then need to select the same under
this field)
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9. Under Type of Additional Cost select the expenses incurred while manufacturing
8
like Labour Charges and Packing Charges

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10. Enter Narration

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The Completed Manufacturing Journal Voucher appears as shown in the figure 14.10:
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532
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Figure 14.10 Manufacturing Journal Voucher Screen
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ED
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Observation: Once the labour Charge and Packing charge is added the effective rate of
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primary item increases to 5,860/Nos. In this price the labour charge and packing charge is
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added.
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Activity: Once after recording the above entry, go to Gateway of Tally > Stock Summary, here you will
FF
get the finished goods quantity as 50. This is the quantity which we have manufactured.
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Step 6: Recording of Sales Voucher

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To record the sales voucher, follow the steps given below:

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

00

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3. In Reference no. field enter as 1

8
4. In Party A/c name field select Sona Computers

11
5. Accept the Party Details screen as it is

6. In Sales ledger field select Sale of Computers
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7. Under Name of Item field as DDL Laptops and fill in the details in Item Allocations
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for screen as shown in the figure 14.11
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The Stock Item Allocation for screen appears as shown in the figure 14.11:
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Figure 14.11 Stock Item Allocation screen
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9. Enter the Bill-wise Details
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Figure 14.12 Sales Voucher Creation Screen
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Activity:
 Once after recording the entry of figure 14.12, check the stock summary report the finished goods
quantity will be nil. This is because we have manufactured 50 quantity of laptop and sold the same.
 On 10-07-2017, manufacture 100 Quantity of DDL Laptop and store the same in
Jayanagar Storehouse and include labour charges of ₹ 4,000 and Packing charges of ₹ 2,000
while manufacturing.
14.5 Transferring of Manufactured Goods from

Storehouse to Showroom
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In Tally.ERP 9, Stock Journal voucher is used to transfer the goods from one location to
AN
another and also this voucher is used to record the manufacturing process.
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Illustration 2: Transferring of manufactured goods from one location to another using
stock journal voucher and checking of stock journal register.
H
Pass the following transaction in the book of DDL Manufactures ED
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Date Particulars
11-07-2017 Transferred 50 Quantity of DDL Laptops from Jayanagar Location
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to Jayanagar Showroom.
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Table 14.5
To transfer the manufactured goods from one location to another, follow the steps given
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below:
1. Go to Gateway of Tally > Inventory Vouchers > Press Alt+F7 > Select Stock
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Journal
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2. Under Source (Consumption) field select the stock item by name DDL Laptop
3. Select the Godown as Jayanagar Storehouse
6
00
4. Enter Quantity as 50 and the Rate and Amount will get captured automatically
00
The Stock Journal Voucher screen with Source (Consumption) appears as shown in the
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figure 14.13:
8
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Figure 14.13 Stock Journal Voucher Screen – Source (Consumption)
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5. Bring the cursor to Destination (Production) filed and enter the stock item details as
shown in the figure 14.14
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Figure 14.14 Stock Journal Voucher Screen – Destination (Production)
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Once after recording the entry check the following report in Tally.ERP 9
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14.6 Reports
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Once after recording the transactions like purchase, manufacturing journal, sales and
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stock journal let us check the how these transactions are reflected instantly on reports
6
like Stock Journal Register, Transfer Analysis, Godown Summary and Cost estimation.
00
14.6.1 Stock Journal Register

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Stock Transfers/Stock Journal Register displays the list of all the Stock Journal Vouchers
86
used in Tally.ERP 9 to make stock adjustments. For example, to record any increase or
8
decrease in stock due to shortage, wastage of stock or to record inter-Location transfers of

11
stock, assembling or disassembling.

21
Transactions recorded in manufacturing journal voucher will reflect the details in Stock
journal register.
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To view stock transfer register, go to Gateway of Tally > Display > Inventory Books>
Stock Transfers.
The Stock Journal Register screen appears as shown in the figure 14.15:
536
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Figure 14.15 Stock Journal Register
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Select a particular month and press Enter to reach the Voucher Register where we will
get the details of all vouchers of that particular month.
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14.6.2 Transfer Analysis

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When using different Stock Journals types to record different transactions, Transfer
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Analysis
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gives the movement details for each type of Stock

Journal.
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This report displays information about the Items which are transacted in the Stock
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Journal Voucher. Generally, in the Stock Journal Voucher, Movement of Goods,

6
00
Manufacture of Goods or inter-Godown Transfer is recorded.

00
To view the Stock Transfer analysis for any Stock Journal Voucher
Type:
86
Go to Gateway of Tally > Display > Inventory Books > Movement Analysis
8
11
>Transfer Analysis > Select Manufacturing Journal, from the list of voucher type.
21
The Transfer Analysis Report is displayed as shown in the figure

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14.16:
537
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Figure 14.16 Transfer Analysis Report
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ED
In the report of figure 14.16, you will get the goods production details as well as goods
consumed details.
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Activity: Similarly check the other reports falling under the Movement Analysis
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Report.
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14.6.3 Cost Estimation

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Cost Estimation is a statement that gives the value of the cost incurred in the
manufacturing of finished goods. To view the cost estimation of a particular finished
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product, select the relevant Stock Group which will display the stock consumption
6
details and cost thereof for each of the stock items falling under that Group.
00
00
Cost estimation helps in fixing the selling price of the final product after charging
appropriate overheads and allowing certain margin for profits. It also helps in drawing
86
conclusions regarding the cost of production and in determining the necessity to

8
introduce cost reduction techniques in order to improve the manufacturing process.

11
To view Cost Estimation report follow the steps given below:

21
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Go to Gateway of Tally > Display > Statements of Inventory > Cost Estimation >
Select Finished Goods (Stock Group) > Press F5 to display all BoM
The Item Estimates report appears as shown in the figure 14.17:
538
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Figure 14.17 Item Estimates Report
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Note:
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 From the report of figure 14.17, press F6:Component-wise to view Components-wise
Item Estimates details.
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 Press F5: Show All BOM to view the details all BOM created in Tally.ERP 9.
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14.6.4 Stock Ageing Analysis

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Stock Ageing Analysis report displays the details of period i.e., how long the stock is lying
ideal in the godown. It produces default ageing period of <45 days, 45-90 days, 90-180
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days and >180 days. Depending on the requirement, you can also define the ageing slabs.
6
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To check the Stock Ageing Analysis report, follow the steps given below:
Go to Gateway of Tally > Display > Inventory Books > Ageing Analysis > Select
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Finished Goods Stock Group.

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The Stock Ageing Analysis report appears as shown in the figure 14.18:
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21
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Figure 14.18 Stock Ageing Analysis Report Screen

539
In the report of figure 14.18, we can observe that the particular stock item appears under
the slab of less than 45 days, this shows that the stock is lying in godown for 45 days. To
change the period slab, press F6: Ageing Periods and provide the required ageing
period.
Note: From the Stock Ageing Analysis Report screen, press Alt+F1: Detailed, in order to get the details
of Godowns.
Conclusion
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In this chapter, we have learnt about manufacturing process and how the same is handled
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with ease in Tally.ERP 9, with the use of Bill of Materials. We have seen how BoM
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automate the allocation of components while recording manufacturing journal voucher
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and also we have seen how additional cost incurred while manufacturing can be added to
the cost of finished goods.
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Key Takeaways ED
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 Bill-of-Material is a term generally associated with the manufacturing of goods.

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Tally.ERP 9’s Manufacturing Journal records the item manufactured with the use
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of bill- of-material and enables an automatic reduction in the quantity of stock

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item consumed
 The manufacturing journal is not a default voucher type in Tally.ERP 9. It has to be
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created
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 Additional cost incurred while manufacturing can be allocated to finished goods

cost while recording manufacturing journal voucher.
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 Cost Estimation is a statement that gives the value of the cost incurred
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in the manufacturing of finished goods.

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Shortcut Keys
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8
Alt+F5  From stock journal register.

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 To toggle between quarterly and monthly register.

21
F4  From stock journal register.

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 To navigate to different voucher types.

F5  From cost estimation report.
 To check all the BOM created.
F6  From cost estimation report.
 To toggle between components and finished goods
details
Ctrl+C  From Stock item components (BoM) screen.
 To copy the BoM.
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Practice Exercises
1. Bill of Materials (BoM) feature can be enabled for which type of stock item?
a. Finished Goods
b. Components
c. Scrap
d. Raw Materials
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2. I cannot allocate the expenses incurred to produce finished goods in Tally.ERP 9.
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a. True
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b. False
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3. In ______________report, one can check the details of all the BoM created in
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Tally.ERP 9.
a. Stock Journal Register
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b. Transfer Analysis
c. Cost Estimation
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d. Transfer Analysis
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4. To Automate the Listing of raw materials or components ____________ feature is

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used in Tally.ERP 9.
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a. Bill of Materials
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b. Price Level
c. Bill of Inventory
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d. Batch wise Details

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00
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5. Match the following with their relative function.

8
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a BoM 1 Recording of
21
Manufacturing process
b Manufacturing journal Voucher 2 Transfer of stock from
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one location to another

and also recording of
manufacturing process.
c Stock Journal Voucher 3 Automatic listing of components.
a. a-3, b-1, c-2

b. a -1, b-2, c-3
c. a-3, b-2, c-1
d. a-2, b-1, c-3
6. BoM can be set for?

a. Ledger.
b. Stock Item
c. Stock Group
541
d. Accounting Group
7. BoM stands for?

a. Balance of Materials.
b. Backup of Materials
c. Bills of Materials
d. Bills of Material out
8. Manufacturing Journal voucher inherits the properties of which of the
following predefined voucher type?
a. Sales Voucher Type
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b. Purchase Voucher Type
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c. Physical stock Voucher Type
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d. Stock Journal Voucher Type
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9. What is the shortcut key to record a Manufacturing Journal Voucher?
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a. Alt+F8
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b. Alt+F7
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c. Ctrl+F7
d. Ctrl+F8
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10. I can transfer the goods from one location to another location with
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_________Voucher.
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a. Purchase
b. Sales
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c. Rejection In
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d. Stock Journal
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00
00
8 86
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21
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542

Computerized Accounting Using Tally - Erp 9 - Student Guide

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© 2017 Tally Solutions Pvt. Ltd. All rights reserved.

their respective owners.

Chapter No. Chapter Name Page No.

5 Stock Keeping Units ED 110

6 Recording of Day-to-Day Transactions 131

7 Accounts Receivable and Payable Management 209

9 Allocation and Tracking of Expenses and Incomes 358

10 MIS Reports 381

11 Storage and Classification of Inventory 415

12 Management of Purchase and Sales Cycle 464

13 Price Levels and Price Lists 508

14 Manufacturing Process 524

The stakeholders of a typical business concern are:

 Investors (existing and potential)

1.2 Accounting Terms

 Cash transaction: A cash transaction is one where money is immediately received

the unrealized amount is called bad debts.

purchased on credit are called credit purchases.

1. Accounting Entity Assumption

recorded in the business’ Books of Accounts.

3. Going Concern Assumption: As per this assumption, accounts have to be maintained

even though the payment may be received later.

2. Dual Aspect Concept

3. Full Disclosure Concept

will be ₹ 9, 00,000, which is the revenue minus expenses.

6. Revenue Realisation Concept

the possibilities of inflating incomes and profits.

of ₹ 15, 00,000 should be accounted for in 2017.

7. Verifiable and Objective Evidence Concept

action for gains.

1.4 Double Entry System of Accounting

transaction is called the Double Entry System of Accounting.

Accounts are classified based on the three categories of business transactions:

the examples of artificial person's accounts.

Outstanding Account. This is a representative personal account.

They can be of two types:

and machinery account, and cash account.

1.6 Golden Rules of Accounting

Type of Accounts Golden Rules

Credit what goes out

Debit all expenses and losses

Credit all income and gains

Rule for Personal Accounts

Figure 1.1 Personal Account

Ledger Nature of Golden Rule Debited/Credited Amount (₹)

Account Accounts Applied

Mr.Praveen Personal Rule 1 Debited: Received 80,000

Sales Nominal Rule 3 Credited: Goods 80,000

gone out of the

Rule for Real Accounts

Figure 1.2 Real Account

Ledger Nature of Golden Rule Debited/Credited Amount (₹)

Account Accounts Applied

Machinery Real Rule 2 Debited: Machinery 1,25,000

has come in the

Figure 1.3 Nominal Account

Ledger Nature of Golden Rule Debited/Credited Amount (₹)

1.7 Source Documents for Accounting

in the Books of Accounts of both the buyer and the seller.

holder when a certain amount is credited in his account.

and the amount involved.

later. In the books of Anup Enterprises, Rajesh will be considered a ______________.