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Saturday, April 24, 2010

Ledger Accounts Creation lesson

Ledger Accounts Creation



Once you have created all the Accounts Groups, you are now ready to make entry for Ledger Accounts. To do, first arrange the Ledger Accounts and note down which ledger account is to be placed under which Group. Previous year’s Final Accounts may also be of help. There are two Reserved Ledger Accounts, Cash and Profit & Loss a/c. that are created by Tally 9 when you create a Company which you can not delete nor you can move them under any other Group.

Single Ledger Creation
Ledger Creation
Name: Type the new Ledger’s name here. Duplicate in name is not permitted.

Alias: Alternate names for you ledgers. This is optional.

Under: Select the Group under which this Ledger Account falls. You will get a pop-up window from which you can select the appropriate Group. To create a new Group press ALT+C which will bring Group Creation Screen. When you have created the Group, cursor will return to this place accepting newly created Group as default.

Opening Balance: Enter the opening Balance as on the date of Books Beginning From. Normally the Opening Balance of Revenue Accounts will be Zero unless you start from middle of the Financial Year. If your books begin at mid-year i.e., dates fro Financial year from and Books beginning from are different, enter closing balance of previous date as opening balance here for all capital and Revenue accounts.

Cr/Dr: If opening Balance figure is not zero, specify whether the amount is Debit or Credit.

Mailing & Related Details

If you have set Yes o ‘Allow Addresses for Ledger Accounts’ under F12: Configure, you can enter Mailing & related details for Ledger accounts under Sundry Debtors, Sundry Creditors, Branch/Divisions, Loan, Loan & Advances groups.

If you have set Yes at the ‘Use Contact Details for Ledger Accounts’ Under F12: configure, you get additional prompts to input Contact Person, Telephone, Fax Numbers etc.

Advanced information

If you have set Yes to Allow Advanced Entries in masters under F12: Configure, you get a screen with options configured by you.

Maintain balances bill-by-bill?

If you have set Yes in F11: Features to Maintain bill-wise details, then this option appears

  • While creating any ledger placed under Sundry Debtors or Creditors Group, you may specify yes to keep bill-wise details for the ledger
  • Similarly, you can specify Yes to other ledger accounts also, if you had specified Yes to For Non –Trading A/c also in Accounting Features under F11: Features

Specify No, when you do not need to maintain bill-wise details of outstanding balance but like to get ledger balances only. The input becomes simpler and you do not have to enter the bill-wise details of the Opening Balance as described below.

If you have specified Opening Balance and have opted for bill-wise details, then you may specify bill-wise details of Opening Balance in the popup box where in first field you enter date of Bill, next enter Bill Reference, Credit Days/Due Date in next field, amount of Bill outstanding and Debit or Credit in the last field. You may however, leave the full or part of the opening balance amount as On Account.

Cost Centres Applicable?

You get this option if you had set yes to Maintain Cost Centres in the Accounting Features under F11: Features. You may selectively specify Yes (or No) to the respective ledgers where you want to allocate the amount to Cost Centres/Cost Categories.

Inventory Values are Affected?

Specify Yes to ledgers like Sales / Purchase which affect Inventory. If any duty of Direct Expenses affects your inventory, you may set to Yes for such ledgers.

Percentage of Calculation

If you have set Allow Invoicing in the Accounting Features under F11: Features and if the Ledger is placed under Duties & Taxes Group or any other Group for which you responded to yes to the Query Used fro Calculation? Then you may specify the rate of Tax (%). On specifying rate, you have to select the Method of Calculation from the list of Types of Duties.

  • Additional Duty
  • On Total Sales
  • Surcharge on Tax
  • Tax based on Item Rate

Additional Duty

Under F11: Features, if you disable Excise Rules, Additional Duty and Surcharge on Tax functions similarly. If enabled, Additional Duty is added to the Tax based on Item Rate in the Invoice to reflect the Total Duty Payable.

On Total Sales

As the term suggests, this type of Duty will be calculated on the Total value of individual items ignoring the rate of Duty specified for each item in Stock Item Master.

Note: If you have responded yes to the question Calculate Tax on Current sub-total? In the Invoice/orders settings under F12: Configure, then the calculation will be on current sub-total and if set to No, it will calculate on Total value of Inventory Only.

Surcharge on Tax

A surcharge is treated as a percentage of the duty levied and is computed on immediately preceding entry. The Tally software presumes that the preceding line in the Invoice is the Duty on which surcharge is to be computed. This is suitable for taxes or duties like of Additional Excise Duty that is computed on the Tax (or Duty) amount.

Tax Based on Item Rate

If rate of Tax or Duty is directly associated with items which again differs from item to item, this type of Duty will be most suitable.

While creating Stock items, you get a field to specify Rate of Duty, where you may specify rate of Duty applicable for the Item.

When you select this Type of Duty for the Ledger, while preparing Invoice the rate of duty specified in each item will be picked up and computed. If more than one rate of Duty is applicable in single Invoice amount for similar rate of duty will be clubbed.

During Invoice Entry, the Tally software will automatically compute the Tax/Duty at the specified rate as per specified method which can however be modified.

Activate Interest Calculation?

This prompt appears if you responded Yes to the question Activate Interest Calculations? At F11: Features for the Company. If your response is Yes to that question, you will get another question: Use Advanced Parameters? Giving Yes will activate Advanced Mode and No will restrict to Normal Mode.

Here is the complete tutorial on Tally 9 Interest Calculation

Effective Date for Reconciliation:

When you create any Ledger under Bank Accounts (or Bank OCC) Group, this prompt appears displaying books beginning date as default. Enter here the date from which you want to reconcile the Bank Accounts.

Specifying Closing Stock Value

In Case of creating new ledger Accounts under stock-in-hand, you can enter only Opening Balance. You should enter figures of closing stock through Alteration mode which allows you to specify date and closing balance for that date.

Note: Date wise closing Balance is available only in Ledger Alter menu only. Once you create the stock ledger. Go to alter select the ledger and give closing stock values.

If you maintain non-integrated accounts, Balance Sheet as on this date will reflect the closing balance that you specify here. However if you maintain integrated accounts, you can not enter closing stock value through this option.

Credit Limit

For Ledger created under Sundry Creditors, Sundry Debtors and Branch / Divisions you get additional option ‘Set credit Limit:’ you can specify the credit limit amount for such ledegers.

Default credit period (in days) will be asked for these ledgers if you have given yes to Maintain balances bill-by-bill?

Alter

In this option you can change the contents of any existing ledger.

Note: To enter opening balance in an of the built-in ledger Accounts (Cash A/c, Profit & Loss A/c) select the Ledger in Alter mode and type opening balance.

To Delete a Ledger, first select the ledger from the pop-up in Alter mode, then press ALT+D keys, a confirmation box will appear. To confirm, press Y, the item will be deleted. However, if any voucher has been placed under the ledger, it can not be deleted as long as any Voucher is associated with the ledger. If you still want to delete the Ledger, list the vouchers which are associated with the Ledger through and option in Display mode, alter the voucher or delete the voucher. When there is no voucher contain the ledger to be deleted, you will be permitted to delete the Ledger. This Deletion concept applies to all masters.

Group Creation in Tally

Account Groups



Account Groups provide you the ability to organize you Accounts. You can classify all ledger based on their functions. When you create a ledger, you have to put it in an appropriate Group depending on its nature of function. This classification is known as Grouping of Ledgers which determines whether the ledger goes into the Profit and Loss account o into the Balance Sheet. Grouping of ledger determines the type and amount of Information you can get.

Tally 9 provides a set of pre-defined Groups. You can use these Groups readily for classification of ledgers, without creating new Groups or you can create Groups under and of these Groups and place ledger under these Group or create new primary Group. You create multi-level Group one under another to any level.

Group Creation
Create New Group

Select Create under Single Group menu Groups menu, a screen appears to create a new Group with following fields as in picture.

Name: Type the name of the Group. You can not give duplicate name.
Alias: Give additional name(s) for the Group.When you select Group you can refer to it either by Name or by Alias. Alias is optional but Name is compulsory.

Under: When you reach this field a pop-up window will open and show all the existing Group heads. Select the parent group under which the Group being created should be placed. You may select any from the existing Group by pressing ALT+C which will bring Group Creation screen to create parent group of the group you are currently creating.

Creation of Primary Group

You can create a Primary Group if Allow Advanced Entries in Masters is set to Yes. While creating New Group, select Primary at Under, then select the nature of Group from the following 4 items

  • Assets
  • Expenses
  • Income
  • Liabilities

If you select Expenses or Income, you have to additionally specify whether this Group affects Gross Profit or not by appropriately responding Yes / No

For example, you may crate Groups like Depreciation, Interest on Loan, Selling Expenses etc. in primary Group. The advantage of Primary Group is that you can configure the Group nearer to your requirements than the default Reserved Groups provided by Tally 9.

Ledgers in Tally

Ledger Accounts



Tally 9 by default creates two Ledger Accounts when creating company:

  • Cash (under Cash-in-Hand Group)
  • Profit & Loss Account (Direct Primary Account)

Apart from these ledgers you have to create all other ledgers accounts and place them under proper Groups as explained under Accounts Groups.

Cost Centre and Cost Category

Cost Centre & Cost Categories provide us various means to allocate the amount of vouchers of selected ledger accounts, in our own way.

Cost Centres



While accounts ledger provides information about the nature of transaction, it does not identify the departments or divisions involved with it. Cost Centers gives additional dimension to the transaction. Cost center is any unit in an organization to which costs can be allocated. Cost Centers may be various Branches, Departments, Projects, Products, and Persons etc.

We can organize Cost Centers into numerous (Primary & Secondary) levels, in hierarchical structure without any limit.

For example, you have following Ledgers under Revenue Accounts:

  • Traveling Expenses
  • Telephone Expenses
  • Conveyance Expenses

And you have following departments

  • Sales
  • Production
  • Accounts

If you want ledger wise as well as department wise breakup of expense you can create cost centers for each department and while entering such vouchers, allocate to respective Cost Centers. Then you can generate statements,

  • Ledger account wise
  • Cost center wise
  • Cost center wise breakup of each ledger
  • Ledger Account wise breakup of each cost Center

Stock Group and Stock Items

Stock Groups: Like Accounts Ledger, Stock Items take part in all Inventory Transactions. For better organization of hundreds & thousands of Stock Items that may be stocked & traded in an organization, you may organize them in Stock Groups. The relationship between Stock Item and Stock Group is similar to that of Accounts Ledger and Accounts Groups.

Stock Categories

Normally, Stock Groups will be sufficient for most of the organizations for managing the Inventory Reports in an organized manner. However, some organizations may need an alternative way to find out Items of similar nature. To help them, Tally allows a parallel method to organize the Stock items in Stock Categories.

Stock Items

Stock Items are the actual items that are transacted and take part in any Inventory Voucher. Stock Items are placed under Stock Groups & Stock Categories.

Groups and Ledgers in Tally - PART 2

Groups and Ledgers in Tally - PART II



Explanation of Groups

Capital Account: Capital Accounts may be directly placed under Capital Group or a sub-group may be created for them. Common example of Ledger Accounts under Capital Account group is Share Capital, Partners’ Capital Accounts, and Proprietors Capital Account. Separate Ledgers may be opened for Equity Capital, Preference Capital A/c etc.

Reserves & Surplus (Retained Earnings): The Group Reserves & Surplus is a sub-group to Capital Account. All Reserve accounts (recognized as Retained Earnings) are placed under this group. Common examples are: General Reserve, Capital Reserve, Investment Allowance Reserve, Share Premium Account etc.

Loans (Liabilities): All loans taken should be placed under this group.
Reserved sub-groups under this Primary Group: Bank Overdraft & Cash Credit (Bank OD), Secured loans and unsecured loans.

Bank OD Accounts (Bank OCC A/c): Normally a business house has two types of bank accounts: Current account and Bank Loan Account (overdraft). While Current A/c should be placed under current Assets the Bank Overdraft and Cash/Credit Accounts availed under Hypothecation, Bill Discounting etc. which are operated on a day-to-day basis should be placed here. Although these are a type of secured loan (loan obtained by furnishing security), they must be placed under the group Bank OCC to allow transactions in payment, receipt and contra vouchers and reflect in Cash Flow statements etc. like normal Bank Accounts. Except that they appear under Loans (Liabilities) head, they are treated similar to normal Bank Accounts under Current Assets. Bank Book is printed for accounts placed under this Group and does not form part of Ledger.

Secured Loans: Term loans and other Medium/Long term Secured Loans, should be put under Secured Loans. Loans taken from Banks, Financial Institutes etc. upon furnishing security, against which normal day to day transaction is not permitted should be placed here. Debentures should also be placed under this sub-Group.

Unsecured Loans: This group normally constitutes a large number of Ledger Accounts and sub-groups. To standardize the management reporting, this primary group has further been subdivided into 3 reserved sub-groups namely,

  • Duties and Taxes
  • Provisions
  • Sundry Creditors

Duties and Taxes: This is for all Excises, Sales and other trade taxes. This head normally constitutes all the duties and taxes that you collect or pay through Sales & Purchase transactions and whose balance will appear in Balance Sheet. Examples: Local Sales Tax

We must distinguish between Duties & Taxes falling under this group and those under Revenue account. Accounts falling under Duties & Taxes Group constitute your Balance Sheet and they are not part of your Sales & Purchase value. For example, Sales Tax, Excise Duty if forming part of Sales or Purchase value should not be placed here. We cite and example to clarify it further:

You sold a computer at Rs. 20000 and charged VAT @ 10% amounting to Rs.2000 making the total of Bill for Rs. 22000. So the Bill,

1 Computer Rs.20000
Vat @ 10% Rs. 2000

Total: Rs.22000

Now you can account for the above entry in 2 ways:

If you credit Rs.20000 to your sales Account and Rs. 2000 to VAT then VAT ledger will be placed under Duties & Taxes Group

If you credit entire Bill Amount Rs.20000 to your sales account, then VAT becomes your expense and the ledger should not be placed under Duties & Taxes Group, instead be placed under Direct Expenses.

Provisions: It is a place for all provisions. Common examples are Provision for Income Tax, Provision for Bad Debts. Place similar Provisions as applicable in your case.

Sundry Creditors: All Trade creditors of the company. i.e. all the parties accounts, with whom transactions are entered through Purchase Vouchers

Fixed Assets: This constitutes all the Fixed assets, Immovable Properties, Patents, Trade Rights etc. Create separate sub-group for Work-in-progress for Capital Projects etc., under this group.

Fixed Assets may have several sub-groups for each type of assets if you wish to have separate Ledger Accounts for Individual asset.

Investment: Place here accounts related to Investments in shares, bonds, Govt. Securities and investment in other companies. Create sub-groups under this primary group, if necessary.

Current Assets: It constitutes of 6 sub-groups as under

  • Stock-in-hand
  • Deposits (Assets)
  • Loans & Advances (Assets)
  • Cash-in-hand
  • Bank Accounts
  • Sundry Debtors

You should place individual ledger accounts under the appropriate sub-groups and try to avoid placing any ledger directly under main Current Assets Group.

Stock-in-hand: It’s a special group and needs careful study & understanding as it is differently treated than normal ledger accounts.

Normally, you should create sub-groups or ledger accounts for Raw Materials, Work-in-process and Finished Goods as required.

Accounts falling under Stock-in-hand group are not permitted any transaction. So you cannot include them in any kind of voucher. In case of non-integrated Accounts, you may enter the value of stock for any date. This figure constitutes the pseudo transaction for closing stock entry and is reflected in the respective reports. Since no transaction through voucher can be passed, these are the only accounts for which the Closing Balance can be entered from Ledger Accounts or by from Balance Sheet or Profit & Loss A/c. For Integrated Accounts & Inventory, these figures are carried from the Inventory Value.

The opening Balance of these accounts give the opening stock of the company, while the closing Balance gives the closing Stock. The Closing Balance under these accounts appears only in the P/L Statement and Balance Sheet.

Deposits (Assets): Place all the deposits (assets) like Fixed Deposits, Security Deposits, Deposits in other companies, Rental Deposits etc.

Loans and Advances (Assets): Place all advances of non-trading nature. Example of advances which should be placed under this group are: Advances against salaries, Loans to Employees etc. Even Advance for work-contracts or supply of fixed assets may be placed here. Loans given by the company should also be placed and you may create separate sub-group for loans, if needed.

Sundry Debtors: Placing all the parties’ accounts who are normally your customers. For recording transactions, the system does not make any distinction between sundry Debtors or Creditors. They are interchangeable at any time allowing you to make purchase and sales transactions through same account. If you are selling and make purchase from same party, you need not open two separate accounts; you can place the Ledger either under Sundry Debtors or Sundry Creditors Group.

Cash-in-Hand: A Cash Ledger account is created by the Tally software by default and placed under this group when you create a company. You can open any number of additional cash accounts or place sub-groups under this.

Bank Accounts: All the Bank Accounts like Current Accounts, Savings Accounts and other Bank Accounts should be placed here (except overdraft account)

Branch / Divisions: This Group may be used for convenience by multi-branch companies for Inter branch reconciliation and consolidation. Create ledgers for all companies which may be Branches, Divisions, Affiliates, Sister concerns, subsidiaries etc. Tally 9 will permit Sales / Purchase transactions with these accounts.

Misc. Expenses (Asset): Preliminary, Pre-operative and similar expenses that have been capitalized should fall under this group. Though the accumulated loss of a company should also fall in this category, Tally 9 treats it as negative profit and carries to Profit & Loss A/c.

Suspense Account: This is a primary Group that appears in Balance Sheet. If you create any Suspense Ledger to record monies paid or received temporarily or who’s nature of transaction if not yet know. For example Advance paid for Traveling Expenses etc. details fro which will be known upon submission of TA bills may be recorded in such ledger. As far as practicable, try to avoid this account and do not be tempted to record anything as it may upset your accounts.

Sales: This is a primary Group, all sorts of Sales should constitute this group. The examples for ledger accounts are

  • Product lines
  • Geographical area
  • Nature
  • Sales tax nature

The classification depends on the type of information you emphasis upon for your day to day work.

Purchase: Similarly, all sorts of trade Purchases should constitute this Group. You may have multiple purchases Account for Purchases according to:


Product line
Nature (Cash, credit card, credit)
Sales Tax (@ 4%, @ 10% etc)

Direct Income (Income Direct): This primary Group is the place to hold all such Ledger Accounts for Income which will be considered for computation of Gross Profit.

Indirect Income (Income Indirect): Normally, all non-major revenues like receipts on account of Rent, Interest, Commission, Dividend etc should be placed here. These are not considered for computation of Gross Profit but are considered for computation of Net Profit only.

Direct Expenses (Expenses Direct): This primary group holds all Ledger accounts of Direct Expenses. In case of Traders, normally Carriage Inwards should be placed under this group. All expenses which are considered for computing Gross Profit/Loss are to be placed here.

Indirect Expenses (Expenses Indirect): All expenses considered for computation of Net Profit/Loss only should be placed here. For example: Depreciation Account.

Ledgers and Groups in Tally - Part 1

Ledgers and Groups in Tally - Part I



In manual accounting, accounts (ledgers) are grouped upon preparation of Trial Balance to prepare Final Accounts, namely Profit & Loss Accounts and Balance Sheet, so you don’t get Final Accounts until Trial Balance is prepared. In Tally 9, at the time of creation of Ledger Accounts, you place it under appropriate Account Groups provide you the ability to classify your accounts to get all the statements instantly and properly classified. You can re-group later to suit your requirements.

Tally provides tremendous ability to organize Accounts Ledgers and Groups in a versatile way without any limit on depth of nesting, number of Group and Sub Groups and number of Ledger Accounts that can be achieved with Tally.

Account Groups



By default Tally creates a set of pre-defined Account Groups called Reserved Groups. You can not delete / alter these Groups except the name.

Some of the Reserved Groups are Primary Groups while some are sub-groups to the primary groups. These Groups determine whether the Ledger is a revenue item (effecting Profit & Loss A/C and will appear in the Income or Expenditure side) or capital item (will appear in the Balance Sheet’s Assets or liabilities side). These Reserved Groups are normally sufficient for most of the organizations. However users are free to create any number of Groups and nest up to any level or can also create Primary Group, as required.

Reserved Groups that goes into Balance Sheet:

Liabilities side:
  • Capital Account
  • Reserves & Surplus (Retained Earnings)
  • Loans (Liabilities)
  • Bank OD Accounts (Bank OCC Accounts)
  • Secured Loans
  • Unsecured Loans
  • Current Liabilities
  • Duties & Taxes
  • Provisions
  • Sundry Creditors

Assets side

  • Fixed Assets
  • Investments
  • Current Assets
  • Bank Accounts
  • Cash-in-hand
  • Deposits (Asset)
  • Loans & Advances (Asset)
  • Stock-in-hand
  • Sundry Debtors
  • Branch/Divisions
  • Miscellaneous Expenses (Asset)
  • Suspense Account

Reserved Groups that goes into Profit & Loss Account

Income side
  • Sales Account
  • Direct Income (Income Direct)
  • Indirect Income (Income Indirect)

Expenses side
  • Purchase Account
  • Direct Expenses (Expenses Direct)
  • Indirect Expenses (Expenses Indirect)

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