1

INTRODUCTION-BASIS OF ACCOUNTING

Definition of Accounting
The American Accounting Association defines accounting as "the process of identifying,
measuring and communicating economic information to permit informed judgments and
decisions by the users of the information."
According to AICPA (American Institute of Certified Public Accountants) it is defined as "the art
of recording, classifying and summarizing in a significant manner and in terms of money,
transactions and events which are in part at least of a financial character and interpreting the
result thereof."

BASIS ACCOUNTING TERMS

o CREDIT-CR
An accounting entry that may either decrease asset or increase liability and equity
on company balance sheet.
o DEBIT-DR
An accounting entry where there is either an increase in assets or decreases in
liability on a company balance sheet.
o BOOK-KEEPING
Book Keeping is an art of recording business transaction.
o ACCOUNTS
Account is a summarized record of transaction effecting one person, one kind of
property or one kind of gain or loss.
o CONTRA ENTRY
Contra-Entry affects both the sides of the Cash Book.
After we getting to know the basic Accounting terms, we move further increasing
our knowledge & getting deeper in our study, to know all about this powerful
letter word Understanding the rules of Accounting is making your foundation in
Accounts strong.
ACCOUMTING ASSUMPTIONS AND PRINCIPLE
Accounting Assumptions
o Entity Assumption: Separate entity concept implies that business unit or a company is a
body corporate and having a separate legal entity distinct from its proprietors. The
proprietors or members are not liable for the acts of the company. But in the case of the
partnership business or sole trader business no separate legal entity from its proprietors.
Here proprietors or members are liable for the acts of the firm. As per the separate entity
concept of accounting it applies to all forms of business to determine the scope of what is
to be recorded or what is to be excluded from the business books.
o Periodicity Assumption: According to this concept, income or loss of a business can be
analyzed and determined on the basis of suitable accounting period instead of wait for a
long period,.,until it is liquidated. Being a business in continuous affairs for an indefinite

period of time, the proprietors ,the shareholders and outsiders want to know the financial
position of the concern, periodically. Thus, the accounting period is normally adopted for
one year. At the end of the each accounting period an income Statement and balance sheet
are prepared.
o Going Concern Assumption: It is otherwise known as Continue of Activity Concept.
This concept assumes that business concern will continue for a long period to exit. In
other words, under this assumption, the enterprise is normally viewed as a going concern
and it is not likely to be liquidated in the near future. This assumption implies that while
valuing the assets of the business on the basis of productivity and not on the basis of their
realizable value or the present market value, at cost less depreciation till date for the
purpose of balance sheet.
o Monetary Assumption: According to this concept, accounting transactions are
measured, expressed and recorded in terms of money. This concept excludes those
transactions or events which cannot be expressed in terms of money. For example, factors
such as the skill of the supervisor, product policies, planning, employer-employee
relationship cannot be recorded in accounts in spite of their importance to the business.
This makes the financial statements incomplete.
Accounting Principles
o Business Entity: A business is concerned a separate entity from the owner and should be
treated separately. Any personal transactions of its owner should not be recorded in the
business accounting book unless the owners personal transaction involves adding and
withdrawing resources from the business.
o Historical Cost: All business resources acquired should be valued and recorded based
on the actual cash equivalent or original cost of acquisition, not the prevailing market
value or future value. Exception to the is when the business is in the process of closure
and liquidation.
o Matching: This principle requires that revenue recorded, in a given accounting period,
should have an equivalent expenses recorded, in order to show the true profit of the
business.
o Consistency: This principle ensures similar and consistent accounting procedure is used
by the business, year after year, unless change is necessary. Consistency allows reliable
comparison of the financial information between two accounting periods.
o Accounting Period: This principle entails a business to complete the whole accounting
process over a specific operating time period. Accounting period may be monthly,
quarterly or annually. For annual accounting period, it may follow a calendar year.
o Accrual Principle: Accrual Concept is closely related to Matching Concept. According
to thisconcept, revenue recognition depends on its realization and not accrual receipt.
Likewise cost arerecognized when they are incurred and not when paid. The accrual
concept ensures that the profit or loss shown is on the basis of full fact relating to all
expenses and incomes.
Conventions
o Convention of Disclosure :
This convention requires that accounting statements should be honestly prepared and all
significant information should be disclosed therein. That is, while making accountancy

records, care should be taken to disclose all material information. Here the emphasis is
only on material information and not on immaterial information. This convention
assumes greater importance in respect of corporate organisations where the management
is divorced from ownership. That is why forms of Balance Sheet and Profit and Loss
accounts are prescribed in Schedule VI of the Companies Act, 1956; so that significant
information may not be left out to be disclosed.
The purpose of this convention is to communicate all material and relevant facts of
financial position and the results of operations, which have material interests to
proprietor, creditors and investors.
Sometimes, there may be time gap between the preparation of Balance Sheet and its
publication and if there are material events bad debts, destruction of plant or
machinery etc., which occurred in the time gap, may also be known to users proprietors,
creditors etc.
In short, full disclosure of all relevant facts in accounts is a necessity in order to make
accounting record useful. Therefore, full disclosure is a very healthy convention, and is
important.
o Convention of Consistency:
Rules and practices of accounting should be continuously observed and applied. In order
to enable the management to draw conclusions about the operation of a company over a
number of years, it is essential that the practices and methods of accounting remain
unchanged from one period to another. Comparisons are possible only if a consistent
policy of accounting is followed. If there are frequent changes in the treatment of
accounts there is little or no scope for reliability. Comparison of accounting period with
that in the past is possible only when the convention of consistency is adhered to.
According to Anthony, the consistency requires that once a company had decided on one
method, it will treat all subsequent events of the same character in the same fashion
unless it has a sound reason to do otherwise. This convention plays its role particularly
when alternative accounting practice is equally acceptable. Moreover, consistency serves
to eliminate personal bias. But if a change becomes desirable, the change and its effect
should be clearly stated in the financial statements. Accounts should lend themselves
easily to comparisons and contrasts. This convention increases accuracy and
comparability of accounting information for prediction or decision making. This
convention does not prohibit changes. If there is any change, its effect should be clearly
stated in the financial statements.
o Convention of Conservatism:
Anticipate no profit and provide for all possible losses is the essence of this
convention. Future is uncertain. Fluctuations and uncertainties are not uncommon.
Conservatism refers to the policy of choosing the procedure that leads to understatement
as against overstatement of resources and income.
The consequences of an error of understatement are likely to be less serious than that of
an error of overstatement. For example, closing stock is valued at cost or market price
whichever is lower. This is a convention of caution or playing safe and is adhered to
while preparing financial statements. Showing a position better than what it is, is not
permitted. Moreover, it is not proper to show a position substantially worse than what it
is.
Following are the examples:

o Convention of Materiality:
American Accounting Association defines the term materiality as An item should be
regarded as material if there is reason to believe that knowledge of it would influence the
decision of informed investor. It refers to the relative importance of an item or event.
Materiality of an item depends on its amount and its nature.
Theoretically, all items, large or small, should be treated alike. Materiality convention
implies that the economic significance of an item will to some extent affect its accounting
treatment.
Materiality in its essence is of relative significance. In the sense that some of the
unimportant items are either left out or included with other items.
For instance, acquisition of items like fountain pen, stapler, pin cushion, punching
machine etc., can be treated as part of assets, when considering their durability and span
of life. But, it is not necessary to maintain separate ledgers. Such low cost items can be
treated as expense for the period.
Therefore, unimportant items are either left out or merged with other items. The reason
for this different treatment lies in the magnitude of their amount. The dividing line
between material and immaterial varies according to the company, the circumstances of
the transactions and economic significance. It should also be noted that an item
considered to be material for one business firm, may be immaterial for another firm.
Similarly, an item of material in a year may not be material in the subsequent years.
Similarly, most of the companies publish their financial statements in whole rupees round
figures, by ignoring paise.
Omission of paise is immaterial, i.e., insignificant when figures appear in lakhs. In short,
all material information should be disclosed that is necessary to make the financial
statements clear and understandable.
Double entry book keeping system
The double entry system of accounting or bookkeeping means that every business
transaction will involve two accounts (or more). For example, when a company borrows
money from its bank, the company's Cash account will increase and its liability account
Loans Payable will increase. If a company pays $200 for an advertisement, its Cash
account will decrease and its account Advertising Expense will increase.
Double entry also allows for the accounting equation (assets = liabilities + owner's
equity) to always be in balance. In our example involving Advertising Expense, the
accounting equation remained in balance because expenses cause owner's equity to
decrease. In that example, the asset Cash decreased and the owner's capital account
within owner's equity also decreased.
A third aspect of double entry is that the amounts entered into the general ledger accounts
as debits must be equal to the amounts entered as credits.

Types of accounts

o Real Accounts
All assets of a firm, which are tangible or intangible, fall under the category Real
Accounts.
o Tangible real accounts are related to things that can be touched and felt physically.
A few examples of tangible real accounts are building, machinery, stock, land, etc.
o Intangible real accounts are related to things that cant be touched and felt physically.
A few examples of such real accounts are goodwill, patents, trademarks, etc.
o Personal Accounts
These accounts are related to individuals, firms, companies, etc. A few examples of
personal accounts include debtors, creditors, banks, outstanding/prepaid accounts,
accounts of credit customers, accounts of goods suppliers, capital, drawings, etc.
o Nominal Accounts
Accounts which are related to expenses, losses, incomes or gains are called Nominal
accounts. The dictionary meaning of the word nominal is existing in name only and
the meaning remains absolutely true in accounting sense too, because nominal accounts
do not really exist in physical form, but behind every nominal account money is
involved. E.g. Purchase A/C, Salary A/C, Sales A/C, Commission received A/C, etc.

GOLDEN RULE OF ACCOUNTING

The 3 Basic Golden Rules of Accounting.
o Personal Accounts
Accounts recording transaction with persons or firms are known as Personal accounts.
Accounts recording transaction which do not effect particular person, but effects business
in general are known as Impersonal A/cs Impersonal A/cs may be either Real Accounts
or Nominal Accounts.
RULE: Dr-TheReceiver
Cr-The Giver
o Real Accounts
Real Accounts are those accounts of property or possession.
Example: Goods Accounts, Cash Account, Bank Account, Office Furniture Accounts.
RULE: Dr-What Comes in
Cr-What Goes out
o Nominal or Fictitious Accounts
Records Expenses, gains & losses. Examples:Rent A/c Salaries A/c Advertising A/c
Interest Recieved A/c Discount A/c Commission Recd A/c Etc.
RULE: Dr-All Expenses & Losses

Cr-All Income & Gains

The Accounting Equation
All accounting entries in the books of account for an organisation have a relationship
based on the accounting equation:
Assets = Liabilities + Owners equity
Financial Statement
A financial statement (or financial report) is a formal record of the financial activities
and position of a business, person, or other entity. Relevant financialinformation is
presented in a structured manner and in a form easy to understand

Tally.ERP 9 Fundamentals

Tally.ERP 9 is the worlds fastest, affordable and highly reliable ERP solution. Tally.ERP 9 is
easy to buy, quick to install, simple to learn and is designed to meet the needs of small, medium
and large businesses. It provides an integrated business solution involving Sales, Finance,
Purchase, Inventory, Manufacturing, Excise and Payroll besides tremendous reporting, data
synchronisation, remote capabilities and so on.
Salient Features
o Simple and Flexible: Tally.ERP 9 is simple to learn and flexible to use. It allows both
keyboard and mouse conventions for smooth and easy data entry.
o Codeless Accounting: Tally.ERP 9 pioneered the no accounting codes concept which
allows the user to maintain data in plain English (natural language interface).
o Complete Business Solution:Tally.ERP 9 provides an integrated business solution for
accounting, inventory, sales, finance, purchasing, manufacturing, excise and payroll
extensive with features to record, extract, display and print information effectively
o Integrated Accounting and Inventory: Tally.ERP 9 provides the facility to integrate
accounting and inventory information at any point of time for consolidated book
keeping / MIS.
o Speed and Power:Tally.ERP 9 is a robust software which provides tremendous
capability to maintain multiple companies with unlimited levels of classification,
generate reports with high speed and accuracy and drill down to the transaction level at
any point of time.
o Real time processing:Tally.ERP 9 helps to generate numerous reports and statements
instantly upon entering the transactions.
o Versatility:Tally.ERP 9 is designed to handle multiple companies for multiple accounting
periods with multiple locations/branches.
Tally.ERP 9 Start-up
You can start Tally.ERP 9 using any of the following ways:
Click on Start > Programs > Tally.ERP 9 > Tally.ERP 9 icon or

Double-click on the Tally.ERP 9

Screen Components
o Title bar: Displays the version number of Tally.ERP 9
o Horizontal button bar: Selection of Language key, Keyboard Language and Tally.ERP
9 Help
o Close button:Performs the standard Windows Operating Systems function (Windows
95 onwards), allowing you to Close/ Quit Tally.ERP 9 and work on other applications.
To restore Tally.ERP 9, click the Tally.ERP 9 icon on the task barTally.ERP 9
Fundamentals
o Gateway of Tally:Displays menus, screens, reports and accepts the choices and options
which you select to view data as required
o Buttons toolbar:Displays buttons which provide quick interaction with Tally.ERP 9.
Only but-tons relevant to the current task are visible
o Calculator Area:Used for calculator functions
o Info Panel:Displays Version number, License details, Configuration details
Quitting Tally.ERP 9
o Press ESC until you see the message Quit? Yes or No? Press Enter or Y, or click Yes
to quit Tally.ERP 9
o Alternatively, to exit without confirmation, press Ctrl+Qfrom Gateway of Tally
o You can also press Enter, while the option Quit is selected from Gateway of Tally
Create a Company
o Go to Gateway of Tally > Company Info. > Create Company

Select a Company
To Select a Company
Go to Gateway of Tally > press Alt+F3 (Company Info.) > Select Company
o Tally.ERP 9 displays the List of Companies screen with all the companies created in an
alphabetical order
o Select the required company from the list

In case two or more companies are loaded, click on the company which you need to
work on. The selected company will be highlighted and will appear on top of the list

STEPS:
Let us create a company and enable VAT
Go to Gateway of Tally > F3: Company Info. > Create Company Inthe Company Creation
screen,
o Specify Universal Enterprises as the Company Name
o Enter the Address details
o Select India in the Statutory Compliance for field
o Select Tamil Nadu in the State field
o Enter the Pin code, Telephone No., Mobile No. and E-Mail details
o Set Enable Auto Backup to Yes if required.
o Select Accounts with Inventory in the Maintain field
o Enter the other required information in the Company Creation screen
Enabling VAT
Go to Gateway of Tally > F11: Features > F3: Statutory & Taxation
In the F3: Statutory & Taxation features,
o Set Enable Value Added Tax (VAT) to Yes
o Set/Alter VAT Details to Yes
o The Company VAT Details screen will be displayed.
o In the Company VAT Details screen, select the State where the business of the dealer is
registered. Here select the State as Tamil Nadu. Select the Type of Dealer as Regular and
enter the Date in Regular VAT Applicable From field.

Alter a Company
To Alter a Company,
Go to Gateway of Tally > press Alt+F3 (Company Info.) > Alter
o Select the company which you need to alter from the List of Companies and press Enter t
o view the Company Alteration screen
o Alter the company details as required and accept the screen
Shut a Company
To Shut a Company,
Go to the Gateway of Tally > press Alt+F3 (Company Info.) > Shut Company
o Select the company which you need to shut from the List of Companies
o You can also use Alt + F1 to shut a Company from the Gateway of Tally screen
o You can also access these functions, by selecting the appropriate button from the button
Company Features
The F11: Features are company-specific whereas, F12: Configurations are applicable to all the
companies in a data directory. You can press F11 (functional key) from any screen of Tally.ERP
9 or you may also
click on the F11:
Features button
available in the
button bar, to enable
the required
features. The F11:
Features is
divided into the
following major
categories:
o Accounting
Features
o Inventory
Features
o Statutory &
Taxation
o Tally.NET
Features
o Add-On
Features
Go to Gateway of
Tally > press
F11: Features

ACCOUNTING
This feature enables
various Accounting
Features required for transaction entries.
Go to Gateway of Tally > F11: Features > F1: Accounting Features

FEATURES
you to set the

GENERAL
o Integrate Accounts and Inventory
This option has a significant effect on the Balance Sheet and Profit & Loss Account. If set to Yes,
it extracts the stock/inventory balance figures from the inventory records and provides a drill
down to the Stock registers from the Balance Sheet.
If set to No, it ignores the inventory books figures and picks up manually entered closing stock
balances from the ledger account created. This facilitates the maintaining of accounts and
inventory separately.
Stock records often contain compensating errors caused by wrong allocation to items. This
feature enables finalisation of financial books without waiting for the reconciliation of stocks.
o Income/Expense Statement Instead of P & L
By Default, this option is set to No.
If set to Yes Tally.ERP 9 displays Income & Expenses A/c instead of Profit & Loss A/c in the
Gateway of Tally.ERP 9 Menu. Income and Expenditure statement generally used for NonTrading accounts and Profit & Loss a/c are used for trading accounts.
o Allow Multi-Currency
By Default, this option is No.
Set this option to Yes, if you want to create multiple currencies and the Menu Currencies is
displayed in Gateway of Tally > Accounts Info.
OUTSTANDING MANAGEMENT
o Maintain Bill wise Details

The Bill-wise facility is made functional by setting this option to Yes. By activating the Billwise
feature, the ledger masters under Sundry Debtors and Sundry Creditors automatically displays
an additional option called Maintain balances bill-by-bill. On setting this option to Yes, an
additional option Default Credit Period is displayed..
When you enter details of sales and purchases with the Bill-wise option activated, Tally.ERP 9
prompts you to identify the invoice with an appropriate reference number. The reference can then
be used to allocate payments to the correct invoice to maintain an accurate account of
outstanding.
o Activate Interest calculation
Set this option to Yes to enable Tally.ERP 9 to calculate interest automatically based on the
interest rate and style of calculation specified. Enabling this option allows interest calculation on
outstanding balances for any ledger account or on each invoice for the period it is outstanding
completely or partly.
COST / PROFIT CENTRES MANAGEMENT
Set this option to Yes if you want to maintain Payroll information on Tally.ERP 9 for the selected
company .
o Maintain Cost Centers
A Cost Centre can be defined as a unit of an organization to which transactions can be posted.
When only costs or expenses are allocated to these units, they are referred to as Cost Centers.
The Cost Centre feature is activated by setting this option to Yes.
Set this option to Yes to display the opening balance in Cost Centre Report for the cost centers
which are allocated to the Ledgers, grouped under Income and Expenses Group.

INVOICING
o Allow Invoicing
Set this option to Yes, to create Sales and Purchase vouchers in the invoice format. The
advantage of using the invoice format for sales invoice entry is that it
enables automatic calculations of Duties and Taxes accounts.
Set this option to Yes, to enable voucher class option in purchase voucher type.
o Use Debit/Credit Notes

The Debit Note and Credit Note voucher types are made available only if this feature is set
to Yes.
o Invoice Mode for Credit Notes
Set this option to Yes to create Credit Notes in Invoice Mode.

BUGDETS AND SCENARIO MANAGEMENT

o Maintain Budgets and Controls
Set this option to Yes, to create multiple budgets. The Budgets menu option is displayed
in Gateway of Tally > Masters Info. > Accounts Info. menu.
o Use Reversing Journals & Optional Vouchers
Setting this option to Yes displays the Scenario option in Accounts Info menu. You will now be
able to create and alter Scenarios. You can enter the Reversing Journal and make it Optional, so
that the entries do not to affect the books.
BANKING FEATURES
o Enable Cheque Printing
Set this option to Yes, to enable Cheque Printing. Refer Cheque Printing for details.
o Alter Banking Features
Set this option to Yes to alter features with respect to Banking. Refer Banking Features for
details.
OTHER FEATURES
o Allow Zero Valued Entries in Vouchers
Set this option to Yes, to allow Zero valued entries in vouchers.
o Maintain Multiple Mailing Details for Company & Ledgers
Set
this
option
to Yes,
to
maintain
multiple
your company and ledgers. Refer Multi Address for details.
INVENTORY FEATURE

mailing

details

for

This feature enables you to set the Inventory Features required for the transactions.
Go to Gateway of Tally > F11: Features > F2: Inventory

STATUTORY AND TAXATION

This feature enables you to set the Statutory Features required for the transactions.
Go to Gateway of Tally > F11: Features > F3: Statutory & Taxation

 Configuration in Tally.ERP 9
Configuration can be selected or modified by using F12: Configure button. This button is
available in almost all the screens of Tally.ERP 9 enabling the user to modify it as and when your
requirements change.
F12: Configure is application Level configuration and saved in a file known as tallycfg.tsf.
Note: As configuration is application level, it is not possible to set the company level
configuration as F11: Features.
Go to Gateway of Tally > F12: Configure

o General Configuration in Tally.ERP 9

You can configure Country Details, Style of Names, Style of Dates, Configuration of Numbers in
the General configuration screen.
Go to Gateway of Tally > F12: Configuration Menu > General

o Numeric Symbols Configuration in Tally.ERP 9

This enables you to set the number styles. The default styles and symbols are specified.
However, you have the option of changing them in the respective fields according to your
preference.
For example, change negative sign from (-) to (+).
Go to Gateway of Tally > F12: Configure > Numeric Symbols

o Types of Voucher :
There are 18 vouchers already created in Tally software, which is divided into two parts:
1. Accounting Vouchers
2. Inventory Vouchers
Accounting Vouchers:
There are 10 accounting vouchers already created in Tally software. You can create, delete or
modify other vouchers as per your requirement.
Inventory Vouchers:
There are by default 8 inventory vouchers are automatically created in Tally software. You can
create, delete or modify other vouchers as per your requirement. You can create, display, alter or
delete any voucher as per requirement in tally from Got (Gateway of Tally) -> Accounts Info /
Inventory Info -> Voucher Types
Accounting Voucher:
All entries which you made in these given accounting vouchers is effect on your current
accounting of your business.
F4: Contra-> Used for cash and bank entries and also fund transfer from one bank to another.
F5: Payment ->Used for expenditure and payment to parties by cheque or cash.
F6: Receipt -> Used for income and received amount from the parties by cheque and cash.
F7: Journal -> Used for adjustable and transferable entries.
F8: Sales -> Used for sales entries and income
F9: Purchases ->Used for purchased entry and expenses.
Ctrl+F8: Credit Note -> Used for sales return entries.
Ctrl+F9: Debit Note-> Used for purchases return entries.
F10: Reverse Journal: Used for rectifying any wrong entries. (Non Accounting Voucher)
Ctrl+F10: Memo (Memorandum): Used for memorize any entry in tally. ( Non-Accounting
Voucher)

Inventory Vouchers:
These vouchers are effect on inventory reports in the business. All entries which you made in
these inventory vouchers are effect on your stock register.
ALT+F4: Purchases Order Voucher: Used to give purchases order to party.
ALT+F5: Sales Order Voucher: Used to received sales order from customer.
ALT+F9: Receipt Note Voucher: Used for recording goods received.
ALT+F8: Delivery Note: Used for recording goods delivered to a customer.
ALT+F6: Rejections Out: Used for records goods that are rejected and returned to a supplier.
CTRL+F6: Rejections In: Used to record goods that are rejected and returned back by the
customer.
ALT+F7: Stock Journal Voucher: Used to record stock transfers from one location to another
Alt+F10: Physical Stock: Used for recording actual stock physically verified or counted

3 Creating Masters in Tally.ERP 9

Once you have enabled Excise in Tally.ERP 9 in the manner as discussed above, the Excise
options will now be available in the ledger masters.

Creating Ledgers

Before creating transactions create the following ledger masters in the manner as discussed.

i - Create Purcahse Ledger

ii - Create Sales Ledger

iii - Create Customer Ledger

iv - Create Supplier Ledger

Create Purchase Ledgers

Free Download

Registration Number

Financial Statements

Ledgers

Ally

Alter

Balance

Bill

Companies

Debtors

Free Download

Registration Number

Financial Statements

Ledger
Under Inventoryvalues are affected Used In VAT Returns
VAT/Tax Class

Purchases @ 4%

Purchase

Accounts

Yes

Yes

Purchases @ 4%

Purchases @ 12.5% Purchase

Accounts

Yes

Yes

Purchases @ 12.5%

Multiple Group
1. Create: To create one or more group or sub groups in Tally.
2. Display: To view active group or sub group information only in Tally.
3. Alter: To change active group or sub group information only but you cant permit to delete any
selected group or subgroup from this window.

Note:If you want to delete any group or subgroup then you have to choose Single Group > Alter
option in Tally software.

 Creating Inventory Masters in Tally.ERP 9

Inventory accounting includes recording of stock details like the purchase of stock, the sale of
stock, stock movement between storage locations or godowns and providing information on
stock availability. Tally.ERP 9 makes it possible to integrate the inventory and accounting
systems so that the financial statements reflect the closing stock value from the Inventory
system.

The inventory system operates in much the same way as the accounting system.
o First you set up the inventory details, which is a similar operation to creating the chart of
accounts although, in this case, there are no pre-defined set of stock groups.
o Second, you create the individual stock items, which is similar to setting up the ledgers.

In a newly created company the Inventory Info. menu comprises of four types of Masters, viz.
Stock Groups, Stock Items, Units of Measure and Voucher Types.
Go to the Gateway of Tally > Inventory Info.
The Inventory info. menu is displayed as shown:

The above Inventory Masters types are explained in detailed in the following sections.
Units of Measure

Let us take the example of Indus Enterprises that sells Televisions and Music Systems.
Given below is the structure of items being sold.

Group A Televisions

A1 Sony

A1a Sony 29 inches TV

A1b Sony 25 inches TV

A2 Philips

A2a Philips 29 inches TV

A2b Philips 25 inches TV

A3
Videocon

A3a Videocon 29 inches TV

A3b Videocon 25 inches TV

Group B Music Systems

B1 Sony

B1a Sony Tape-Recorder

B1b Sony CD Player

B2 Videocon

B2a Videocon Tape-Recorder

B2b Videocon CD Player

The televisions are sold in numbers. Hence, the Unit of Measure will be Nos.
Indus Enterprises has two Godowns, the Bangalore Godown and the Mumbai Godown.
The grouping structure in Tally.ERP 9 is as follows:
Stock Group
1. Televisions (main stock group)
o Sony TV stock group under Televisons
o Philips TV

stock group under Televisons

o Videocon TV

stock group under Televisons

2. Music Systems (main stock group)

o Sony Music Systems

Stock Group under Music Systems

o Videocon Music Systems

Stock Group under Music Systems

Under the stock group Televisions, let us create stock groups based on the different brands being
sold viz. Sony, Philips and Videocon. This helps to find the total sales of a particular brand of
televisions at any given point of time. In order to compare the total sales of the 29 and 25
inches televisions respectively, Tally.ERP 9's feature of Stock Categories for parallel
classification can be used.
Experiment Creation of Inventory Masters in Indus Enterprises.

Stock Groups
Stock Groups are provided to help in the classification of stock items. Classification is done
based on some common behaviour. Grouping stock items makes it easy to identify and report
them in the statements. For example, items of a particular brand can be grouped together so that
you can get the inventory details of all the items of that brand.
Creating Stock Group
Create the Stock Group Television under Primary.
Go to the Gateway of Tally > Inventory Info. > Stock Groups > Create (under the Single
Stock Group).
Ensure that the screen appears as shown below:

o Press Y or Enter to accept the screen.

Similarly, create Music Systems under Primary.

Create Sony TV under Televisions.

The screen is displayed as shown below:

o Press Y or Enter to accept the screen.

Create the following Stock Groups in the similar manner

Name

Under

Can Quantities of
items be ADDED

Philips TV

Televisions

Yes

Videocon TV

Televisions

Yes

Sony Music Systems

Music Systems

Yes

Videocon Music Systems

Music Systems

Yes

Stock Categories
This is a feature, which offers a parallel classification of stock items. Like Stock Groups, Stock
categories are also classified based on some similar behaviour. The advantage of using
Tally.ERP 9 lies in categorising Stock items together, (based on functionality) across different
stock groups. This enables you to obtain reports for alternatives or substitutes of a stock item.

o Set Yes to Maintain Stock Categories in F11: Features (F2: Inventory Features) to
get an additional option Stock Categories under Inventory Info.

Creating Stock Category

Go to the Gateway of Tally > Inventory Info. > Stock Categories > Create.
Create Stock Category 29 inches TV Under Primary

o Press Y or Enter to accept the screen.

Similarly , create Stock Category 25 inches TV under Primary.

Godowns / Locations
A place where stock items are stored is referred to as Godowns. You can specify where the stock
items are kept. For example: A warehouse, shelf or rack etc, and obtain stock reports for each
Godown and account for the movement of stock between locations/Godowns.

o Set Yes to Maintain Multiple Godowns in F11: Features (F2: Inventory Features) to
get additional option like Stock Categories under Inventory Info.
Creating a Godown
Go to the Gateway of Tally > Inventory Info. > Godowns > Create.
i. Create a Godown Bangalore under Primary.
Ensure that the screen is displayed as shown below:

o Press Y or Enter to accept the screen.

Godowns have a main location, by default because of which the options Display and Alter are
functional even before you create a godown.
Similarly create the godown Mumbai under Primary.

Units of Measure
Stock Items are mainly purchased and sold on the basis of quantity. The quantity inturn is
measured by units. In such cases, it is necessary to create the Unit of Measure. The Units of
Measure can either be simple or compound. Examples of simple units are: nos., metres,
kilograms, pieces etc. Examples for compound units are: a box of 10 pieces etc. Create the
Units of Measure before creating the Stock Items.

Creating Units of Measure

Go to the Gateway of Tally > Inventory Info. > Units of Measure > Create.

The Unit Creation Screen appears as shown below:

Figure 4.6 Units of Measure Creation screen

Type
Tally.ERP 9 has the option to create simple units as well as compound units. Examples: box, nos,
pcs, etc. A Compound Unit is a combination of two simple units of measure. Example: A box of
10 pcs is a compound unit of measure.
Symbol
It is the abbreviated form by which a stock item is identified. For example, the abbreviation pcs
indicates pieces.
Formal Name
This represents the complete or formal name of a symbol used while creating a unit. Different
companies use different symbols to represent the same units. Formal names help you to match
the symbols with their respective units. For example, the symbol for numbers (formal name) can
be nos or num.
Number of Decimal Places
A unit can be expressed as fractions. For example, a 3.15 Kg refers to 3Kg and 150 grams. The
number of digits expressed in grams after the decimal places are three. Likewise, fractions up to
four decimal places can be expressed in the same manner. For expressing numbers, without a
decimal place, specify 0 in this option.

Let us create the unit Nos.

1. Type: Simple
2. Symbol: Nos
3. Formal Name: Numbers
4. Number of Decimal Places: 0

The Unit Creation screen is displayed as shown below:

5. Press Y or Enter to accept the screen.

Stock Items
Stock items are goods that you manufacture or trade (sell and purchase). It is the primary
inventory entity. Stock Items in the Inventory transactions are similar to ledgers being used in
accounting transactions. Therefore, Stock Items are important in an inventory just as ledgers are
important in accounting.

Creating a Stock Item

Go to Gateway of Tally > Inventory Info. > Stock Items > Create.
The Stock Item Creation Screen appears as shown below:

Enter the following details:

o Name: The name of the stock item.
o Under: The stock group under which you want to classify the stock item.
o Category: The stock category you want to classify the stock item for parallel
classification.
o Units: The unit of measure for the stock item being created.
o Rate of Duty: Enter the rate of duty charged on the item.
o Opening Balance: The opening balance of a stock item, refers to the stock available with
us. Godowns that have already been created, must have the opening balance quantity and the
location specified.

i. Create a Stock Item Sony 29 inches TV, under the Group Sony TV.
Ensure that the details appear as shown below:

Press Y or Enter to accept the screen.

Name

Under

Category

Units

Sony 25 inches TV

Sony TV

25 inches TV

Nos

Philips 29 inches TV

Philips TV

29 inches TV

Nos

Philips 25 inches TV

Philips TV

25 inches TV

Nos

Videocon 29 inches TV

Videocon TV

29 inches TV

Nos

Videocon 25 inches TV

Videocon TV

25 inches TV

Nos

Similarly, create the following Stock Items under Televisions

Similarly, create the following Stock Items under Music Systems

Name

Under

Category

Units

Sony Tape - Recorder

Sony Music Systems

Not
Applicable

Nos

Sony CD - Player

Sony Music Systems

Not
Applicable

Nos

Videocon Tape - Recorder

Videocon Music Systems

Not
Applicable

Nos

Videocon CD - Player

Videocon Music Systems

Not
Applicable

Nos

Creating Inventory Masters for National Traders

Before you start to create the inventory data for National Traders, there are some important
functions of housekeeping that are to be taken care of.
o Make sure your screen displays the main menu of the Gateway of Tally and ensure
that only National Traders is loaded.
o Set Tally.ERP 9s Current Date to April 1, 2009 select F2: Date at the Gateway
of Tally.
o You also need to check whether the following features in Tally.ERP 9 are enabled for
this module

i. In the F11: Features (F2: Inventory Features) set Yes to:

o Maintain Stock Categories
o Maintain Multiple Godowns

ii. In the F12: Configure > Accts/Inventory Info. set Yes to:
o Allow ALIASES along with Names
o Allow Language ALIASES along with Names
o Allow ADVANCED entries in Masters (Accounts)
o Use ADDRESSES for Ledger Accounts
o Use CONTACT DETAILS for Ledger Accounts
o Allow ADVANCED entries in Masters (Inventory)
o Allow Std. Rates for Stock Items

Let us now use Tally.ERP 9 to set up the basic inventory details for National Traders that sells
computers, Printers and Peripherals. Create the stock groups and sub-groups as shown:

Stock Group

Under

Computers

Primary

Printers

Primary

Peripherals

Primary

Accessories

Peripherals

Components

Peripherals

Create Stock Groups

You will now set up the stock groups using both the single and multiple create options.

i. Creating single stock groups

Go to the Gateway of Tally > Inventory Info. > Stock Groups > Create.
Create a Stock Group - Computers
1. Name: Computers
2. Aliases: Skip the field
3. Under: Primary
4. Can quantities of items be ADDED?: Yes

The field Can quantities of items be added? in the stock group creation screen pertains to
information on measuring the units of the Stock Items that have been categorised under the
Stock Group. The Stock Items categorised under the group should have similar units for them
to be added up. You cannot add quantities
Press Y or Enter to accept the screen.

Name

Under

Can Quantities of
items be ADDED

Peripherals

Primary

Yes

Printers

Primary

No

.
ii. Creating Multiple Stock Groups
Go to the Gateway of Tally > Inventory Info. > Stock Groups > Create.

Create Accessories and Components under Peripherals.

Ensure that the Multi Stock Group Creation screen is displayed as shown below:

Press Y or Enter to accept the screen.

Displaying and Altering Stock Groups

Once created, stock groups can be displayed and altered in both the single and multiple mode.
You can delete a stock group by using the option Alter under the Single Stock Group by
pressing Alt+D. However, you cannot delete a stock group with sub-groups or stock items. The
lower levels must be deleted first.

Creating Single Stock Categories

Go to the Gateway of Tally > Inventory Info. > Stock Categories > Create.

Name

National

Under

Primary

Creating Multiple Stock Categories

Go to the Gateway of Tally > Inventory Info. > Stock Categories > Create

Under Category

Name of Category

Primary

HCL

Primary

IBM

Primary

HP

Primary

Samsung

Displaying and Altering Stock Categories

Once created, stock categories can be displayed and altered in single and multiple mode. You can
delete a stock category via Single Stock Category > Alter by pressing Alt+D. However, you
cannot delete a stock category with sub-categories. The lower levels must be deleted first.

Creating Units of Measure

Go to the Gateway of Tally > Inventory Info. > Units of Measure > Create

Type

Symbol

Formal Name

Number of
Decimal Places

Simple

Nos

Number Of

Simple

Box

Boxes

Creating Compound Units of Measure

Go to the Gateway of Tally > Inventory Info. > Units of Measure > Create.
1. Type: Compound (press Backspace)
2. First Unit: Select Box
3. Conversion: Type 100
4. Second Unit: Select Nos

Figure 4.12 Compound Units of Measure Creation

Press Y or Enter to accept the screen.

Displaying and Altering Units of Measure

Once created, the units of measure can be displayed and altered. You can delete a unit of measure
in the alteration screen by pressing Alt+D. However, you cannot delete a unit of measure that is
part of a compound measure. The compound measure must be deleted first.

Creating Godowns
Ensure that Maintain Multiple Godowns is set to Yes in the F11: Features (F2: Inventory
Features).
The concept of Godowns is essentially to store the inventory and can be used as a location,
warehouse, department, sub-contractor locations etc. Tally.ERP 9 permits any number of
godowns that can be grouped and sub-grouped to match the structure you need.

To Create a Godown, go to the Gateway of Tally > Inventory Info. > Godowns > Create.
1. Name: Warehouse
2. alias: Skip the field
3. Under: Primary
4. Allow Storage of materials: Yes

Similarly, create On-Site as Godown under Primary.

1. Name: On - Site
2. alias: Skip the field
3. Under: Primary
4. Allow Storage of materials: Yes

Displaying and Altering Stock Godowns

Once created stock Godowns can be displayed and altered in single and multiple mode.
Go to the Gateway of Tally > Inventory Info. > Godowns > Alter.

You can delete a stock Godown via Single Godown > Alter by pressing Alt+D. However, you
cannot delete a stock Godown with sub-godowns. The lower levels must be deleted first.

Create Stock Items

Go to the Gateway of Tally > Inventory Info. > Stock items > Create.
Create the stock items as on 1-4-2009, with the information provided below:

Stock

Cost

Warehous
e

On Site

Total Qty

Total
Value

Retail
Price

COMPUTERS

HCL PIV

17,500

5 Nos

87,500

21,500

IBM PIV

17,100

4 Nos

68,400

24,785

PERIPHERALS

Accessories

CD ROM Disks 100s

450

5 Box

2,250

500

35

10 Nos

350

40

1,250

10

10 Nos

12,500

1,600

Wireless Keyboard

490

10

15

25 Nos

12,250

700

Wireless Mouse

250

10

10

20 Nos

5,000

430

HP Laserjet 1010 Series

8,200

7 Nos

57,400

9,500

Samsung Laserjet 1500

8,100

5 Nos

40,500

9,850

Total

2,86,150

Dust Covers

USB Pen Drives 64MB

Printers

Ensure that Allow ADVANCED entries in Masters is set to Yes in the F12: Stock Item
Configuration.

Create the stock item HCL PIV with the following details:
1. Name: HCL PIV
2. alias: Skip this field

3. Under: Computers
4. Category: HCL
5. Units: N os
6. Alter Standard Rates?: Yes
7. Enter the details in the Standard Rate screen as shown below:

Enter other details as given in the table:

Rate Of Duty

Cost Method

Avg Cost

Market Valuation Method

Last Sale Price

Ignore Diff due to Physical Counting?

No

Ignore Negative Balances?

No

Treat all Sales as New Manufacture?

No

Treat all Purchases as consumed?

No

Treat all Rejection Inward as scrap?

No

Opening Balance: Quantity

5 Nos

Opening Balance: Rate

17,500

Allocate the items as shown below:

The Stock Item Creation screen for HCL PIV appears as shown below:

Press Y or Enter to accept.

Explanation for Behaviour

o Costing Method: This is the method by which stocks are valued. The value arrived at
will be the stock value in the books. This method considers Purchase costs only.
o Market Valuation Method: This method considers the Sale price only for the
valuation of stocks. The method selected, is not however, used for standard reporting.
o Ignore Diff. due to Physical Counting?: This requires you to enter information
on whether Tally.ERP 9 should automatically account for stock difference by passing
an appropriate entry or not.
o Ignore Negative Balances?: This requires you to enter information on whether
Tally.ERP 9 should warn you if there is a negative balance. This however does not
prevent you from entering vouchers.
o Treat all Sales as New Manufacture?: This requires you to enter information on
whether on entering a sale voucher, the item will automatically be manufactured and
brought in stock.
o Treat all Purchases as Consumed?: This requires you to enter information on
whether on entering a purchase, the item is automatically issued from stock.

o Treat all Rejections inward as Scrap?: This requires you to enter information on
whether the goods rejected and taken into stock should be shown as issued and hence
valued nil.

Similarly, Create other Stock Items.

Once you have entered all the stock items, return to the main Gateway of Tally menu and select
the Stock Summary. This should show a grand total of 2,86,150, the break-up of which
is, Computers - Rs. 1,55,900, Peripherals - Rs. 32,350, Printers - 97,900 = Rs. 2,86,150.
Ensure that the Stock Summary appears as shown :

4 Voucher Entry & Invoicesing

Accounting Vouchers:
There are 10 accounting vouchers already created in Tally software. You can create,
delete or modify other vouchers as per your requirement.

Predefined voucher types:

Purchase Voucher / Invoice
Sales Voucher / Invoice
Receipt Voucher
Payment Voucher
Contra Voucher
Journal Voucher
Debit Note Voucher
Credit Note Voucher
Contra Voucher (F4):
With the help of contra voucher you can make entry which is related to cash and bank both. Like
Cash deposited into your bank account, Cash withdrawals from your bank account either from
Cheque / DD / ATM or any other media and also you can make entry to transfer amount from
one bank account to another bank account using this voucher.
Exp: Cash Deposited in to SBI Rs. 25000/Cr. Cash
25000
Dr. SBI
25000

Payment Voucher (F5) in Tally9

Receipt voucher
Go to Gateway of TALLY > Accounting Vouchers
Press/select F6: Receipt from button bar
Select Party Name in the To field and specify amount
Select Bill references in the Bill Wise Details for screen
Select Bank ledger in the By field and press Enter to accept amount
Press enter and save(as shown in the FIGURE 2.0)

Credit note
Go to Gateway of TALT > Accounting Vouchers
Press Ctrl + F8 or select Ctrl + F8: Credit Note on button bar
Enter the required details
Press Enter and save(as shown in the FIGURE 2.5)

Reversing Voucher in Tally 9.0

Reversing Journals are special journals that are automatically reversed after a specified date.
They exist only till that date
and are effective only when they are included in reports. These are used in interim reporting in
the course of the financial
year where accruals are to be reported. These accruals are usually short term and are cleared in
the subsequent period.
However, to get a proper perspective, decision makers require the reports with full impact of all
aspects and transactions.
To activate Reversing Journals,
Go to Gateway of Tally
1. Select F11: F1: Accounting Feature
2. Set Use Reversing Journals & Optional Vouchers? to Yes.
3. Accept the screen to save.
You may use reversion journal for accounting for or providing for depreciation. Since,
depreciation is usually provided
during at the end of the year, using the Reversing journal you may include them for monthly
reporting or a specific period
to give more accurate status or position.
For eg. On 30th June you want to view the Balance Sheet but June months rent is not been paid

Memo Voucher (Ctrl+F10) in Tally9

Creating Voucher:
Go to Gateway of Tally
Go to Accounts Info.
Go to Voucher Type
Go to Create

Give name to Cash sales,if you want to record only cash sales transactions
Choose primary voucher type as Sales
Accept the screen
Voucher would be created and can be viewed in display.

Displaying Voucher type:

Go to Gateway of Tally
Go to Accounts Info.
Go to Voucher Type
Go to Display
Choose Voucher you want to see

 Altering Voucher Type :

If you want to alter voucher type created e.g changing name,changing type etc,you can do it
with Alter option.
Go to Gateway of Tally
Go to Accounts Info.
Go to Voucher Type
Go to Alter
Make changes as you wish.
Accept the screen to save your changes.

 Inventory Vouchers:
There are by default 8 inventory vouchers are automatically created in Tally software. You can
create, delete or modify other vouchers as per your requirement. You can create, display, alter or
delete any voucher as per requirement in tally from Got (Gateway of Tally) -> Accounts Info /
Inventory Info -> Voucher Types
How to maintain bill wise detail for receivable and payable in Tally or Tally.ERP9 ?
Step 1. Press F11 (Company Features)- > F1 (Accounting Feature) -> Maintain Bill Wise
Details YES.
Step 2. Now Create a Party (Ledger A/c) under the group Sundry Debtors as well as one under
group Sundry Creditors, and also activate Maintain balances bill by bill for all the Parties
while you are in Ledger creation mode.
Step 3. Make a Voucher Entry from Gateway of Tally -> Select Sales or Purchase Voucher.
Now, while entering the transaction, the user can specify a Ref. no with due date for the amount

or break it up by giving multiple ref no with different due dates. There are four types of reference
given below:
Types of Reference
New Reference:
It is used when you make any purchases or sales entry.
Against Reference:
It is used when you have to pay or receive amount against credit bill.
Advance Reference:
Use this option when you paid or received amount as an advance from or to party. In other
words, It is used in case of advance receipt or payment entry.
On Account:
It is used when you dont have any idea of any bill wise detail.
Step 4. To view the reports follow the procedure given below:
Select Display (in Gateway of Tally menu) -> Select Statement of Accounts -> Select
Outstanding -> Select Receivables (in case you want to see amount due to the company) ->
Select any particular group. The report displays bill by bill outstanding for all parties along with
the pending amount as well as the due date.
In case user wants to see the amount payable by the company then select the option Payable
under the menu Outstanding. The user, once he has selected either Payable or Receivables can
toggle between the two reports by clicking F4 function key.
Step 5. For individual Party wise outstanding Report:
Select Display (in Gateway of Tally menu) -> Select Statement of Accounts -> ->Select
Ledger option under Outstanding. This report gives a bill-by-bill display of all outstanding for
the concerned party along with the total outstanding amount.
For a display of total outstanding for all parties -> select Group in the menu Outstanding and
then select any particular group or sub-group.
Step 6. Tally gives Age wise Analysis Reports and hence keeps the user informed for the range
of period the bills have been outstanding. The user has the luxury of defining the Ageing periods
as per his needs. e.g. 0 to 30 days, 30 to 45 days, 45 to 60 and so on. The procedure for
displaying the report is given below. The aging analysis gives flexibility to do ageing by due date
or bill date.
Select Display (in Gateway of Tally menu) -> Select Statement of Accounts -> -> Select
Outstanding under Display menu -> select Receivables or Payable press F5 (age wise) ->
select method of ageing -> specify the periods.
Active bill wise detail
The options to activate Bill-wise details and their use is given below:
To activate Bill-wise details:
o Go to Gateway of Tally > F11: Features > Accounting Features
o Set Maintain Bill-wise Details to Yes
To use Bill-wise details in voucher entry:
o Go to Gateway of Tally > Accounts Info > Ledgers > Create/Alter
o Create a party ledger and set the option Maintain balances bill by bill to Yes
o Specify the Default credit period for the customer (optional)
o Open Sales / Purchase / Debit Note / Credit Note voucher screen

o Press F12 and set the option Use defaults for Bill Allocation to No
After enabling these options when the party for which the billwise details is enabled is used
in the above mentioned vouchers then Billwise details window will pop up during entry.
If the Bill-wise details is required for non Trading A/cs then the same has to be enabled in
7
Credit limits
credit Limit means the monetary limit which is set on any party account for selling or buying and
goods for trading. Credit Limit is set either on any sundry debtor or creditor ledger account
during the financial year. If you set credit limit for any party account and your bill amount is
exceed of Credit Limit then you will be not able to store that kind of voucher and you will get a
notification message window on your Tally ERP9 screen.
How to Set Credit Limit in Tally ERP9
You can easily set Credit Limit for any ledger accounts which exists in the Sundry Debtors or
Creditor group at any time in Tally.ERP9. Mostly Credit Limit is set specially for Debtors ledger
accounts. It is very useful feature in Tally.ERP9 because you will get notification message during
the entering sales voucher entry for those Debtors who wants to take goods on credit most of the
time and amount is much higher. If you set Credit Limit then you will be alert for those parties.
Now, lets have a look how to set Credit Limit in Tally.ERP9 software.
Step 1: Active the company in which you want to Turn on Credit Limit feature in Tally ERP9.
Step 2: Press F11 function key and then either click on the Accounting Features option or you
can also press F1 to open Accounting Features window in Tally ERP9.

Step 3: In Accounting Features window turn on Set Maintain Budgets and Controls option to
Yes and save it by pressing enter key or for quick save press Ctrl + A shortcut key
combination.
Step 4: Create one or more ledger account or Alter any existing ledger account from GOT >
Accounts Info > Ledgers > Create / Alter which exist under Sundry Debtors or Sundry Creditor
group in which you want to set Credit Limit in Tally ERP9 or, you can also set Credit Limit
from GOT > Accounts Info > Ledgers > Credit Limits option which exist in the Multiple Ledgers
category. After setting the Credit Limit on one or more ledger accounts press enter to save.

Step 5: Now, make entry in the Purchase or Sales vouchers in Tally ERP9, if your bill amount is
exceed the credit limit then Tally ERP9 shown an error message that amount is exceeding the
credit limit on your computer screen. You will not able to save the voucher which credit limit is
exceed so, either you have to modify or credit limit amount of ledger account or you can also
modify the invoice value.
Exceeding credit limits
During invoice or order entry, if the credit amount limit is exceeded, at the accepting the
voucher, Tally.ERP 9 prompts an error message displaying the amount exceeding the credit limit
specified. You can however,
1. Enter a lower value (within the prescribed credit limit) to complete the entry ; or
2. Abandon the current entry and obtain authorization to increase the credit amount limit
in the Multi Ledger Limit Alteration screen.
This feature helps in restricting Invoicing for the customers or parties exceeding the prescribed
credit limits and thereby facilitating better and effective control of the outstandings.

 Cheque Printing in Tally

Organisations choose banks to maintain the current/overdraft/savings accounts based on their
business needs and the facilities offered by each bank. Each bank maintains a unique design of
cheque for India (as prescribed by the NPCI - National Payment Corporation of India) and for
other countries. These formats have to be taken into consideration in the process of cheque
printing configuration wherein the dimensions in "mm" are provided. Based on the same, the
cheque can be printed. For the benefit of business entities and users, Tally.ERP 9 has provided
the convenience of preconfiguring the dimensions for ease in configuring and printing of
cheques. The Cheques can be printed at the time of making payments to vendors during Voucher
Entry i.e., directly from the Payment Vouchers or from cheque printing reports. Enabling Cheque
Printing To configure and print the cheques, Go to Gateway of Tally > F11: Accounting
Features. Set Enable Cheque Printing to Yes. Note: When a new company is created in
Tally.ERP 9, the option Enable Cheque Printing is set to Yes, by default. Tally Solutions Pvt.
Ltd. Document Title Page 2 Using this feature, cheque printing is configured under Banking
configuration which appears in the ledgers grouped under Bank Accounts and Bank OD
Accounts. The same has been mentioned as note below the Enable Cheque Printing feature. The
cheque printing configurations can be set in Bank Ledger Creation or Alteration screen.
Cheque Management
Cheque Register helps users to manage their cheque books for various banks, give information
about Cheques which do not belong to any cheque range available and also the status of all the
cheques. This report gives the values of the total number of cheques for each bank (Cheque Book
wise), that are Available, Unreconciled, Reconciled, Blank and Cancelled.
The advantages of the Cheque Register:

User will know how many cheques are available for use.
Used cheques are classified as Unreconciled and Reconciled.
Unreconciled cheques can be reconciled from the Cheque Register itself.
Cheque Register has an option to Search for Cheque Numbers.
Report can be viewed either Bank-wise or Cheque Range wise or drill-down to Cheque
numbers.
Users are allowed to change the status of cheques (Available) to Cancelled or Blank and
make cancelled chequesavailable.
Report can be viewed period-wise, hence makes it easier to filter the cheques that are
issued on particular date or during a particular period.
Deposit Slip
The Deposit Slip option in the Banking menu allows the user to generate the deposit slip
for payments receivedthrough cheque/dd which need to be deposited into the bank.
o Accessing Deposit Slip
To access Deposit Slip screen,
Go to Gateway of Tally > Banking > Deposit Slip.
The Select Bank screen displaying the List of Bank appears as shown

Select the required Bank account and press Enter.

The Deposit Slip screen of the selected Bank is displayed as shown:

Select the required row from the Deposit Slip list and press Enter to open the voucher in
alteration mode.
F2: Period: Allows to change the period.
F4: Bank: Allows to select other required Bank from the list
F7: Edit Ch Details: Allows to edit/update the Received From Name and Instrument No as
shown

Accept the screen to save the settings

F12: Range: Allows to filter the Deposit Slip screen. The user may filter the cheque details
based on the Amount, Bank Date, Date, Party Ledger, etc as shown:

 Payment advice
The Payment Advice option in the Banking menu allows the user to generate the payment advice
to be sent to suppliers/other parties along with the cheques/other instruments.

Accessing Payment Advice

Printing Payment Advice

Accessing Payment Advice

To access Payment Advice screen,

Go to Gateway of Tally > Banking > Payment Advice.

The ledger selection screen displaying the List of Ledgers appears as shown:

Select the required Ledger and press Enter.

Note: If All items is selected, the payment advice for all transactions will
be displayed

The Payment Advice screen displays the payment list of the selected ledger as shown:

Select the required row and press Enter to open the voucher in Alteration mode.

Confirm each payment advice before Print/e-Mail: If user selects multiple transactions for
mailing/printing belonging to different Parties, then the confirmation screen will be displayed
one by one for each party's payment advice. If this option is set to No then Confirmation screen
display once.
Note: The option will come when user selects "All Items' and not
when individual ledger is selected

Start Fresh page for Print/e-Mail : When this option is set to Yes, if user selects multiple
transactions for mailing/printing belonging to same Party, then print/mail for one transaction
will happen per page at a time (without combining all into one page)
To print the Payment Advice when a single ledger is selected,
Go to Gateway of Tally > Banking > Payment Advice.

Select the required Ledger account from List of Ledgers.

The Payment Advice screen is displayed with list of payment vouchers.

To print each transaction or payment advice in separate page,

o

Set Yes to Start fresh page for each transaction for Print/e-Mail as shown
below:

Accept the screen

Printing Payment Advice
To print the payment advice of all the payments,

Click Print or Press Alt+P.

To print the payment advice for the selected payments:

Press Spacebar to select the required payment row(s)

Click Print or Press Alt+P.

The Print Report screen appears as shown below:

Click No or Press N or Esc key to set the other options as follows:

o

Payment Advice Date: By default, the current date is displayed. Provide the
required date

Include Bill Details: By default, this options is set to No. Set it to Yes to include
the bill details in the payment advice

Show Transferred to: By default, this options is set to No. Set it to Yes to show
the transferred information like A/c No, IFS code, Bank Name which is
applicable for Inter & Same Bank Transfer

Print Due Date: By default, this option is set to No. Set it to Yes to print the due
date in the payment advice

Print Companys PAN/IT Number: By default, this option is set to No.

Set Yes to print the PAN/IT No of the company

Button options in the Payment Advice report

F2: Period
Press F2 key or click F2: Period button to change the period.
F4: Ledger
Press F4 key or click F4: Ledger button to select other required Ledger from the list.
P: Mark as Printed
Press P: Mark as Printed or click Ctrl + P to mark the transaction as printed. When data is
migrated from a lower release to release 4.8, many of the transactions for which payment advice
have already been printed will appear as not printed in release 4.8. This option can be used to
mark those transactions as printed.
F12: Configure
To configure the Payment Advice for printing,

Click F12: Configure button or press F12 key from the Print Report of the Payment
Advice screen

The Payment Advice Print Configuration screen appears as shown:

Note: The Payment Advice Printing Configuration screen allows the user to
enable/disable Printing Company Logo. The Location of Logo set in F11:
Accounting Features will be the pre-filled in this screen which can be
altered as per requirement.

Set the required options and press Ctrl+A to save the settings

The Print Report screen appears.

Press Ctrl+A or click Accept to Print

The print previews of the selected Payment Advices will be displayed as one payment advice per
page as shown below:

Interest Calculation in Tally.ERP 9 Meaning

1
Tally.ERP 9 allows you to obtain reports on interest calculated by Tally.ERP 9 based on
the instructions you furnish. Interest figures are typically desired in the following situations:
On outstanding balance amounts
2. On outstanding bills/invoices/transactions (Receivable and payable)
Tally.ERP 9 gives you an tremendous capability to obtain interest implications on both
Interest Calculation in Simple Mode
To calculate Interest in the Simple Mode:
1. Go to Gateway of Tally> F11: Features> Accounting Features > Set Activate Interest
Calculation to Yes. > Set Use Advanced Parameters to No.
2. In the Ledger Creation screen set Activate Interest Calculation to Yes.
3. The Interest Parameters sub screen is displayed. Enter the Rate and select the interest style
from the list
Interest Calculation in Advanced Mode
The advanced parameters are particularly useful where interest rates change from time to time.

Go to Gateway of Tally> F11: Features > Accounting Features > Set Activate Interest
Calculation to Yes. > Set Use Advanced Parameters to Yes.

The Interest Parameters sub-screen is displayed

Interest Calculation on Group
Interest Calculation reports are automatically produced if the feature is activated In F11: F1:
Accounting Features and the parameters are set for individual ledger accounts.
Interest Calculation on Ledger Balances
You can get a report on the Ledger balances for the interest calculated.
Go to Gateway of Tally> Display> Statements of Accounts> Interest Calculations> Ledger
Select Account E.g. Bank Loan Account.
Statement of Interest Due on Invoice
You can calculate interest on each invoice for the period it is outstanding, wholly or partly.
Transaction by transaction or bill-by-bill interest calculation is permitted for 'Party' accounts like
accounts falling under the groups Sundry Debtors and Sundry Creditors. Bill-wise details should
be active for the company and the party
Interest Calculation based on Bank Date / Voucher Date

The interest calculation feature is enhanced with the facility to calculate interest on ledger
balance as per Bank balance provided in Bank Reconciliation Statement using simple and
advanced parameters based on bank/reconciliation date. However, to allow users to predefine
auto-calculation of interest based on voucher date, the Date Type - Voucher Date is also made
available along with Bank/Reconciliation Date in the bank ledger master.

10 Cost Category & Cost Center

Meaning Cost Center in Tally.ERP 9
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 Centres. When profits are also allocated to these units, they become Profit Centres. You
can now obtain a Profit and Lossaccount of each such Profit Centre.
Cost Centre in Tally.ERP 9 allows an additional dimension to a transaction where a Ledger
account indicates the nature of the transaction. It does not readily disclose, except in the
narration field, which part of the organisation was involved in the transaction.
With the help of Cost Centres, a transaction can be allocated to it, which would then
enable accumulation of the all transactions for that particular Cost Centre. Tally.ERP 9 gives you
the Cost Centre break-up of each transaction as well as details of transactions for
each Cost Centre.
Some examples of Cost Centres are

Departments of an organisation - Finance, Manufacturing, Marketing, and so on.

Products of a company.

Individuals such as Salesman A, Salesman B.

o Creating Cost Centers under Cost Categories in Multiple Mode in Tally.ERP 9
To create a Cost Centre under a Cost Category, set More than ONE
Payroll/Cost Category to Yes in F11: Accounting Features
Go to Gateway of Tally > Accounts Info. > Cost Centre > Create (under Single Cost Centres)

Category
This field appears
only
when
you
have
opted
Payroll/Cost Category in F11: Features. Else, Tally.ERP
a Primary Cost Category to which all cost centres are assigned.

for More
than
9 automatically

ONE
creates

All the other fields are described in detail in the section Creating Cost Centres in Single mode
Displaying and Altering Cost Centres under Cost Categories in Single mode is similar to
Displaying and Altering CostCentres in Single mode explained previously. The only
additional field is Category.
Cost centres report
Cost Centre Reports For faster identification and detailed analysis of how costs are allocated to
your business units, Tally.ERP 9 provides reports to show complete details of all the cost centres
and their related transactions in different ways. These reports are: 1. Category Summary 2. Cost
Centre Break-up 3. Ledger Break-up 4. Group Break-up For example, the Cost Category
Summary report is shown below: To view these cost centre reports: Go to Gateway of Tally >
Display > Statements of Accounts > Cost Centres Hence, no matter how many business units you
have to handle and optimize your profit, the cost centre and cost category in Tally.ERP 9 can help
you make faster decision for your business

11

Multi-Currency in Tally.ERP 9

Many Organizations have transactions in more than one currency. Such transactions have
to be recorded either in the base (home) currency or in the foreign currency. If the transactions
are recorded in home currency, the rate at which the foreign currency is exchanged should be
recorded as well. At times you need to record the transaction in the foreign currency itself when
you maintain the balance of the concerned account in foreign currency.
Tally.ERP 9 uses the term base currency for the currency in which your account books are kept.
Foreign Exchange is used interchangeably with foreign currency. The base currency is specified
while creating the company.
Tally.ERP 9 makes it easy to manage multiple currencies, automatic calculations of exchange
rates, automatic conversion of any currency used to record a transaction to the currency of the
account, etc.

The Balance Sheet and Profit & Loss Account of the company is maintained in the base
currency. Conversion of foreign currency account balances is done as per rules set by you.

Go to Company Info. > Create Company

Note: At time of installing Tally.ERP 9, if the Country Selection is opted as India/Saarc, the
Currency Symbol is defaulted as Rs. in the Company master otherwise if the Country Selection
is opted as International (Others), the Currency Symbol is defaulted as in the Company master.
More:
2-A : Enabling Multi-Currency
2-B : Creating a Currency
2-C : Altering a Currency
2-D : Defining Rates of Exchange
2-A : Enabling Multi-Currency
Enable Multi-Currency feature to view and enter transactions in multiple currencies.

Go to Gateway of Tally

Select F11: Accounting Features

Set Allow Multi-Currency to Yes

Accept to Save.

 Multi Currency feature is now enabled.

Currencies menu
Once the Multi-Currency feature is enabled in F11: Accounting Features, you can view the
Currencies menu from Gateway of Tally > Accounts Info > Currencies.

Creating a Currency
To create a foreign currency
1.

Go to Gateway of Tally > Accounts Info. > Currencies > Create

2.
Enter the currency symbol in Symbol field. This symbol appears in your reports, wherever
applicable.
Use ASCII Special Characters with [Alt] key combination, if your keyboard does not have the
symbol. Utilities like Character Map (Start > All Programs > Accessories > System Tools) in
Windows, shows the key combination for most symbols. This might be different on some
notebook computers, refer to the computer's user manual or the vendor.
You cannot assign a duplicate currency symbol for a company in Tally.ERP 9.
The Key combinations for a few currency symbols are given below:

Alt + 156 Pound Sterling -

Alt + 0165 Japanese Yen -

Alt + 0128 Euro -

Use the Dollar and the Rs. Symbol from the keyboard
Enter the name of the currency in Formal Name. e.g., US Dollars, Pound Sterling, Indian
Rupees, Omani Rial and so on.
A formal name is required to distinguish different currencies with the same symbols. For e.g.
Assume you have created two companies (ABC & XYZ) in Tally.ERP 9. ABC andXYZ have
different set of currencies. ABC uses symbol $ for Australian Dollars and XYZ uses the symbol
$ for U.S. Dollars. The formal name distinguishes two different currencies with the same
symbol, when you compare Books of Accounts of the two companies.
The company that is loaded first retains the original symbol for display purposes. The other
company's currency symbol will be prefixed with the first letter/first few letters (to make it
unique) of the formal name. Here, if ABC is loaded first then the symbol $ is for Australian
Dollars and in XYZ (loaded next) the symbol $ is prefixed with the letter U (first letter of its
formal name).
Note: You cannot assign a duplicate Formal Name for a currency in Tally.ERP 9.

Enter the number of decimal places for the currency in Number of Decimal Places. E.g.
Currencies with 2 decimal places like paisa and currencies with three decimal places like dinar.
There are currencies that do not have decimal places, e.g., Vietnamese Dong.
Tally.ERP 9 has two formats for displaying an amount, viz., in millions and in lakhs. 1000000
(one followed by six zeroes) in millions format would appear as 1,000,000 and lakhs would
appear as 10,00,000.
Select the required parameter in Show Amounts in Millions field. If you select No, the amounts
will appear in Lakhs, by default.
Note: You can always specify the appearance of numbers in specific reports, e.g. In Profit &
Loss Account display, press F12: Configure to change scale factors for values.
6.
Set Is Symbol SUFFIXED to Amounts to Yes for the symbol to appear after the
amount. Set it to No, for the symbol to be prefixed to the amount.
7.
Set Put a SPACE between Amounts and symbol? to Yes to apply a space between
amounts and symbol.
8.
Enter the Symbol for Decimal portion of currency in Symbol for Decimal Portion of
Amount field. Eg., Ps. for Paise.
9.
Enter the number of decimal places for printing the amounts in words in Decimal
Places for Printing Amounts in Words field. This number should be equal to or lesser than the
number specified in Number of Decimal Places field.
Note: The Currency cannot be translated or transliterated but will appear in the Language
created.
Buttons available in the Currency creation/alteration screen:

Buttons

Keys

Description and usage

G: Groups

Ctrl+G

User is allowed to create Accounting

the Currency Creation/Alteration screen.

Group from

L: Ledgers

Ctrl+L

User is allowed to create Accounting

the Currency Creation/Alteration screen.

S: Cst Cat

Ctrl+S

User is allowed to create Cost Category from the Currency

Creation/Alteration screen.

Ledgers from

C: Cst Ctr

Ctrl+C

User is allowed to create Cost Centre from the Currency

Creation/Alteration screen.

B: Budget

Ctrl+B

User is allowed to create Budget from the Currency

Creation/Alteration Screen.

V: Vch Types

Ctrl+V

User is allowed to create Voucher Type from the currency

creation/alteration screen

12

Reports in Tally.ERP9

Did you know you can see Shoper reports in Tally? This exciting feature allows you to customise
Shoper 9 reports using the hugely popular TDL (Tally Developer Language). Now, get the same
look and feel of the reports that you see in Tally.ERP 9 (or your current version).
Bring your retail business the advantage of Tally Reports that already address most business
requirements. If you want specific reports, they can be easily developed without huge delay or
cost.
In addition, you have the whole Tally eco-system that can help you customise these reports... all
you need to do to reach them is just search for the nearest Tally Partner in your area on our
website.
Features:
Drill down to detail level
Email the report while you are viewing it
Export to Excel/XML
Print to any printer
Configure reports on-the-fly
Save report configuration
Benefits:
Access expertise of Tally eco-system
User-friendly UI

 Customise to your business' needs

Faster and easier customization

Types of financial statement

Four Types of Financial Statements

The four main types of financial statements are:

Statement of Financial Position

Statement of Financial Position, also known as the Balance Sheet, presents the financial position
of an entity at a given date. It is comprised of the following three elements:

etc)

Assets: Something a business owns or controls (e.g. cash, inventory, plant and machinery,

Liabilities: Something a business owes to someone (e.g. creditors, bank loans, etc)

Equity: What the business owes to its owners. This represents the amount of capital that
remains in the business after its assets are used to pay off its outstanding liabilities. Equity
therefore represents the difference between the assets and liabilities.
View detailed explanation and Example of Statement of Financial Position
Income Statement

Income Statement, also known as the Profit and Loss Statement, reports the company's financial
performance in terms of net profit or loss over a specified period. Income Statement is composed
of the following two elements:


etc)

Income: What the business has earned over a period (e.g. sales revenue, dividend income,

Expense: The cost incurred by the business over a period (e.g. salaries and wages,
depreciation, rental charges, etc)
Net profit or loss is arrived by deducting expenses from income.

View detailed explanation and Example of Income Statement

Cash Flow Statement

Cash Flow Statement, presents the movement in cash and bank balances over a period. The
movement in cash flows is classified into the following segments:

Operating Activities: Represents the cash flow from primary activities of a business.

Investing Activities: Represents cash flow from the purchase and sale of assets other than
inventories (e.g. purchase of a factory plant)

Financing Activities: Represents cash flow generated or spent on raising and repaying
share capital and debt together with the payments of interest and dividends.
View detailed explanation and Example of Cash Flow Statement

Statement of Changes in Equity

Statement of Changes in Equity, also known as the Statement of Retained Earnings, details the
movement in owners' equity over a period. The movement in owners' equity is derived from the
following components:

Net Profit or loss during the period as reported in the income statement

Share capital issued or repaid during the period

Dividend payments

Gains or losses recognized directly in equity (e.g. revaluation surpluses)

Effects of a change in accounting policy or correction of accounting error

Books and Register @ Tally.ERP9

Statements of Accounts in Tally.ERP 9

Statements of Accounts are derived from the transactions recorded in the books of accounts. In
Tally.ERP 9, they are generated for cost centres and outstanding accounts

Outstandings
The Outstanding Statement in Tally.ERP 9 displays the status of receivables and payables of
the business concern. These are the two important components of the working capital of every
business entity. Receivables form a major component of current assets whereas payables form a
component of current liabilities. Both determine the short-term liquidity and financial health of
the company considerably. Therefore, effective control of the receivable and payable is a must
for the financial soundness of a business concern.
The Outstanding Statement Display in Tally.ERP 9 can be any one of the following.
Receivables
This statement displays the sundry debtor's bill-wise balance till date. It is to be noted here that
since this statement displays the information bill by bill, the same needs to be activated while
recording the transactions in Tally.ERP 9. This statement provides the following information:

The effective date of the invoice.

The reference number given in the invoice while providing the bill-wise details.

The party name and the outstanding balance of a particular invoice.

Payable
Payable outstanding displays the outstanding bill-wise balance of the sundry creditors. Again,
this information can be viewed only on activating and entering the bill-wise details while
recording the transactions. The information provided is similar to the receivables outstanding.
The uses of a payable outstanding statement are as follows:

The pending party-wise bills and the number of days by which they are over-due can
be viewed.

The interest liability that is likely to arise can be estimated with the help of the
number of days over-due.

The credit period allowed by the party can be analysed and the need for arranging
short-term funds can be evaluated.

Ledger
This summarises and displays the outstanding balance information with respect to each party.
Thus, the bill status of a particular party account can be viewed with the help of this statement.
Some of the uses of a ledger outstanding statement are:

It displays information similar to the receivable and payable outstanding statements,

but with respect to a particular party ledger. Thus, this statement can be put to a
similar use as stated above.

It facilitates the viewing of the address and contact details of the party selected, by
using the Alt + C button.

It can be used to generate reminder letters to be sent to the party specifying the
details of outstanding bills. It is one of the very useful features in Tally.ERP 9 used
with the Print Option.

Group
It displays a summarised view of the balances of all the ledgers under a particular group. For
example, Sundry Debtors Group will display all the party ledgers with their account balances. It
can further be drilled down to each account to show the bill-wise outstanding for that account.
Some of the uses of a group outstanding statement are as follows:

Schedule
Contact Details
Invoice
Financial Statements
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Asset
Balance
Bill
Schedule
Contact Details

Summarised information can be viewed and analysed for each group.

Another group can be displayed in a column using the Alt+C: New Column button
on the screen and comparisons can be made.

Group details can be printed and submitted as a supporting schedule to

the financial statements.