IT & ITES Related Theory for Exercise 2.3.

121
COPA - Using Accounting Software

Introduction to Tally, Features and Advantages

Objectives: At the end of this lesson you shall be able to
• explain about the tally software & history of Tally
• features of the tally software
• advantages of the tally software.

Introduction to Tally : Tally is an complete accounting mats in to the current data format. This is possible though
software. It is a versatile and massive software package, Import of Data Facility.
being used by various types of business Organisations.
Tally 6.3: Tally 6.3 is extended enterprise systems whereby
History of Tally it interacts with other system through ODBC (Open Data
Base Connectivity) you and e-mail upload your financial
Tally is a complete business solution for any kind of Busi- records form tally.
ness Enterprise. It is a full fledged accounting software.
Tally 7.2: This version is an integrated enterprise system
The Initial Release of Tally was Tally 4.5 version. This is provides different kind of taxes like VAT, TDS & TCS and
DOS (MS-DOS) based software released in the beginning Service Tax modules is introduced in this version.
of 1986's. It had Basic Financial Accounting / Book Keep-
ing Tools. Personal computers had gaining popularity in Tally 8.1: Tally 8.1 is multi language support software. It
India those days. supports 10 Languages includes is introduced in this ver-

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sion.
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Peutronics (The Company that develops Tally) used this

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opportunity and put their Tally Version 4.5 on the market. Tally 9.0: This version is an improved model over the ver-
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sion 8.1. it supports 13 Languages (Includes Foreign Lan-
Auditors and Accountants who used to maintain large vol- guages). Payroll, POS (Point of Sales) modules is intro-
umes of hard-bound notebooks were amazed at the abil- duced in this version.
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ity of Tally to calculate Balance sheets and Profit Loss

accounts within seconds. All you need to do is just create Tally.ERP9: This is the latest version which provides dif-
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Ledgers and enter vouchers. Tally will do the rest. It will ferent features like remote access,much powerful data
create all the statements, Trial Balance and Balance Sheet security, tally.net and many more.
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For you.
Tally ERP9 is considered as the latest version.
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The subsequent Tally releases are Tally 5.4, Tally 6.3,

Tally 7.2, Tally 8.1 and Tally 9.0, Tally ERP (Enterprise Features of Tally
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Resources Planning). These release Include support for

Inventory used to stock maintenance of the company, 1 Accounting Features
Payroll which used to employee salary calculation and
wages payments and Multi Lingual support in Many In- i Handles different types of vouchers
dian languages Hindi, Tamil, Telugu, Kannada, Malayalam, - Payments Receipt
Gujarati, Marathi and more.
- Journals
Versions of Tally: - Debit Notes
Tally 4.0 & Tally 4.5: This version MS-DOS support finan- - Credit Notes
cial accounting system. It takes care of accounting activi- - Sales Notes
ties only such as Ledgers Classification Vouchers Entry.
It provides simple financial reports and bill wise analysis - Purchase Notes
of debtors and creditors in the business. - Receipt Notes

Tally 5.0: This version is an upgraded version to tally 4.5 - Delivery Notes etc.
and it works in windows operating system Inventory mod- ii Handles Primary Books of Accounts
ules is introduced in this version, which involves detailed
inventory, structure invoicing and integrating accounting - Cash Book
and Inventory records. - Bank Book

Tally 5.4: This version is an improved module over the ver- - Ledger
sion 5.0 where it is capable of converting earlier data for-

143
 - Purchase registers 5 Technological features
- Sales Registers etc.,
- Tally allows importing data from other software as
iii Used to prepare Statement of Accounts well as exporting data from tally.
- Trial Balance - ODBC connectivity is available in Tally. We can
connect applications like MS Word, MS Excel,
- Profit and loss Accounts
Oracle and can use data from tally directly.
- Trade Accounts
- While working with tally, we can e-mail, browse a
- Balance Sheet website. We can send a report on document directly
- Funds Flow from tally.

- Cash Flow - We can upload reports on the website directly from

tally.
2 Financial Management Features - Protocol support for HTTP, HTTPS, FTP, SMTP,
ODBC and RAW sockets with data interchange
- We can get closing stock value as entered in stock formats like XML, HTML, related formats.
ledgers by non-integrating Accounts and Inventory.
- Daily Balances and Transactions value can be got. Advantages of the Tally

- Funds flow and cash flow statements to track 1 Simple and Rapid Installation
movement of cash and funds in the company.
- Tally.ERP9's installation is a wizard driven, simple
- Tally computes interests as per book date. and speedy process involving minimal user-
intervention. The software occupies tiny space and

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- Tally provides Budgeting option.
can be installed on any drive. Tally.ERP9 supports
-
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Ratio Analysis provides important performance ratios installation on multiple systems connected to a
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that give the pulse of the corporate health. network with different operating systems
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(Windows98, NT, 2000, XP and Windows7)
3 Inventory Management Features
2 Auto Backup and Restore
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- Flexible invoicing and billing terms.

- Flexible units of measure. - Tally.ERP9 provides automatic backup facility to
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secure your company from any kind of data loss /

- Stock Transfer-Tally provides stock journal. corruption and helps in smooth functioning of your
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- Stock query provides all relevant information for any business. Tally.ERP9 safeguards your data from any
stock item in a single screen. loss due to power failure or improper shutdown of
the system.
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- Multiple stock valuation methods like FIFO, LIFO

and average methods are enhanced in Tally. 3 Tally Audit
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4 Security Features - Tally.ERP9 audit feature allows you to verify, validate

and accept accounting information based on the
- The system administrator can define multiple levels masters, users and transactions (vouchers).
of security. Hence can credit, authorize-users,
assign passwords and assign specific task rights. 4 Split Company Data
- Tally offers data encryption (Tally vault) and follows
Data Encryption Standard (DES) Encryption - Tally.ERP9 allows splitting of company data into
methods. multiple companies for the required financial period.
Once the data is split, the closing balances of the
- Tally provides options for data backup in floppy/hard previous period are automatically carried forward as
disk and restoration of backup data. the opening balance for the subsequent period.
- Tally locker: It is a small portable hardware device
of a thumb size with storage capacity of 16MB. We 5 Import and Export of Data
can store data and work directly at tally locker. When
the task is over, we can simply keep it in our pocket. - Tally.ERP9 allows you to flexibly export and import
It is also used for backup. data in various formats such as MS EXCEL, JPEG,
PDF, XML, HTML or ASCII format.

144 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.121
6 Graphical Analysis of Data Tax, TCS (Tax Collected all Source), TDS (Tax
Deducted at Source), FBT (Fringe Benefit Tax), GST
- Tally.ERP9 allows easy analysis of results / reports (Goods and Service Tax).
with graphical representation of values.
8 E-Mail Facility
7 Duties and Taxes
- Tally.ERP9 supports mailing of required information
- Tally.ERP9 allows Statutory Reporting for VAT to intended recipients and also mass mailing facility
(Value Added Tax), CST (Central Sales Tax), Service for certain reports like Payslip etc.

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IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.121 145
IT & ITES Related Theory for Exercise 2.3.122
COPA - Using Accounting Software

Implementing Accounts in Tally - Basics of Accounting, Golden Rules of

Accounting, Voucher Entry, Ledger Posting, Final Accounts Preparation
Objectives: At the end of this lesson you shall be able to
• explain the tally software screen
• understand accounting, its types, terms used
• understand golden rules of Accounting
• state about the journals, ledgers with entry posting methods
• prepare cash book, bank book etc.
• know shortcut keys.
Tally Software : In Gateway of Tally the following option is
display. (Fig 1)

Fig 1

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Screen of the Tally 4 Single or Multiple User

5 System Day and Date
Tally Screen: Tally screen can be divided into following
four broad parts. 6 System Time

1 Product info Button Bar: Buttons appearing in the button bar (at right
of the screen) provide quick access to different options.
2 Button bar
Buttons on the button bar is context sensitive, different
3 Calculator buttons appear at different screens.
4 Work area
Calculator: By default the work area becomes active and
calculator remains inactive. Press Ctrl + N that would
Product info: Product info bar in Tally.ERP9 consisting
activate the calculator when calculator is active, we can
of the information about the product.
enter value and operators.
1 Developer company
The calculator follows BODMAS rule that indicates the
2 Software version and Release execution sequence: Bracket, Power, Division,
3 Software Serial Number Multiplication, Addition and Subtraction.

146
Work area remain inactive and by default cursor would appear on
Create Company option.
The work at Gateway is broadly separated into two
sections. Buttons at gateway

1 The right hand side contains the popup menu, where Help (Hotkey: Alt+H): This button launches "Tally Reference
we would select instructions to Tally. Manual. This is a compiled HTML Help file. Normally on
clicking this button, the relevant content in respect of the
2 The left hand side displays list of selected companies.
screen would be displayed. If no context sensitive Help
On left part of the screen exists, contents would be displayed. We can select the
topic we wish to view.
Current Period
Web browser (Hot key: Alt+W)
Financial period with which we are working is displayed
for reference. To change the Financial period click This button launches the default installed web browser.
"F2:period" button in the button bar or press <Alt> + <F2>. For example, internet explorer is the default web browser,
on clicking the button IE will be loaded. The browser will
Current Date appear within the work area of the tally screen. All other
areas of Tally screen still remains in the screen.
It is not the calendar date but the date we worked last
during the current period. Vouchers will have the same F1- Select cmp (Hoy key: F1)
date as of current date. To change current date click
"F2:Date" button in the button bar or press F2. This button will display the list of companies. Move the
highlight bar and press <Enter> key to select a particular

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List of selected companies company. Or simply press F1 key on the keyboard.

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Name of all selected companies with last date voucher Introduction to Accounting

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entry is displayed here. If we select more than one
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company, the active company is shown at the top of list in It is the language of business through which normally a
bold face and others appear next in normal fonts. business house communicates with the outside world.
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On right part of the screen Accounting may be defined as "the art of

recording, classifying summarising and
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Gateway of Tally menu analysing transactions in the books of

accounts".
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Primary choices of menu is displayed. The menu

operations are dependent on selection/activation of Accounting and accountancy are often synonymous terms.
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operations. In some cases, we may find some operations

grayed indication that the option is not active. Accounting can be classified into two parts.
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For example, upon selecting a company maintaining 1 Financial accounting

Accounts only, Inventory Info and stock summary options
2 Management Accounting
would be grayed.
Financial Accounting
Selections of menu
The accounting for revenues, expenses assets and liabilities
We can select a menu in either of the following mode: that is commonly carried on in the general offices of a
business is termed as Financial Accounting.
1 Press the highlighted character. For example, to select
create company, press 'C' the highlighted character. Its aim is to ascertain the profit or loss and to state the
financial position of the business as at a particular date.
2 Move highlight bar on the option with Up/Dn arrow key
and press<Enter>.
Scope of Financial Accounting
3 Using mouse double click the option. (We have to click
twice very fast). 1 Recording information in account books like journals,
cashbooks etc
Company Info Menu
2 Classifying the accounts using ledger.
On loading Tally, by default, Company Info menu appear
3 Summarising the information as statements like (1)
to select a company we wish to work with. If we are
Trial balance (2) Income statement and (3) Balance
installing Tally first time. select company option would
sheet

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.122 147
Management Accounting Current Asset means the things and properties for resale
ie. The asset converts into cash. Eg. A cloth shop owner
The term management accounting refers to accounting for buys cloth for resale. Stock of cloth is current asset.
the management. The management accounting provides
information to the management so that planning, organis- Liabilities
ing directing and controlling of business operations can be
done in an orderly manner. All the amounts payable by a business concern to outsid-
ers are called liabilities.
Scope of Management Accounting
Capital
Following areas are identified within management ac-
counting Capital is the amount invested for starting a business by a
person.
1 Financial accounting
Debtor
2 Cost accounting
3 Revaluation accounting Debtor is the person who receives benefit without giving
money or moneys worth immediately, but liable to pay in
4 Budgetary control
future. i.e. the person owes amounts to the businessman.
5 Inventory control
Creditor
6 Statistical methods
7 Interim Reporting Creditor is the person who gives benefit without receiving
money or money's worth immediately but ot claim in fu-
8 Taxation

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ture. i.e. the personto whom amounts are owed by the
9 Office services businessman.
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10 Internal Audit
ish Debit: The receiving aspect of a transaction is called debit
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or Dr.
Accounting terms
Credit: The giving aspect of a transaction is called credit
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Business transaction
or Cr.
A business transaction is "The movement of money and
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Drawings
money's worth form one person to another" or exchange
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of values between two parties.

Drawings are the amounts withdrawn (taken back) by the
businessman from his business for his personal, private
Purchase means goods purchased by a businessman
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and domestic purpose. Drawings may be made in the form

from suppliers.
cash, goods and assets of the business.
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Sales is goods sold by a businessman to his customers.

Receipts
Purchase Return or Rejection in or Outward Invoice
It is a document issued by the receiver of cash to the giver
Purchase return means the return of the full or a part of of cash acknowledging the cash received voucher.
goods purchased by the businessman to his suppliers.
Account
Sales Return or Rejection out or Inward Invoice
Account is a summarized record of all the transactions
Sales return means the return of the full or a part of the relating to every person, everything or property and every
goods sold by the customer to the businessman. type of service.

Assets Ledger

Assets are the things and properties possessed by a busi- Ledger is the main book of account. It is the book of final
nessman in business. entry where accounts lie.

Two types of Assets Journal

Fixed Asset means the asset remain in business of Journal is a book of first entry. Transactions are entered in
use and not for resale. Eg. A shop owner purchase the journal before taken to the appropriate ledger accounts.
buildings, typewriter, showcases

148 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.122
Trial Balance Personal Accounts

It is a statement of all the ledger account balances pre- Impersonal Accounts

pared at the end of particular period to verify the accuracy
of the entries made in books of accounts. Impersonal Accounts can be further divided into two types.

Profit 1 Real Account

2 Nominal Account
Excess of credit side total amount over debit side total
amount.
Personal accounts are the accounts of persons, firms,
concerns and institutions which the businessmen deal.
Loss
Principles: Debit the receiver, Credit the giver
Excess of debit side total amount over credit side total
amount. Real Account: These are the accounts of things, materi-
als, assets & properties. It has physical existence which
Profit and loss account
can be seen & touch. Ex. Cash, Sale, Purchase, Furni-
ture, Investment etc.
It is prepared to ascertain actual profit or loss of the busi-
ness.
Principles: Debit what comes in, Credit what goes out
Balance Sheet
Nominal account: Nominal account is the account of
services received (expenses and Losses) and services
To ascertain the financial position of the business. It is a
given (income and gain) Ex. Salary, Rent, Wages, Statio-
statement of assets and liabilities.

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nery etc.

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Types of accounts

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Principles: Debit all expense/losses, Credit all income/
gains
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Accounts can be divided into two major types.
We can clearly understand the classification of accounts
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in the following Figure 1.

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Fig 1
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IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.122 149
 GOLDEN RULES OF ACCOUNTING

Account type Rules

Personal Accounts Debit the Receiver Credit the Giver

Real Accounts Debit what comes in Credit what goes out
Nominal Accounts Debit all expenses & losses Credit all incomes & gains

Account Layout The benefits received by the account are recorded on the
left hand side. The benefits imparted by the account are
An account has two sides. The left hand side is known as recorded on the right hand side.
‘Dr’ or ‘Debit’ side. The right hand side is known as ‘Cr’ or
‘Credit’ side. The layout of an account looks like as under.

ACCOUNT
Dr Cr

Date Particulars Amount Date Particulars Amount

Benefits Benefits
received Imparted

The receiving aspect which is known as ‘Debit’ is entered Double Entry : A business transaction is a transfer of

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on the Debit side of the account. The giving aspect which money or money’s worth from one account to another. A

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is known as ‘Credit’ is entered on the Credit side of the transfer requires two accounts. A business transaction
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accounts.
ish affects two account’s in the opposite directions. If one
account receives a benefit, the another account should
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The principle under which both Debit and Credit aspects impart the benefit.
are recorded is known as the principle of Double entry.
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Every debit must have a credit and vice versa. If the The principle of Double entry is based on the fact that,
accounts are not maintained under double entry system,
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then the records are incomplete and known as single entry. There is no giving without receiving and
There is no receiving without giving
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DOUBLE ENTRY VS SINGLE ENTRY

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Sl.
No. Double Entry Single Entry

1 For every Debit there is a corresponding credit and There are no credits and Debits here
vice versa

2 Maintains a complete record of An incomplete record. Only personal accounts and

a Personal accounts cash accounts are maintained
b Real accounts and
c Nominal accounts

3 A balance sheet and profit and loss statement can A balance sheet and profit and loss statement cannot
be prepared conveniently, since the books of be conveniently prepared since the accounting
accounts present a complete picture records are incomplete

4 Double Entry is a complete, scientific system of Single Entry is not a system. It is incomplete
keeping books of accounts and unscientific

150 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.122
Personal Account - Examples: Cash goes out of the business and hence cash account
should be credited
1 Sold goods to Selvan on credit Rs.1,100/-
6 Paid rent Rs.250/-
Selvan account receives a benefit and hence should be
Cash goes out of the business and cash should be
debited
credited
2 Returned damaged goods to Sami.
In the above examples Sales Account Cash Accounts
Sami account receives a benefit and hence should be are real accounts. They are credited as per Rule.
debited
Nominal Accounts Examples:
3 Proprietor Thiru Anbu withdraws cash Rs.500 for house
hold expenses
1 Paid Rent Rs.250/-
Anbu - Drawing account receives a benefit and hence
Rent is an expense account. Hence rent account
should be debited
should be debited
In the above examples selvan a/c, Sami a/c, and Anbu
2 Paid salary Rs.1,200/-
- Drawings a/c are Personal accounts. They are
receivers of benefits and hence should be debited. Salary is an expense account. Hence salary account
should be debited
4 Anbu started business with cash Rs.50,000/-
3 Purchase of paper, pencils, ink, cover’s etc., for
Anbu - Capital a/c gives benefit in the form of cash to
Rs.250/-
business. Hence capital a/c should be credited
These are stationary items and expense items. Hence
5 Bought goods from Somu on credit for Rs.1,700/-
stationery account should be debited

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Somu a/c gives a benefit and hence should be credited
In the above three examples Rent account, salary

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6 Received five chairs from Godrej Co. at Rs.45 per chair account and stationery account all are nominal ac-
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on credit basis
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Godrej Co a/c gives benefit in the form of 5 chairs. 4 Received commission Rs.500/-
Hence godrej co a/c should be credited.
Here commission is income to the business and hence
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In the above examples capital a/c, Somu a/c and Godrej commission account should be credited.
a/c are personal accounts. They are giving benefits.
5 Received interest on loan given to B Rs.100/-
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Hence their accounts should be credited.

Interest is income to the business. Hence interest
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Real Account - Examples Account should be credited.

1 Bought five chairs [ furniture] from Godrej Co. at Rs.45 In the above two examples commission account and
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per chair on credit basis. interest account are Nominal accounts. They have been
credited since they are incomes.
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Furniture worth Rs.225 have come into the business as

per Rule, Debit what comes in. Since Furniture has
Books of Accounts
come in, Furniture Account should be debited.
2 Anbu started business with cash Rs.50,000/- Books of accounts can be generally classified into three
categories.
Cash of Rs.50,000 has come into the business and
hence cash account should be debited
1 Journal
3 Purchased goods from Somu on credit for Rs.1,700/-.
2 Ledger
Goods are bought in the aspect of purchases. Hence
3 Subsidiary Books
purchases account should be debited.
In the above examples, Furniture Account, cash ac- Journal : Journal is a book of prime entry. When a
count and purchases account are real accounts. Since transaction takes place, it is recorded in the Journal.
they have come into business, the accounts are deb- Layout of a Journal
ited.
4 Sale of goods to Selvan on credit Rs.1,100/- Date Particulars L.F. Dr. Cr.
(1) (2) (3) (4) (5)
Goods have gone out of the business hence sales
account is credited
5 Paid cash to Somu Rs.1,700/-

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.122 151
L.F means Ledger Folio. The L.F column is meant for Example 2
recording the page number of the concerned account in the
Ledger. The transactions recorded in the journal will be July 7, 2003 : Bought goods for cash Rs.1543.
posted to the appropriate accounts in the Ledger.
1 Purchase Account and Cash Account are affected.
Journalising : Journalising is the process of analysing the
2 Purchase Account and cash accounts are Real ac-
business transaction under the heads of debit and credit
counts.
and recording them in the journal.
3 Purchase Account should be debited since goods have
When journalising a transaction the following steps to be come into business. Cash account should be credited
followed. since cash has gone out.

1 What are the accounts affected? name them.

2 What type of accounts are they? Identify them. e.g., Date Particulars L.F. Dr. Cr.
Personal, Real or Nominal Rs. P. Rs. P.

3 Apply the rules for debit and credit. 2003 Purchase Account Dr. 35 1543 00
July 7th To cash Accounts 4 1543 00
Account type Debit Credit (Being cash
purchases of goods)
Personnal The Receiver The Giver
Accounts
Ledger
Real Accounts What comes in What goes out
The ledger is the main book of business containing

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Personal, Real and Nominal accounts of the business. But
Nominal Accounts Expenses and Incomes and
bl I transactions are not recorded in the Ledger directly. These
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Losses Gains

ish are first entered in the Journal and then posted to the
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In Journalising a transcation, the debit aspect is shown first concerned accounts in the Ledger.
with observation “Dr” after the name of the account. The
Layout of Ledger account
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credit aspect is shown as a second item with the word “To”

at the beginning. A brief description of the transaction
An account is divided in the middle and the two sides are
known as “Narration” is given at the end of every entry in the
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called debit side and credit side respectively.

journal.
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Kannan Account (Personal Account)

Example 1
Dr. Cr.
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1st July 2003 : Received cash from Muthu Rs.500

Debit Kannan when he Credit Kannan when he
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1 What are the accounts affected?

receives goods, money or gives goods, money or
Cash Account and Muthu Account value from the business value to the business
2 Types of Accounts
Cash account is a Real account Furniture Account (Real Account)

Muthu account is a personal account Dr. Cr.

3 According to Rule No.2 Cash Account should be
debited because cash comes into the business. Debit Purchase of Asset Credit sale of asset

According to Rule No.1, Muthu Account should be

credited since Muthu has given benefit. Salary Account (Nominal Account)

Journal Dr. Cr.

Date Particulars L.F. Dr. Cr. Debit expenses in normal

Rs. P. Rs. P. account

2003 Cash Account Dr. 2 500 00

July 1st To Muthu Account 41 500 00
(Being cash
received from Muthu)

152 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.122
 The account end with “Dr” is to be debited in the Ledger. The
Interest received account (Nominal a/c) account starts with “To” is to be credited in the Ledger. It
is customary to write “To” on the debit side and “By” on the
Dr. Cr. credit side.

Credit gains in Nominal Example:

accounts
Given the journal Entry

Posting in the Ledger : The technique of recording the

journal entries into the ledger is known as posting.

Date Particulars L.F. Dr. Cr.

Rs. p. Rs. p.

2003 Cash Account Dr. 75,000 00

July 1st To Capital Account 75,000 00
(Being the amount invested in business)

Capital account starts with “To”. So the capital account is

credited with the entry in the credit side as “By cash”.

CAPITAL ACCOUNT
Dr. Cr.

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Date Particulars
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Rs. P. Rs. P.
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2003
July 1 By cash 75,000 00
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JOURNAL VS LEDGER
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S.No. Journal Ledger

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1 The journal is a subsidiary book The ledger is the main book of accounts
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2 Transactions are first entered in Journal Entries in the journal are posted in the Ledger.
3 Journal is a daily record. Business transactions are Posting from journal to Ledger is done periodically,
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entered in this book in the order of dates may be weekly or fortnightly.

4 Entering the transaction in the journal is called The act of recording journal entries into ledger
journalising is called “Posting”.

Subsidiary Books : Journal is sub-divided into smaller 4 Sales Returns Books

journals called subsidiary-journals. We can synonymously
5 Cash book
call subsidiary - journals as subsidiary books.
1 Purchase Book
Categories of subsidiary book includes the following.
– This book is also called as “Purchase Day book”,
1 Purchase Book.
“Invoice Book”, “Bought Book”, “Purchases Journal”.
2 Sales Book.
– It is used for recording credit purchases of goods.
3 Purchase Returns Books
– Cash purchases are not recorded in this book.

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.122 153
 Layout of purchase book

Date Name of the Supplier L.F. Invoice No. Amount

2 Sales Book – Cash sales are not recorded in this sales book
– Sale of an old asset on credit is not recorded in the
This book is also called as “Sales Journal”, “Sold Book”,
sales book
“Sales Day Book”

– It is used to record credit sales of goods.

Layout of the Sales Book

Date Name of the Customer L.F. Outward Invoice No. Amount

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3 Purchase Returns Book
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– This book is also called as “Purchases Returns
goods to suppliers.
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Journal”, “Returns Outwards Book”.

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Layout of Purchase Returns Book

Date Name of Supplier L.F. Debit Notes Nos. Amount

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4 Sales Returns Book – It is used to record particulars of goods returned by

customers.
– This book is also called as “Returns Inwards Book”,
“Sales Returns Journal”.
Layout of Sales Returns Book

Date Name of Customer L.F Credit Note No. Amount

5 Cash Book – Cash book looks just like a ledger.

– The purpose of the cash book is to record all cash

receipts and payments and the sums deposited into
and with drawn from the bank.

154 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.122
 Layout of Cash Book
Dr Cr

Date Particulars L.F. Amount Date Particulars L.F Amount

Accounts Information - Grouping Expenditure incurred during current year but the amount
on which is not yet paid. (Added to the expenditure on the
Current Asset: It is converted into cash with in a year. debit side and entered on the liability side.)
Ex. Bills receivable.
Income received in advance or Income received but
Direct Expenses: These are the expenses which are di- not earned.
rectly related to manufacturing of goods. Ex. Wages, fac-
tory rent, heating, lighting etc., Income received during the currentyear but not earned or
a part of which relates to the next year. (Deducted from
Indirect Expenses: These are the expenses which are the concerned income on the credit side and entered on

ed
indirectly related to manufacturing of goods. Ex. Salary, the liability side)
bl I
rent, stationery, advertisement, printing.
pu M
ish
Depreciation: Decrease the value of the asset.
Prepaid advance or Expenses
Re NI

Expenditure paid during current year but not incurred or a

Sundry debtors: The person who is the receiver or cus- part of which related to the next year is called expenditure
be @

tomer. prepaid.

Sundry creditors: The person who gives or supplier.

o ht

Income outstanding means income earned during the cur-

rent year but the amount on which is not yet received.
t t rig

Expenses Outstanding or Unpaid expenses or Expenses

due:
No py
Co

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.122 155
Accounts information - Ledger - Grouping

Ledger Group

Cash at bank Bank Account

Bank overdraft Bank OD

Capital Capital Account

Cash in hand Cash in hand

Other Liabilities Current Liabilities

Bills receivable Current Asset

Stock of stationery Current Asset

Prepaid expenses Current Asset

Income outstanding Current Asset

Bills payable Current Liabilities

Expense outstanding Current Liabilities

Income received in advance Current Liabilities

ed
Fixed deposit at bank
bl I Deposit
pu M
Fright charges
ish Direct Expenses
Re NI

Carriage inwards or Purchases Direct Expenses

be @

Cartage and coolie Direct Expenses

Octroi Direct Expenses

o ht

Manufacturing wages Direct Expenses

t t rig

Coal, gas, water Direct Expenses

No py

Factory rent, insurance, electricity, lighting Direct Expenses

and heating
Co

Loose tools Fixed Asset

Fixtures and fittings Fixed Asset

Furniture Fixed Asset

Motor Vehicles Fixed Asset

Plant and machinery Fixed Asset

Land and building Fixed Asset

Leasehold property Fixed Asset

Patents Fixed Asset

Goodwill Fixed Asset

Salary Indirect Expenses

Postage and Telegrams Indirect Expenses

Telephone charges Indirect Expenses

Rend paid Indirect Expenses

156 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.122
 Rates and taxes Indirect Expenses

Insurance Indirect Expenses

Audit fees Indirect Expenses

Interest on bank loan Indirect Expenses

Interest on loans paid Indirect Expenses

Bank charges Indirect Expenses

Legal charges Indirect Expenses

Printing and stationery Indirect Expenses

General expenses Indirect Expenses

Sundry expenses Indirect Expenses

Discount allowed Indirect Expenses

Carriage outwards or sales Indirect Expenses

Travelling Expenses Indirect Expenses

Advertisement Indirect Expenses

ed
Shortcut Keys
bl I
pu M
F1 Select Company
ish F6 Receipt Records all receipts into bank or cash ac
Re NI
counts.
Alt+F1 Shut Company
F7 Journal Records adjustments between ledger ac
be @

Alt+F3 Company information menu

counts
Ctrl+A To accept a form wherever you use the key
o ht

combination the screen or report will be ac F8 Sales Records all sales.

cepted as it is on this screen.
t t rig

Ctrl+F8 Credit note voucher

Alt+C To create a master at a voucher screen.
No py

F9 Purchase Records all purchase.

Alt+D To delete a voucher/To delete a master.
Ctrl+F9 Debit note voucher
Co

Ctrl+Enter To alter a master while making an entry or

viewing report. F10 Reversing Journal voucher

F2 Date Alt+2 To duplicate a voucher

Alt+F2 Change period Alt+C To create a Master at a voucher screen

F11 Company features Alt+E To export the report in ASCII, SDF, HTML
or XML Format
F12 Configuration optionsare applicable to all
the companies in a data directory. Alt+I To insert a voucher

Ctrl+N Calculator screen. Alt+R To remove a line in a report in reports

screen
Ctrl+V Voucher mode (Cr. Dr)/Invoice mode (name
of item, rate, quantity, and amount) Alt+S To bring back a line, you removed using
Alt+R in reports screen
F4 Contra Records funds transfer between cash and
bank accounts Alt+X To cancel a voucher in Daybook/List of
vouchers
F5 Payment Record all bank and cash payments

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.122 157
Journalize the following transactions 8 Paid cash to Mr. X Rs.1,000/-

1 Commenced business with cash Rs.50,000/- 9 Received commission Rs.50/-

2 Deposit into bank Rs.15,000/- 10 Received interest on bank deposit Rs.100/-

3 Bought office furniture Rs.3,000/- 11 Paid into bank Rs.1,000/-

4 Sold goods for cash Rs.2,500/- 12 Paid for advertisement Rs.500/-

5 Purchased goods form Mr. X on credit Rs.2,000/- 13 Purchased goods for cash Rs.1,500/-

6 Sold goods to Mr. Y on credit Rs.3,000/- 14 Sold goods for cash Rs.1,500/-

7 Received cash form Mr. Y on account Rs.2,000/- 15 Paid salary Rs.5,000/-

ed
bl I
pu M
ish
Re NI
be @
o ht
t t rig
No py
Co

158 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.122
 Gateway of Tally - Account info - Ledger - Create
Gateway of Tally - Account voucher

Sl.No. Key Voucher Ledger Group Types of Principles Amount

account
Cr. Capital Capital Personal Giver 50,000
account
1 F6 Receipt
Dr. Cash Cash in hand Real Comes in 50,000
Cr. Cash Cash in hand Real Goes out 15,000
2 F4 Contra
Dr. Bank Bank account Real Comes in 15,000
Dr. Furniture Fixed asset Real Comes in 3,000
3 F5 Payment
Cr. Cash Cash in hand Real Goes out 3,000
Dr. Cash Cash in hand Real Comes in 2,500
4 F8 Sales
Cr. Sales Sales account Real Goes out 2,500
Cr. X Sundry Personal Giver 2,000
creditor
5 F9 Purchase
Dr. Purchase Purchase Real Comes in 2,000
account

ed
Dr. Y Sundry debtors Personal Receiver 3,000
6 F8 Sales
bl I
pu M
ish
Cr. Sales Sales account Real Goes out 3,000
Re NI

Cr. Y Giver 2,000

7 F6 Receipt
Dr. Cash Cash in hand Real Comes in 2,000
be @

Dr. X Reciever 1,000

8 F5 Payment
o ht

Cr. Cash Cash in hand Real Goes out 1,000

t t rig

Cr. Commission Indirect Nominal Credit all 50

income income
9 F6 Receipt
No py

Dr. Cash Cash in hand Real Comes in 50

Cr. Interest on Indirect Nominal Credit all 100
Co

bank deposit income income

10 F6 Receipt
Dr. Bank Bank account Real Comes in 100
Cr. Cash Cash in hand Real Goes out 1,000
11 F4 Contra
Dr. Bank Bank account Real Comes in 1,000
Dr. Advertisement Indirect Nominal Debit all 500
expenses expenses
12 F5 Payment
Cr. Cash Cash in hand Real Goes out 500
Cr. Cash Cash in hand Real Goes out 800
13 F9 Purchase
Dr. Purchase Purchase Real Comes in 800
Cr. Cash account
Dr. Cash Cash in hand Real Comes in 1,500
14 F8 Sales
Cr. Sales Sales account Real Goes out 1,500
Dr. Salary Indirect Nominal Debit all 5,000
expense expenses
15 F5 Payment
Cr. Cash Cash in hand Real Goes out 5,000

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.122 159
IT & ITES Related Theory for Exercise 2.3.123
COPA - Using Accounting Software

Financial Accounting Reports

Objectives: At the end of this lesson you shall be able to
• understand financial accounting
• understand book-keeping
• prepare trading account, profit and loss account & balance sheet.

Introduction: The accounting for revenues, expenses, Trading Account : Trading refers to buying and selling of
assets and liabilities that is commonly carried on in the goods. Trading account shows the result of buying and
general offices of a business is termed as Financial selling of goods. This account is prepared to find out the
Accounting. difference between the selling price and cost price.

Its aim is to ascertain the profit or loss of the business and – If the selling price exceeds the cost price, it will bring
states the financial position of the business as at a Gross Profit. For example, If the goods of cost price
particular date. Rs.50,000 are sold for Rs.60,000 that will bring in Gross
Profit of Rs.10,000.
Financial accounting includes the following activities. – If the cost price exceeds the selling price, it will bring
Gross loss. For example, if the goods of cost price
i Book keeping Rs.60,000 are sold for Rs.50,000, that will result in
ii Preparation of Trading Account Gross Loss of Rs.10,000

ed
iii Preparation of profit and loss account Thus Gross Profit or Gross Loss is indicated in Trading
bl I Account.
pu M
ish
iv Preparation of Balance Sheet
Items appearing in the Debit side of Trading account
Re NI

Book-keeping : Book-keeping is the art of recording 1 Opening Stock : Stock on hand at the commence-
business transactions in a systematic manner. Main ment of the year or period is termed as the opening
be @

objective of book-keeping is to calculate the profit or loss stock

of a business accurately.
2 Purchases : It indicates total purchases both cash and
o ht

We have discussed various types of Books of accounts in credit made during the year
the previous chapter.
t t rig

3 Purchases returns or Returns outwords : Purchases

Advantages of Book-Keeping Returns must be subtracted from the total purchases to
No py

get the net purchases. Net purchases will be shown in

1 Book-keeping provides reliable record of transactions
the trading account.
essential for ready reference.
Co

4 Direct Expenses on Purchases : Some of the Direct

2 Profit or loss is ascertained using Books of accounts
Expenses are
3 Calculation of due amount the businessman has to pay
a Wages: It is also known as productive
others is done using Books of accounts
wages or Manufacturing wages
4 Borrowings and Assets are controlled.
b Carriage or carriage Inwards:
5 Financial position and growth of business is ascer-
c Octroi Duty : Duty paid on goods for
tained
bringing them within municipal limits
6 Do’s and Don’ts are identified
d Customs duty, Dock duty, clearing
7 Book-keeping is used for taxation and fixing selling charges, Import duty etc.,
price.
e Fuel, Power, Lighting charges related to
Final Account : Trading, Profit and Loss account, Balance production
sheet are prepared at the end of the year or at the end of
f Oil, Grease and Waste
the part. So it is called Final Account.
g Packing charges: Such expenses are
– Trading, Profit & loss account is prepared to find out
incurred with a view to put the goods in a
profit or loss of the organisation
saleable condition.
– Balance sheet is prepared to find out the financial
Items appearing on the credit side of trading account
position of the organisation
1 Sales: Total sales (Including both - cash and credit)
made during the year or period

160
2 Sales Returns or Return Inwards: Sales returns 3 Closing stock: Generally, closing stock does not
must be subtracted from the Total sales to get Net appear in the Trial Balance. It appears outside the Trial
sales. Net sales will be shown Balance. It represents the value of goods at the end of
the trading period.

Specimen form of a trading a/c

Dr. Trading Account for the year ending Cr.

Particulars Amount Amount Particulars Amount Amount

Rs. P. Rs. P. Rs. P. Rs. P.

To Opening stock xxxx By sales xxxx

To Puchase xxxx Less: Returns
Less : Returns-outwards xxxx Inwards xxxx xxxx
To wages xxxx By closing stock xxxx
To Freight xxxx By Gross loss xxxx
To Carriage Inwards xxxx (to be transferred to P&L A/c)
To Clearing charges xxxx
To Packing charges xxxx
To Dock dues xxxx
To Power xxxx
To Gross Profit xxxx
(to be transferred to P&L A/c)

ed
xxxx xxxx

bl I
pu M
ish
Balancing of Trading Account : The difference between Advantages of Trading Account
Re NI

the two sides of the Trading account, indicates either

Gross Profit or Gross loss. If the total on the Credit side is 1 The results of purchases and sales can be clearly
assertained.
be @

more, the difference represents Gross Profit. On the other

hand, if the total of the debit side is high, the difference 2 Gross profit ratio to sales could also be easily ascer-
represents Gross loss. The Gross Profit or Gross Loss is tained. It helps to determine price
o ht

transferred to Profit & Loss A/c.

3 Gross profit ratio to direct expenses could also be
t t rig

Closing Entries of Trading A/c : Trading account is a easily ascertained. And so, unnecessary expenses
ledger account. Hence no direct entries should be made in could be eliminated
No py

the trading account. Several items such as purchases, 4 Comparison of trading account details with previous
sales are first recorded in the journal and then posted to year details help to draw better administrative policies.
Co

the ledger. The same accounts are closed by transferring

them to trading account. Hence it is called as closing Example 1
entries. Prepare a trading account from the following informations
of a trader
i Total purchases made during the year 2002 Rs.20,000
ii Total sales made during the year 2002 Rs.25,000

Trading account for the year ending 31st December 2002

Dr Cr.
Particulars Amount Particulars Amount
Rs. P. Rs. P.

To purchases 20,000 By sales 25,000

To Gross profit c/d 5,000

25,000 25,000
Example 2
ii Purchases Rs.16,100
Prepare a Trading Account from the following informations
iii Sales Rs.30,600
of a trader.
iv 2002 Dec 31 Closing Stock Rs.3,500
i 2002 Jan 1 Opening stock Rs.5,000
IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.123 161
 Trading Account for the year ending 31-12-2002
Dr Cr.

Particulars Amount Particulars Amount

Rs. P. Rs. P.

To opening stock 5,000 By sales 30,600

To purchases 16,100 By Closing stock 3,500
To Gross profit c/d 13,000
(Transferred to P&L a/c)
34,100 34,100

PROFIT and LOSS Account : Trading account reveals 2 Office Expenses : Expenses incurred on running an
Gross profit or Gross loss. Gross profit is transferred to office such as office salaries, rent, tax, postage,
credit side of profit and loss account. Gross loss is stationery etc.
transferred to debit side of the profit and loss account. Thus
3 Maintenance Expenses : Maintenance expenses of
profit and loss account is commenced. This profit & loss
assets. It includes repairs and renewals, depreciation
account reveals Net Profit or Net loss at a given time of
etc.,
accounting year.
4 Financial Expenses : Interest paid on loan, discount
Items appearing on Debit side of the P& L Account:
allowed etc., are few examples for Financial expenses.
The expenses incurred in a business is divided into two
Items appearing on credit side of P & L account :
parts. One is Direct expenses which are recorded in the
Gross profit is appeared on the credit side of Profit and Loss
trading account. Another one is indirect expenses which
account. Also other gains and incomes of the business are

ed
are recorded on the debit side of profit & loss account.
shown on the credit side. Typical of such gains are items
bl I
pu M
Indirect Expenses are grouped under four heads: such as Interest received, Rent received, Discounts earned,

ish Commission earned.

Re NI
1 Selling Expenses : All expenses relating to sales
Specimen Form:
such as carriage outwards, travelling expenses,
advertising etc.,
be @

Profit & Loss Account for the year ended 31st March 2002
Dr Cr.
o ht

Particulars Amount Particulars Amount

Rs. P. Rs. P.
t t rig

To Trading a/c xxxx By Trading a/c xxxx

No py

(Gross loss) (Gross profit)

To Salaries xxxx By Commission earned xxxx
Co

To Rent & Taxes xxxx By Rent received xxxx

To Stationaries xxxx By Interest received xxxx
To Postage expenses xxxx By Discounts received xxxx
To Insurance xxxx By Net loss xxxx
To Repairs xxxx (Capital account)
To Trading expenses xxxx
To Office expenses xxxx
To Interest xxxx
To Bank charges xxxx
To Establishment expenses xxxx
To Sundry expenses xxxx
To Commission xxxx
To Discount xxxx
To Advertisement xxxx
To Carriage Outwards xxxx
To Travelling expenses xxxx
To Distribution expenses xxxx
To Bad debts xxxx
To Depreciation xxxx
To Net profit xxxx
(transferred to Capital a/c)
xxxx xxxx

162 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.123
Example 3 iii Tax, Insurance Rs.1,400 Discount allowed Rs.600
iv Discount received Rs.400
Prepare profit and loss account from the following balances
of Dharani Enterprises for the year ending 31.12.2012 v Travelling expenses Rs.2,600
vi Advertisement Rs.3,600
i Office rent Rs.3,000 Salaries Rs.8,000
vii Gross profit transferred from the trading account
ii Printing expenses Rs.2,200 Sationeries Rs.2,400
Rs.25,000
Profit and Loss Account of Dharani Enterprises for the year ending 31st Dec 2012
Dr Cr.
Particulars Amount Particulars Amount
Rs. P. Rs. P.

To Salaries 8,000 By Gross profit 25,000

To Office rent 3,000 (transferred from Trading a/c)
To Stationaries 2,400 By Discount received 400
To Printing expenses 2,200
To Tax, insurance 1,400
To Discount allowed 600
To Travelling expenses 2,600
To Advertisement 3,600
To Net profit 1,600
(Capital account)
25,400 25,400

ed
Example 4
bl I Sales Returns 5,000
pu M
ish
Prepare trading and Profit - Loss account for the year Postage 300
Re NI

ending 31st March 2012 from the books of Swamy & Co., Salaries 5,000
Discount received 500
be @

Rs.
Stationaries 1,000
Stock (15-01-1994) 15,000
o ht

Bad debts 100

Carriage Outwards 4,000
t t rig

Interest 800
Purchases 1,65,000
Sales 3,00,000
No py

wages 10,000
Insurance 400
Purchase returns 10,000
Co

Closing stock 80,000

Trading and Profit and Loss account of Swamy & Co., for the year ending 31st March 2012
Dr Cr.

Particulars Amount Particulars Amount

Rs. P. Rs. P.

To Stock (15.01.1994) 15,000 By sales 3,00,000

To Purchases 1,65,000 Less returns 5,000 2,95,000
Less Returns 10,000 1,55,000 By closing stock 80,000
To Wages 10,000
To Gross Profit 1,95,000
3,75,000 3,75,000
To Salaries 5,000 By Gross profit 1,95,000
To Postage 300 (transferred from trading a/c)
To Bad depts 100 By discount received 500
To Carriage outwards 4,000
To Stationaries 1,000
To Interest 800
To Insurance 400
To Net profit 1,83,900
(Capital a/c) 1,95,500 1,95,500

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.123 163
 If trial balance shows trading expenses as well Definition : The word “Balance Sheet’ is defined
as office expenses, the Trading expenses should as “ a statement which sets out the assets and
be shown in the trading account and office liabilities of a business firm and which serves to
expenses should be shown in profit and loss ascertain the financial position of the same on
account. On the otherhand if the trial balance any particular date”.
shown only a trading expenses, it should be
shown in the profit and loss account – On the left hand side of this statement, the liabilities and
capital are shown
In the trial balance, wages are clubbed with
salaries as ‘wages and salaries’. This item is – On the right hand side of this statement, all the assets
shown in Trading account. On the other hand, are shown
it appears as salaries and wages and this item – Hence both the sides of the balance sheet must be
is shown in the profit & Loss account. equal
Income tax : Income tax paid by a proprietor – Capital arrives assets exceeds the liabilities
is considered as personal expenses. So instead
of debited to Profit and Loss account, it should Objectives of Balance sheet
be debited to the capital account.
1 It shows accurate financial position of a firm
Balance sheet
2 It shows various transactions took place at a given
– Trading account provides the details of Gross Profit or period
Gross Loss 3 It indicates that, whether the firm has sufficient assets
– Profit and Loss account provides the details of the Net to repay in liabilities

ed
Profit or Net Loss 4 The accuracy of final accounts is verified by this
– Besides the above, the proprietor wants
bl I statement
pu M
i
ish
to know the total assets invested in business 5 It shows the profit and loss arrived, through profit & Loss
Re NI
account
ii To know the position of owner’s equity
iii To know the liabilities of business
be @

SPECIMEN FORM OF A BALANCE SHEET:

o ht

BALANCE SHEET OF SUNIL ENTERPRISES AS AT 31.12.2012

Dr Cr.
t t rig

Liabilities Amount Amount Assets Amount Amount

Rs. p. Rs. P. Rs. P. Rs. P
No py

Sundry creditors xxxx Cash in hand xxxx

Co

Bills payable xxxx Cash at Bank xxxx

Bank overdraft xxxx Bills receivable xxxx
Loans xxxx Sundry Debtors xxxx
Mortgage xxxx Closing stock xxxx
Reserve Fund xxxx Furniture & Fittings xxxx
Outstanding exp. xxxx Investments xxxx
Capital xxxx Plant & Machinery xxxx
Add: Net profit (or) Loose tools xxxx
Less: Net loss xxxx Land and Buildings xxxx
xxxx Business premises xxxx
Less: Drawings xxxx Horses & carts xxxx
xxxx Prepaid exp.
Less : Income tax xxxx xxxx Patents & Trade marks xxxx
Good will xxxx

xxxx xxxx

The Balance sheet contains two parts. Assets : Assets represent everything which a business
owns and has money value. Assets are always shown as
1 Left hand side the liabilities debit balance in the ledger. Assets are classified as
2 Right hand side the assets follows:

164 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.123
1 Tangible Assets : Assets which can be seen and felt Equation of Balance sheet
by touching are called Tangible assets. Tangible as-
sets are classified into two: Capital = Assets - Liabilities

a Fixed Assets : Assets which are durable in nature Liabilities = Assets - Capital
and used in business over and again are known as Assets = Liabilities + Capital
Fixed assets. E.g., Land and building, machinery,
trucks, etc., Trial Balance : When the transactions are recorded under
b Floating Assets or Current Assets : Current Assets double entry system, there is a credit for every debit. When
are one account is debited, another account is credited with
equal amount.
i Meant to be converted into cash
ii Meant for resale If a statement is prepared with debit balances on one side
and credit balances on the other side, the totals of the two
iii Likely to undergo change sides will be equal such a statement is called Trial
E.g: Cash, Bank Balance, stock, sundry debtor Balance.

2 Intangible Assets : Assets which cannot be seen and Advantages:

has no fixed shape. E.g., Good will, Patent
1 It is the shortest method of verifying the arithmetical
3 Fictitious Assets : Assets which have no real value and accuracy of entries made in the ledger. If the Trial
will appear on the assets side of balance sheet are balance agrees, it is an indication that the accounts are
known as fictitious assets. correctly written up. But it is not a conclusive proof.
Ex: Preliminary expenses, Discount on creditors 2 It helps to prepare the trading account, Profit and loss

ed
account and balance sheet
Liabilities : All that the business owes to others are called
bl I
pu M
liabilities. It means that any amount which a business 3 It presents to the business man a consolidated list of all

ish
concern has to pay legally. It also includes proprietor’s Ledger Balances.
Re NI

capital. They are known as credit balances in ledger.

Sundry Debtors : There may be large number of deptors
to a trader. All the deptor’s names are not written in the trial
be @

Liabilities are classified as follows.

balance. A list of debtors with their individual debit bal-
1 Long term liabilities : Liabilities which will be re- ances are prepared and totalled. The total is written under
o ht

deemed after a long period of time say 10 to 15 years. the heading “Sundry Debtors” which appears in the Trial
e.g., capital, Long-term Loans Balance.
t t rig

2 Current Liabilities : Liabilities which are redeemed Sundry Creditors : There are a number of parties from
within a year are called current liabilities or short term
No py

whom the Trader buys goods on credit basis. All these

liabilities e.g., Trade creditors, Bank Loan creditors names are not written in the Trial Balance. A list
Co

3 Contingent Liabilities : Liabilities which have the of creditors with the balances due to them is prepared and
following features are called contingent liabilities. They totalled. The total is written under the heading “sundry
are :- creditors” which appears in the Trial Balance.

a Not actual liability at present Preparation of Balance sheet : Once the Trial Balance
b Might become a liability in future on condition that is arrived, using that Trading account, Profit and Loss
the contemplatted event occurs. e.g., Liability in account and Balance Sheet can be casted.
respect of pending suit
Trial Balance Vs Balance sheet

Trial Balance Balance Sheet

1 It shows the balances of all ledger accounts It shows the balances of personal and real accounts only
2 It is prepared after the completion of the ledger It is prepared after the completion of trading and
accounts or arrival of the balances profit and loss account
3 Its object is to check the arithmetical accuracy Its object is to reveal the financial position of the business
4 Items shown in the trial balance are not in order Items shown in Balance sheet must be in order
5 It shows Opening Stock It shows Closing Stock
6 It has the headings, debit and credit. It has the headings of Assets and Liabilities

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.123 165
Example 5

From the follwing trial balance extracted from the books of

Sundar & Sons as on 31.12.2012. Prepare i. Trading and
Profit and Loss account and ii. Balance sheet.

Trial Balance as on 31-12-2012

Dr. Cr.
Debit balances Amount Credit Balances Amount
Rs. P. Rs. P.

Cash in hand 2,000 Capital 2,00,000

Machinery 60,000 Sales 2,54,800
Stock 50,000 Sundry Creditors 40,000
Bills receivable 1,600 Bank overdraft 22,000
Sundry Debtors 50,000 Return outwards 3,000
Wages 70,000 Discounts received 1,800
Land 40,000 Bills payable 1,800
Carriage inwards 2,400
Purchases 1,80,000
Salaries 24,000
Rent 4,000
Postage 1,000
Return inwards 3,200

ed
Drawings 10,000
Furniture
bl I
18,000
pu M
ish
Interest 600
Cash at Bank 6,600
Re NI

5,23,400 5,23,400
be @

Stock as on 31-12-2012 is Rs.1,00,000

o ht

Trading, Profit & Loss account of Sundar & Sons for the year ending 31-12-2012
t t rig

Dr Cr.
Particulars Amount Particulars Amount
No py

Rs. P. Rs. P.
Co

To stock (1-1-2012) 50,000 By sales 2,54,800

To purchases 1,80,000 Less Returns 3,200 2,51,600
Less returns 3,000 1,77,000 By closing stock 1,00,000
To wages 70,000
To carriage inwards 2,400
To Gross Profit c/d 52,200
(Transferred to P&L a/c) 3,51,600 3,51,600

To salaries 24,000 By Gross Profit b/d 52,200

To Rent 4,000 (Transferred from Trading a/c)
To postage 1,000 By discount received 1,800
To interest 600
To Net Profit 24,400
(capital a/c)
54,000 54,000

166 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.123
 Balance sheet of Sundar & Sons as at 31.12.2012
Dr Cr.

Liabilities Amount Assets Amount

Rs. P. Rs. P.

Sundry creditors 40,000 Cash in hand 2,000

Bank overdraft 22,000 Cash at bank 6,600
Bills payable 1,800 Machinery 60,000
Capital 2,00,000 Bills receivable 1,600
Add: Net profit 24,400 Sundry debtors 50,000
Less: Drawings 2,24,400 2,14,400 Furniture 18,000
Land 40,000
Closing stock 1,00,000

2,78,200 2,78,200

ed
bl I
pu M
ish
Re NI
be @
o ht
t t rig
No py
Co

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.123 167
IT & ITES Related Theory for Exercise 2.3.124
COPA - Using Accounting Software

Costing Systems
Objectives: At the end of this lesson you shall be able to
• understand costing, its types and cost classification
• differentiate budgeting and standard costing
• cost centre, cost category, cost centre reports
• inventory accounting with tally
• inventory report, inventory books, statement of inventory.

Introduction : Costing refers to fixing the costs of a Cost classification : Cost classification is the process of
product. The factors which determines the cost of a product grouping costs according to their common characteristics.
are known as elements of cost.
Costs may be classified according to their nature and
number of characteristics such as function, variability,
Elements of cost : There are three cost elements exist
controllability and normality.
in costing. They are
1 Nature : Costs are classified according to their nature
1 Material cost
as
2 Labour cost
a Materials cost
3 Expenses
b Labour cost

ed
– Material cost refers to the cost of raw materials used
c Expenses
for production of a product.
bl I
pu M
ish
– Labour cost refers to the wages paid to the workers 2 Function : According to the divisions of activity, costs
Re NI

in the manufacturing department. can be classified as

– Expenses refers to the expenditure by the way of
a Production cost
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rent depreciation and power cut.

b Admistrative cost
Concept of Direct and Indirect costs : The total expendi-
o ht

c Selling cost
ture may be classified as Direct cost and Indirect cost.
t t rig

d Distribution cost
Direct cost : The expenditure which can be conveniently
allocated to a particular job or product or unit of service is 3 Variability : According to their behaviour in relation to
No py

known as direct cost. changes in the volume of production cost can be

classified as
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Direct expenditure is made up of

a Fixed cost
1 Direct materials
b Semi fixed cost
2 Direct labour
c Variable cost
3 Direct expenses
4 Controllability : Costs are classified according to their
Indirect cost : The expenditure which cannot be conven- influences by the action of a given member of an
iently allocated to a particular job or product or unit of undertaking as
service is known as indirect cost.
a Controllable cost
In a firm producting a larger variety of articles most of the
b Uncontrollable cost
expenditure apart from materials and labour will be indirect.
5 Normality : Costs are classified according to the costs
Indirect expenditure is made up of
which are normally incurred at a given level of output as
1 Works of factory expenses
a Normal cost
2 Office and administrative expenses
b Abnormal Cost
3 Selling and distributive expenses
Presentation of total cost : The presentation of total cost
according to their nature is shown here.

168
Statement of total cost Add: Variable expenses ......................
“B” Marginal cost ......................
Rs.
Add: Fixed overhead ......................
Direct material cost ------------------
“C” Total cost ......................
Direct wage ------------------
Fixed and variable costs : Fixed costs are those costs
Direct expenses ------------------
which remain constant at all levels of production within a
“A” Prime cost ------------------ given period of time. In other words, a cost that does not
change in total but become, progressively smaller per unit
Add : Works on cost or when the volume of production increases is known as Fixed
Factory expenses ------------------ Cost. It is also called “Period Costs”.

“B” works cost ------------------ E.g., Rent, salary, Insurance charges, etc.,

Add: Office and administrative Variables costs are those costs which vary in accordance
Expenses ------------------ with the volume of output.

“C” cost of production ------------------ Absorption costing and Marginal Costing : Absorption
Add: Selling and Distribution costing is also termed as Traditional or Full Cost method.
In this method, the cost of a product is determined after
expenses ------------------ considering both fixed and variable costs. In absorption
“D” Cost of sale ------------------ costing all costs are identified with the manufactured
products.

ed
Add: Profit or Less: loss ------------------
Marginal costing is a technique where only the variable
bl I
pu M
__________ costs are considered while computing the cost of a
“E” Selling price
ish
------------------ product. The marginal cost of a product is in variable cost.
Re NI

In this method only variable costs are changed to the cost

__________ units. Fixed cost is written against contribution for that
be @

period.
The presentation of total cost according to their variability
is shown under. Hence we can derive a formula for contribution as under:
o ht

Statement of total costs Contribution = sale price - marginal cost

t t rig

Rs. Standard costing : Standard costing is a specialised

technique of costing. In this costing standard costs are pre-
Direct Material cost ...................... determined. Actual costs are compared with pre-deter-
No py

Direct wages ...................... mined costs. The variations between the two are noted and
analysed. Measures are taken to control the factors
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Direct Expenses ...................... leading to unfavourable variations. Standard costing serves

“A” prime cost ...................... as an effective tool in the hands of the management for
planning, coordinating and controlling of various activities
of the business.
Budgeting Vs Standard costing

Budgeting Standard costing

1 Budgeting considers operation of the business as a Standard costing considers only the control
whole Hence it is more extensive. of the expenses. Hence it is more intensive.

2 Budget is a projection of financial accounts. Standard cost is the projection of cost accounts.

3 It does not involve with standardisation of products. It requires standardisation of products.

4 Budgeting can be operated in part also. It is not possible to operate this system in parts.

5 Budget can be operated without any standards. Standard costing cannot exist without budget.

6 Budgets are maximum target of expenses above Standards are minimum targets which are to be attained
which actual expenses should not rise. by actual performance at specific efficiency level.

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.124 169
Cost Centres : Cost Centre is a location, person or item For example, a company has three departments such as
of equipment, in relation to which costs may be ascertained Marketing, Finance and Production. Each department has
and used for the purposes of cost control. been identified as a cost centre. The wages paid to the
respective workers of the department concerned is the
Any raw material, labour or other input used by an direct cost of that particular cost centre(department).
organisation for the manufacturing process is cost which However, if the rent of the building in which the production
is allocatable as direct or indirect costs to cost centres. departments are located is apportioned to the departments
on a scientific basis, then it is termed as an indirect cost
1 Direct Cost : A cost which is allocated to a cost centre of the cost centre.
is a direct cost of that particular cost centre.
This is the example of use of Cost Categories. The
2 Indirect Cost : A cost which is apportioned to different
Salesmen A, B and C can be Cost Centres under a
cost centres on a suitable basis is an indirect cost of
Category Executive. Similarly, you can create a new Cost
that particular cost centre.
Category projects under which Cost Centres such as
Cost Category: Cost Categories are useful for Airport construction, Road construction and Buildings may
organisations that require allocation of Revenue and Non- be created. So that the classification appears as following
Revenue Items to parallel sets of Cost Centres. The
examples of Cost Categories can be Region-wise, Grade-
wise, Department-wise and so on.

Cost Categories Departments Executives Projects

Marketing Salesman A Airport Construction

ed
Cost Centres Manufacturing Salesman B Road Construction

bl I
pu M
ish
Finance Salesman C Buildings
Re NI

Analysis using Cost Centres : Cost centre performance Ledger Break-up: This report displays the summary
can be measured using volume or relative percentage. For information of all Cost Centers for the selected Ledger.
be @

example. Direct variable cost can be monitored as a

percentage of sales or even as a percentage of cost of Group Break-up: This report displays the summary
o ht

production if there are effective process controls. Indirect information of all Cost Centers for the selected Group.
expenses can be monitored by creating a reasonable limit
t t rig

on the amount to be spent. Inventory Accounting With Tally : Inventory accounting

includes recording stock details, the purchase of stock,
No py

The following elements have to be kept in mind while the sale of stock, stock movement between storage
measuring cost performance. Location or Godowns, and providing information on stock
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availability. With Tally it is possible to integrate the inventory

1 Overall objective of the business. and accounting systems so that financial statements
reflect the closing stock value from the inventory system.
2 Changes in the business environment.
3 Ground realities. The inventory system operates in much the same way as
the accounting system.
Cost Centres in Tally : In Tally's cost centre allow for
multi dimensional analysis of financial information. The • First you set up the inventory details, which is a similar
cost centre feature in Tally allows you to allocate a operation to creating the chart of accounts although,
transaction to a particular cost entre, gives the cost centre in this case, there are No pre-defined set of stock
break-up of each transaction as well as details of groups.
transaction for each cost centre. A Profit and Loss
• Second, you create the individual stock items, which
Statement of every cost centre can also be obtained.
is similar to setting up the ledgers.
Cost Centre Reports : These are the following reports - • Finally, you are ready to use vouchers to record the
various stock transaction.
Category Summary : This report displays the summary
The Inventory features comprises of configurations/
of all the cost centers under a cost category.
functionality pertaining to Inventory transactions and
reports. The Inventory features are further sub-divided into
Cost Centre Break-up: This report displays Ledger and
seven sections:
Group summary information for the selected cost centre.

170 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.124
General 4 Stock Transfers : Stock transfer report display entries
made using stock journal vouchers.
Storage & Classification
5 Physical Stock Register : Physical stock register is
used to record actual stock available, i. e. Stock found
Order Processing
on conducting a stock check. It is not unusual to find a
Invoicing discrepancy between the actual stock and the computer
recorded stock figure. If inventory vouchers have been
Purchase Management configured to ignore physical stock differences, these
physical stock vouchers will be useful for recording
Sales Management purposes.

Other Features Statements of Inventory : There are Godown, stock

categories, stock query, reorder status, purchase bills
Inventory Reports : Tally generates inventory reports pending, sales bills pending.
based on vouchers entries made. You can use the
customised reports to compare inventory data between 1 Godown : A place where stock items are stored is
different companies, periods of the financial year and so referred to as Godowns. You can specify where the
on. There are Inventory Books and Statements of Inventory. stock items are kept, e.g. warehouse, shelf or rack,
etc, and obtain stock reports for each Godown, and
Inventory Books : In inventory books there are stock item, account for movement of stock between locations/
group summary, stock transfers, physical stock register. Godowns.
2 Stock Categories : This is a feature, which offers a
1 Stock Items : Stock item refers to goods in which you parallel classification of stock items. Like Stock Groups,
deal-that is, goods that you manufacture or trade(sell

ed
classification is done based on some similar behavior.
and purchase). It is the primary inventory entity. Similar
bl I The advantage of categorizing items that Tally allows
pu M
to ledgers being used in accounting transactions - you

ish
you to classify stock items (based on functionality)
have to use Stock Item in Inventory transactions. together - across different stock groups, enabling you
Re NI

Therefore, Stock Items are important in Inventory like to obtain reports on alternatives or substitutes for a
how Ledgers are important in Accounting. stock item.
be @

2 Units of Measure : Stock items are mainly purchased 3 Stock Query : Stock query allows you to obtain all
and sold on the basis of quantity. The quantity is information about a stock item. It displays all the
measured by units. In such a case, it is necessary to
o ht

necessary real time information about an item that you

create the unit of measure. Units of measure can be may require to help negotiate order with a customer on
t t rig

simple units such as nos., meters, kilograms, pieces, a single screen. It also display cost and price details
or compound units, e.g. box of 10 pieces. Create the of alternative items.
units of measure before creating the stock items.
No py

4 Purchase Bills Pending : Purchase bills pending

displays all instance of incomplete purchases where
Co

3 Stock Groups : Similar to Groups in Accounting goods may have been received, but not fully invoiced.
Masters - these are provided for the purpose of It also displays instances of invoices received, but
classification of stock items. Classification is done goods have not been received.
based on some common behavior. Grouping stock items 5 Sales Bills Pending : Sales bills pending displays all
enables easy identification and reporting of stock items instance of incomplete sales where goods may have
in Statements. The group summary statement shows been delivered, but not fully invoiced. It also displays
the closing balances of accounts under the selected instances of invoices raised, but goods have not been
group upto the current date. For example, items of a
delivered.
particular brand can be grouped together so that you
can get the inventory details of all items of that brand.
It is NOT necessary to group items.

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.124 171
IT & ITES Related Theory for Exercise 2.3.125 & 2.3.126
COPA - Using Accounting Software

Budgeting systems, Scenario management and Variance analysis

Objectives: At the end of this lesson you shall be able to
• understand the meaning of budget & budget manual
• know the budget period, classification of budgets and its types
• understand scenario management
• understand variance analysis.

Introduction : Planning has become the primary function 1 Budget controller : The chief executive is ultimately
of management these days. Budgets are nothing but the responsible for the budget programme. But large part of
expressions, largely in financial terms of management’s the supervisory responsibility is deligated to an official
plan for operating and financing the enterprise during designated as budget controller or budget director. The
specific periods of time. budget controller should have knowledge of the techni-
cal side of the business and should report direct to the
A budget is a detailed plan of operations for some specific president of the organisation.
future period. It is an estimate prepared in advance of the
2 Budget committee : The Budget controller will be
period to which it applies. It acts as a business barometer
assisted in his work by the Budget committee. The
as it is complete programme of activities of the business for
budget committee will consists of heads of the various
the period covered.
departments as production, sales, finance, etc., Budget
controller is the chairman of the committee. It will be the
Essentials of a Budget

ed
duty of the budget committee to submit, discuss and

bl I
a It is prepared in advance and is based on a future plan finally approve of the budget figures. Each Head of the
pu M
ish
of actions Department will have his own sub-committee with
executive working under him as in members.
Re NI
b It relates to a future period and is based on objectives
to be attained
Fixation of the Budget Period : Budget period means
be @

c It is a statement expressed in monetary and / or the period for which a budget is prepared and employed.
physical units prepared for the implementation of policy
formulated by the management. The budget period will depend upon the following:
o ht

Budget manual : The budget manual is a written docu-

t t rig

1 The nature of the business and

ment or booklet which specifies the objectives of the
2 The control techniques to be applied
budgeting organization and procedures.
No py

For example, a seasonal industry will budget for each

The following are the important matters covered in a budget
Co

season. An industry requiring long periods to complete

manual
work will budget for 3 or 4 or 5 years. But Budget period
should not be longer than that of what is necessary.
1 A statement regarding the objectives of the organisa-
tion and how they can be achieved through budgetary
Budget Procedure
control.
2 A statement regarding the functions and responsibili- Determination of key factor : Key factor indicates whose
ties of each executive regarding preparation of budget influence must first be assessed in order to ensure the
and execution of budget. accomplishment of the functional budgets. Functional
budget is related to different functions of a business, e.g.,
3 Procedures to be followed for obtaining the necessary
sales, production, purchases, cash, etc.,
approval of budgets.
4 Time table for all stages of budgeting. The budget related to the key factor should be prepared
first. Then the other budgets.
5 Reports, statements, forms and other records to be
maintained.
General list of key factors in different industries are given
6 The accounts classification is to be employed. below:

Responsibility for Budgeting : There are two things Industry Key factor
responsible for budgeting. They are the budget controller
1 Motor car Sales demand
and the budget committee.
2 Aluminium power

172
3 Petrolium Refinery Supply of crudeoil d Purchase Budget : This budget forecasts the quantity,
and value of purchases required for production. It gives
4 Electro optics Skilled technicians
quantity -wise, money-wise and period - wise informa-
5 Hydral power generation Monsoon tion about the materials to be purchased

Making of forecasts : A forecast is the statement of facts e Personnel Budget : This budget anticipates the quan-
likely to occur that may affect the flow of budget. Forecast tity of personnel required during a period for production
is done before the budgeting starts. Forecasts are made activity
regarding sales, production cost and financial require- f Research Budget : This budget relates to the research
ments of the business. works for improvement in quality of products or research
for new products.
Consideration of alternative combination of forecasts:
g Capital Expenditure Budget : This budget provides a
Alternative combinations of forecasts are considered with
guidance regarding the amount of capital that may be
a view to obtain the most efficient overall plan so as to
required for procurement of capital assets during the
achieve maximum profit.
budget period
Preparation of Budgets : After finalising the forecasts, h Cash Budget : This budget forecasts the cash position
the actual budgets will be prepared. One budget may be by time period for a specific duration of time
prepared on the basis of the other budget. For example
i Master Budget : This is a summary budget incorporat-
production budget will be prepared on the basis of the sales
ing all functional budgets in a capsule form.
budget.
Flexibility based Budget
Classification of Budgets
a Fixed Budget : A budget prepared on the basis of a

ed
Budgets can be classified into three most common types
standard or a fixed level of activity is called a fixed
1 Time based Budget
bl I budget. It does not change with the change in the level
pu M
2 Function based budget
ish of activity
Re NI

3 Flexibility based budget b Flexible Budget : A budget designed in a manner so

as to give the budgeted cost of any level of activity is
be @

Time based budget : In terms of time, the budget can termed as a flexible budget.
broadly be classified into four categories
Accounting Features : The Accounting Features con-
o ht

a Long term Budget : A budget designed for a long sists of configurations / functionality, which generally
affects accounting transactions and reports. The account-
t t rig

period is termed as long term budget. The period may

be from 5 to 10 years ing features are further sub-divided into six sections,
namely:
No py

b Short term budget : A budget designed for a period

generally not exceeding 5 years is termed as short term General
Co

budget
Out standings Management
c Current budgets : A budget which is prepared for a
very short period, say a month or a quarter is termed as Cost /Profit Centers Management
current budget Invoicing
d Rolling Budgets : A budget which is designed for a Budgets / Scenario Management
year in advance is termed as Rolling Budgets or
Progressive Budgets Other Features

Function Based Budget Scenario Management: This is a management tool

which displays of accounts and inventory related informa-
a Sales Budget : This budget forecasts total sales in tion, by selectively including certain types of vouchers. It is
terms of quantity, value, items, periods, area, etc., a forecasting tool which forecast the expenses using
b Production Budget : This budget is based on sales provisional Vouchers and includes them in the reports.
budget. It forecasts quantity of production in terms of
Scenario Analysis : Scenario planning is also called
items, periods, areas, etc.,
scenario analysis. It is a strategic planning method that
c Cost of Production budget : This budget forecasts the some company use to make flexible long-term plans. Thus
cost of production, separate budgets are prepared for the scenario analysis is process of analyzing possible
different elements of costs. future events by considering alternative possible out-
comes.

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.125 & 2.3.126 173
Several Scenarios are demonstrated in a scenario analysis standard amount and the actual amount incurred/sold.
to show possible future outcomes. It is useful to generate Variance analysis is usually associated with explaining
a combination of an optimistic, a pessimistic and a most the difference (or variance) between actual costs and the
likely scenario. standard costs allowed for the good output. For example,
the difference in materials costs can be divided into a
Variances : Variances can be computed for both costs materials price variance and a materials usage variance.
and revenues. The difference between the actual direct labor costs and
the standard direct labor costs can be divided into a rate
The concept of variance is connected with planned and variance and an efficiency variance. The difference in
actual results. It is effect to the difference between those manufacturing overhead can be divided into spending,
two on the performance of the company. efficiency, and volume variances. Mix and yield variances
can also be calculated.
Variance Analysis : Variance analysis is a tool of budg-
etary control by evaluation of performance by means of Variance analysis helps the management to understand
variances between budgeted amount, planned amount or the present costs and thereafter control the future costs.

ed
bl I
pu M
ish
Re NI
be @
o ht
t t rig
No py
Co

174 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.125 & 2.3.126
IT & ITES Related Theory for Exercise 2.3.127 & 2.3.128
COPA - Using Accounting Software

Concepts of Ratios, Analysis of financial statements

Objectives: At the end of this lesson you shall be able to
• understand the concept of stock
• understand ratio analysis
• understand cash flow
• understand fund flow accounting
• explain the invoice.

Introduction : In a trading business one of the current 250 units @ Rs.11.50 Rs.2,875
assets is stock. It represents goods owned by the company
50 units @ 11.00 Rs. 550
that are for sale to customers. The owners always aware
of stock. Once a year the stock is counted and valued.
Total Rs.3,425
The system used for counting stock and evaluating the
LIFO : In this case the latest consignments are used first.
value of the stock is known as Inventory system. When
Hence the closing stock is supposed to be out of the
business has a more extensive stock, Inventory system is
earliest lots on hand. For the above example, the stock will
used. Stock is controled with the Inventory system.
be valued at Rs.3,100, as under:
Closing stock and its valuation : Closing stock means
200 units @ Rs.10 Rs.2,000

ed
closing stock of raw materials or goods manufactured. The
closing stock must be valued and an entry passed at the 100 units @ Rs.11 Rs.1,100
bl I
pu M
end of the year.

ish Rs.3,100
Re NI

– Suppose an article is purchased for Rs.100. If the article Average Method : In this case all the lots are merged
remains unsold at the end of the year, it will be included together and value of the closing stock is calculated
be @

in the closing stock at Rs.100 even if the selling price accordingly. The average may be simple or weighted.
is more
Simple average Method : In this method, the average
o ht

– But if the article can now be sold at Rs.95only, it should

be included in the closing stock at Rs.95 only price for single unit is
t t rig

– Goods which cannot be sold at all should not be = Rs.10 + Rs.11 + Rs.11.50
included in the closing stock. 3
No py

= 32.50
Casting stock Value : Stock value can be calculated in 3
Co

four methods. They are

= Rs.10.83
1 First in First out (FIFO)
The value for closing stock is = 300 x 10.83 = Rs.3,249
2 Last In First Out (LIFO)
3 Average Weighted Average method : Weighted average method
is most suitable, since the quantities are also taken into
4 Base stock method
account.
FIFO : In this case the earliest lots are exhausted first. The
In this method the average price for single unit is Rs.10.90,
stock on hand is out of the latest consignments received
calculated as under.
and is valued accordingly.
Suppose following lots were received: Number of units price Amount
16th October 200 units @ Rs.10 Rs. Rs.
20th November 300 units @ Rs.11
200 10 2,000
15th December 250 units @ Rs.11.50
300 11 3,300
The closing stock consists of 300 units . The value will be
250 11.50 2,875

750 Total 8,175

175
Unit cost = 8,175 2 Sales made during these two weeks amounted to
Rs.3000. The firm makes a gross profit of 33 1/3% on
750
sales. Find out the value of closing stock on 30th June,
= 10.90 2001.

The value of 300 units = 300 x 10.90 For this case the statement of stock can be calculated as
under:
= Rs. 3,270
Statement of stock
Base Stock Method : In this method, the minimum stock
carried by the factory is valued at the price originally paid Stock on 30th June 2001
for it. The excess of actual stock over the minimum level is
Rs.
valued according to the current cost, calculated in one of
the three methods given above. Sales 3,000
Less 33 1/3% on sales 1,000
Suppose the minimum stock is 200 units and the original
price paid was Rs.8 per unit. Sales at cost 2,000
Value of stock two weeks after 22,500
The value of stock of 200 units @ Rs.8 = Rs.1,600
30th June 2001
The value of remaining 100 units is calculated with the unit
Less:purchases during 2 weeks 500
price of Rs.11.50 or Rs.11.00 or 10.83 or 10.90
Value of stock on 30th June 2001 22,000
Statement of stock : M/s. Nanda & Bose close their

ed
financial books on 30th June 2001. Stock taking continues
for two weeks after this date. In 2001, the value of stock Inventory control and Reordering : Inventory control
bl I
pu M
came to Rs.20,500, without making adjustments for the system always monitors the availability of stock. In any
following:-
ish business minimum stock should be maintained for
Re NI

uninterupted sale. If the minimum stock level falls, then the

1 Purchases made during the two weeks after 30th June purchase order for that product is to be made.
2001 were Rs.500
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The minimum stock level below which purchase order is to

be made is known as reorderlevel. If the stock level falls
o ht

below the reorder level purchase order is proposed.

t t rig

Example
No py

Item No. Description Stock Reorder Reorder

level yes/no
Co

10283 REXONA BIG 125 50 N

10284 REXONA SMALL 25 50 Y
10285 CINTHOL NEW 85 75 N
10286 CINTHOL OLD 15 25 Y
10287 VICCO PASTE 100 10 15 Y
10288 VICCO PASTE 50 00 15 Y
10289 VICCOTURMERIC 15 27 N

Purchase order should be made for the items 10284, In Accounting, there are many standard ratios used to try
10286, 10287, 10288. Hence the purchase order can be to evaluate the overall financial condition of a corporation or
proposed using the inventory control system. other organization. It are also compared across different
companies in the same sector to see how they stack up,
Ratio Analysis : Ratio Analysis is used to evaluate various and to get an idea of comparative valuations.
aspects of a company's operating and financial perform-
ance such as its efficiency, liquidity, profitability and Types of Ratios :
solvency.
1 Financial Ratios : These are categorized according to
the financial aspect of the business which the ratio

176 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.127 & 2.3.128
 measures. It allow for comparisons between compa- Fund Flow Accounting : These statements give the
nies, between industries, between different time peri- information of funds on a particular date. The purpose of
ods for one company, between a single company and preparation of funds flow statements is to know about from
its industry average. where funds are coming and where being invested. The fund
flow stalemates is generally prepared from the data iden-
2 Liquidity Ratios : It is measure that the availability of
tifiable and profit and loss account and balance sheets.
cash to pay debt.
Fund Flow statement is also called as sources and
3 Activity Ratios : It is measure how to quickly a firm application of funds. It shows the detail of funds business
converts non-cash assets to cash assets. received from sources and the amount of funds the busi-
4 Debt Ratios : It is measure the firm's ability to repay ness used for different purpose in the year.
long-term debt.
Invoice : While making a sale, the seller prepares a
5 Profitability Ratios : It is measure the firm's use of its statement giving the particulars such as the quantity, price
assets and control of its expenses to generate an per unit, the total amount payable, any deductions made
acceptable rate of return. and shows the net amount payable by the buyer. Such a
6 Market Ratios : It is measure the investor response to statement is called invoice.
owning a company's stock and also the cost of issuing
An invoice is a statement of list of goods with their quantity
stock.
and price.
Cash Flow Accounting : In accounting cash flow is the
An invoice is a business document which is prepared by
difference between the amount of cash available at the
sellers and given to buyers. Usually the invoice are pre-
opening balance (beginning of a period) and the amount at
pared in triplicate one copy will be issued to the buyer. The
the closing balance (end of that period).
after two copies will be retained by the seller.

ed
When Cash is coming in from customers or clients who are
bl I
buying your products is called accounts receivable and
Inward Invoice : To the buyer, he calls the invoice as
pu M
ish
'inward invoice'. He enters the details of the invoice in his
when the cash is going out of your business in the form of
purchase book.
Re NI
payments for expenses like rent, loan payment is called
accounts payable.
Outward Invoice : To the seller, he calls the invoice as
be @

'outward invoice'. He enters the details of the invoice in his

The net cash flow of a company over a period is equal to the
sales book.
change in cash balance over this period : positive if the cash
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balance increases, negative if the cash balance decreases.

Details of the Invoice : The invoice should give the
The total net cash flow is the sum of cash flows that are
following details:
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classified in three areas:

1 Name and address of the seller
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1 Operational Cash Flows : Cash received or expended

as a result of the company's internal business activi- 2 Name and address of the buyer
ties. It includes cash earnings plus changes to working
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3 Invoice Number
capital.
4 The Date
2 Investment Cash Flows : Cash received from the sale
of long-life assets, or spent on capital expenditure. 5 Quantity, description, unit price, amount of the goods
sold
3 Financing Cash Flows : Cash received from the issue
of debt and equity, or paid out as dividends, share 6 Trade discount and cash discount, if necessary
repurchases or debt repayments. 7 Expenditure
In financial accounting, a cash flow statement is also 8 Net amount
known as statement of cash flows which is a financial 9 Signature of the invoicing authority
statement that shows how changes in balance sheet
accounts and income affect cash and cash equivalents, 10 E. & O. E. at the left bottom corner of the invoice
and breaks the analysis down to operating, investing and
financing activities. The cash flow statement is concerned E. & O. E. means Errors and Omission Excepted. This
with the flow of cash in and out of the business. indicates that if errors and omissions are found out, the
matter can be reported and settled and the seller under
takes to correct them.

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.127 & 2.3.128 177
IT & ITES Related Theory for Exercise 2.3.129
COPA - Using Accounting Software

Tax processing in Tally

Objectives: At the end of this lesson you shall be able to
• explain statutory & taxation
• explain direct & indirect taxes
• explain VAT & service tax processing
• explain TDS, TCS, FBT taxes
• explain GST.
Statutory & Taxation : The Statutory & Taxation features The buyer files the TDS returns containing details of the
comprises of configurations/functionality pertaining to seller and the bank, where the Tax Deducted at Source
statutory compliances available in Tally.ERP9. The amount is deposited to the Income Tax Department.
Statutory features are country specific and strictly depends
upon the Country selected in the Company Creation Tax Collected at Source : Tax Collected at Source (TCS)
screen. The following features are available, when India is is income tax collected by seller in India from payer on
selected in the Statutory Compliance for field in the sale of certain items. The seller has to collect tax at
Company Creation screen. specified rates from the payer who has purchased these
items :
• Excise
• Alcoholic liquor for human consumption
• Value Added Tax

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• Tendu leaves
• Service Tax
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• Timber obtained under a forest lease

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• Tax Deducted at Source
• Timber obtained by any mode other than under a forest
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• Tax Collected at Source
lease
• Payroll
• Any other forest produce not being timber or tendu
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• Income Tax leaves

• GST • Scrap
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• Parking lot
Tax : The Tax is a financial charge upon an individual
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(called taxpayer) by a country / state or the functional • Toll plaza

equivalent of a state such that failure to pay, is punishable
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• Mining and quarrying

by law.
The TCS on the above mentioned items vary from 1% to
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Taxes are two types : direct or indirect taxes.

5%.
Direct Taxes : Direct Taxes are taxes collected by
FBT : Fringe Benefits Tax (FBT) is taxation of most which
government, directly from tax payers, through levies such
are generally non-cash employee benefits. A new tax was
as income tax, wealth tax and interest tax. In the case of
imposed on employers by India's Finance Act 2005 was
direct taxes, the incidence and burden of paying the tax
introduced for the financial year commencing April 1, 2005.
falls on the same person.
The fringe benefit tax was temporarily suspended in the
2009 Union budget of India by Finance Minister Pranab
TDS : Tax Deducted at Source (TDS) is one of the modes
Mukherjee.
of collecting income tax in india. The buyer (deductor)
deducts the tax from the payment made to the seller
The following items were covered:
(deductee) and remits the tax to the Income Tax
Department within the stipulated time.
• Employer's expenses on entertainment, travel,
employee welfare and accommodation. The definition
The buyers (Corporate and Non-Corporate) make payments
of fringe benefits that have become taxable has been
(such as Salary, Rent, Dividends, Professional Fees,
significantly extended. The law provides an exact list
Commission, etc) to the sellers (Services) and deduct the
of taxable items.
requisite amount from such payments towards tax.
• Employer's provision of employee transportation to work
These taxes are on Immovable Property, Contractor, Rent or a cash allowances for this purpose.
of Machinery, Rent of Land and Building.
• Employer's contributions to an approved retirement plan
(called a superannuation fund).

178
• Employee stock option plans (ESOPs) have also been Invoice
brought under fringe benefits tax from the fiscal year
2007-08. Rule 4A prescribes that taxable services shall be provided
and input credit shall be distributed only on the basis of a
Indirect Taxes : Indirect Tax, imposed on commodities, bill, invoice or challan. Such bill, invoice or challan will
is indirectly borne by the people. It includes value added also include documents used by service providers of
tax, sales tax, customs duty, excise duty. In the case of banking services (such as pay-in-slip, debit credit advice
indirect taxes, the person on whom the incidence to pay etc.) and consignment note issued by goods transport
the tax falls is different from the person who carries the agencies. Rule 4B provides for issuance of a consignment
burden of paying the tax. note to a customer by the service provider in respect of
goods transport booking services.
Service Tax
Value Added Tax : The Government of India has, after
Service Tax is a tax imposed by Government of India on committing to the World Trade Organization regime,
services provided in India. The service provider collects decided to modernize and streamline its indirect taxation,
the tax and pays the same to the government. It is charged in the light of the experience of other WTO member
on all services except the services covered in the negative countries. The Government has availed of the services of
list (Section 66d of Finance Act'1994) of services & services the international management consulting firm for drafting
covered under Mega Exemption Notification (Notification of rules, procedures and forms for introduction of VAT. VAT
NO. 25/2012 ST dated 20.06.2012). The current rate is is prevalent in over 140 countries including India.
12.36% on gross value of the service. Introduction of VAT would be a historic reform of the
domestic trade tax system. It is expected to facilitate the
Dr.Raja chelliah committee on tax reforms recommend states and union territories to transit successfully from
the introduction of service tax. Service tax had been first the erstwhile sales tax system to modern domestic system.

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levied at a rate of five per cent flat from 15 July 1994 till 13

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May 2003, at the rate of eight percent flat w.e.f 1 plus an A Value Added Tax (VAT) is applies the equivalent of a
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education cess of 2% thereon w.e.f 10 September 2004 le sales tax to every operation that creates value. The example
services provided by service providers. The rate of service is a Toy manufacturer company imported plastic. That
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tax was enhanced to 12% by Finance Act, 2006 w.e.f company will pay the VAT on the purchase price, remitting
18.4.2006. Finance Act, 2007 has imposed a new that amount to the government. The company will then
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secondary and higher education cess of one percent on use the plastic into a toy, selling the toy for a higher price
the service tax w.e.f 11.5.2007, increasing the total to a wholesale distributor. The company will collect the
education cess to three percent and a total levy of 12.36 VAT on the higher price, but will remit to the government
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percent. The revenue from the service tax to the only the excess related to the "value added". The wholesale
Government of India have shown a steady rise since its distributor will then continue the process, charging the
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inception in 1994. The tax collections have grown retail distributor the VAT on the entire price to the retailer,
substantially since 1994-95 i.e. from Rs. 410 crores in but remitting only the amount related to the distribution
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1994-95 to Rs.132518 crores in 2012-13. The total number mark-up to the government. The last VAT amount is paid
of Taxable services also increased from 3 in 1994 to 119 in by the retail customer who cannot recover any of the
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2012. However, from 1 July 2012 the concept of taxation previously paid VAT. For a VAT and Sales Tax of identical
on services was changed from a 'Selected service approach' rates, the total tax paid is the same, but it is paid at differing
to a 'Negative List regime'. This changed the taxation points in the process.
system of services from tax on some Selected services to
tax being levied on the every service other than services VAT is usually administrated by requiring the company to
mentioned in Negative list. complete a VAT return, giving details of VAT it has been
charged (input tax) and VAT it has charged to others
Service Tax Return (output tax). The difference between output tax and input
tax is payable to the Local Tax Authority.
According to Rule 5 of Service Tax Rules, 1994, records
include computerized data and means the record as If input tax is greater than output tax the company can
maintained by an assessee in accordance with the various claim back money from the Local Tax Authority.
laws in force from time to time. Records maintained as
such shall be acceptable to Central Excise Officer. Every Mechanism of tax credit:
assessee is required to furnish to the Central Excise Officer
at the time of filing his return for the first time a list of all For the VAT auditors, the knowledge of tax credit is utmost
accounts maintained by the assessee in relation to Service important. Therefore it is necessary to understand the
Tax including memoranda received from his branch offices. mechanism of tax credit.
This intimation may be sent along with a covering letter
while filing the service tax return for the first time. WHAT is Tax Credit ?

1 It is a salient feature of VAT.

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.129 179
2 It is available to registered Purchasing Dealer. Tally.ERP 9 ensures you generate GST invoices and
transactions as per the GST format.
3 Availability of the credit of tax paid on purchases of
taxable goods.
Able to file GSTR-1, GSTR-3B and GSTR-4 on your own
4 Tax credit is available at the point of purchases. by exporting data to the Excel Offline Utility tool or in
JSON format as per the GST portal. The unique error
5 Purchases of goods should be intended for the specific
detection and correction capability ensures that you file
purposes.
returns accurately.
6 Original Tax Invoice is must stating separate amount
of tax charged. When it comes to e-Way Bills, Tally.ERP 9 helps you to
easily generate and manage e-Way Bills. You can capture
7 Tax credit is not dependent or related either sale of
all the required information at invoice level itself, export
very goods or it is used in manufacturing.
the data in JSON format and upload the data in the e-Way
8 Tax Credit is adjustable against payment of tax / liability portal to generate the e-Way Bill.
of tax.
In the year 2005, VAT was introduced to overcome
GST (Goods and Services Tax) cascading affect (tax on tax). While VAT did eliminate the
cascading tax effect on the indirect taxes within a state,
- Goods and Services Tax (GST) is an indirect tax levied the cascading effect of other indirect taxes across the
in India on the supply of goods and services. country, still remained. For example, the Central Sales
- GST has been introduced to replace multiple indirect Tax (CST) applicable on interstate trade was non-creditable,
taxes levied by State and Central Governments in order leading to a break in the input credit chain. Similarly, a
to simplify the indirect tax. manufacturer charging Excise Duty on sale to a dealer
caused the chain to break. This uncreditable tax found its

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- GST is levied at every step in the production process, way into the product cost.
but is refunded to all parties in the chain of production
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other than the final consumer.

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GST on the other hand, allows for seamless flow of tax
- GST is a comprehensive Value Added Tax (VAT) on credit, and eliminates the cascading effect of all indirect
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goods and services. taxes across the supply chain from manufacturers to
retailers, and across state borders.
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- France was the first country to introduce this system

in 1954. Today it has spread to over 140 countries. A quick comparison of the taxes one paid in the previous
regime and in the current regime, will able to understand
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- Comprehensive dual GST has been implemented in

India Since 1st July 2017. the aspect of GST vs VAT clearly.
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GST means different things to different stakeholders. • Previous Regime-Taxes paid by the dealer (Excise)
Businesses registered as regular dealers need to file their to the manufacturer is added to the cost. When the
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GSTR-1 on a monthly basis if their aggregate turnover dealer sells down the chain, VAT keeps getting charged
exceeds 1.5 Cr. Businesses with aggregate turnover less on the sum of actual product cost + excise component,
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than 1.5 Cr have to do GSTR-1 return filing on a quarterly and the VAT keeps getting levied at every point of sale,
basis. Also, both the businesses need to file their GSTR- till it reaches the end customer.
3B on a monthly basis.
• GST Regime- Taxes paid by dealer (CGST + SGST)
On the other hand, composite dealers have to file GSTR- to manufacturer is not added to cost. This is because
4 on a quarterly basis. Also, going forward, as e-Way bill GST allows the dealer to set off the tax liability of CGST
becomes mandatory for interstate and intrastate + SGST. This is one of the fundamental features of
movement of goods worth Rs. 50,000/- GST, which allows seamless credit from manufacturer
to dealer, and eliminates the cascading effect of taxes.
Components of GST? At the 26th GST Council meeting, it has been decided to
implement he inter-state e-way bill from 1st April, 2018.
There are 3 taxes applicable under GST: CGST, SGST & For intra-state movement, the e-way bill will be rolled out
IGST. in a phased manner starting from 15th April, 2018, such
that all states are covered by 1st June, 2018.
CGST: Collected by the Central Government on an intra-
state sale (Eg: Within the same State) Eway bill - Introduction
SGST: Collected by the State Government on an intra- In its 22nd meeting, the GST Council decided and
state sale (Eg: Within the same State ) recommended that the e-way bill under GST shall be
introduced in a staggered manner from 1st January, 2018,
IGST: Collected by the Central Government for inter-state and will be rolled out nationwide from 1st April, 2018.
sale (Eg: one state to another state)

180 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.129
However, at the recently concluded 24th GST Council If the recipient of goods doesn’t communicate acceptance
meeting held on 16th December, 2017, it was announced or rejection within 72 hours, it will be deemed as accepted
that the e-way bill will be launched from the 1st of February, by the recipient. The facility of generation and cancellation
2018 – a full two months ahead of the earlier plan. of E-Way Bill will be made available through SMS.

The GST Council, reviewed the readiness of the hardware HSN stands for Harmonized system of Nomenclature which
and software required for the nationwide rollout of e-way was developed by world customs organisations (WCO)
bill, and has announced the renewed date, post discussions with the vision of classifying goods all over the world in a
with all the States. systematic manner.

The E-Way Bill is applicable for any consignment value HSN Contains six digit uniform code that classifies
exceeding INR 50,000. Even in case of inward supply of 5000 + products and which is accepted world wide. HSN
goods from unregistered person, E-Way Bill is applicable. code describes the commodity/product.
The E-Way Bill needs to be generated before the
commencement of movement of goods. Form GST EWB- India has already been using HSN system in the central
01 is an E-Way Bill form. It contains Part A, where the excise and customs regime.
details of the goods are furnished, and Part B contains
vehicle number. For multiple Consignments the transporter Tax payers whose turnover is below Rs.1.5 crores are not
should generate a consolidated E-Way Bill in the Form required to mention HSN code in their invoices. The list of
GST EWB 02 and separately indicate the serial number HSN codes are available in public domain.
of E-Way Bill for each of the consignment.
The E-Way Bill format in GST comprises of 2 parts – Part
Upon generation of the E-Way Bill, on the common portal, A and Part B.
a unique E-Way Bill number called ‘EBN’ will be made

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available to the supplier, the recipient and the transporter.

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IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.129 181
GST E-Way Bill Format A.7 : Reason for Transportation : The reason for
transportation is pre-defined and you need to select the
FORM GST EWB-01 most appropriate option from the list.

(See Rule 138) Code Description

E-Way Bill 1 Supply

2 Export or Import
PART A
3 Job Work
A.1 : GSTIN of Recipient : Mention the GSTIN number of
4 SKD or CKD
the recipient.
5 Recipient not known
A.2 : Place of Delivery : Mention the Pin Code of the
6 Line Sales
place where goods are delivered.
7 Sales Return
A.3 : Invoice or Challan Number : Mention the Invoice or
8 Exhibition or fairs
Challan number which the goods are supplied.
9 For own use
A.4 : Invoice or Challan Date : Mention the Invoice or
10 Others
Challan Date which the goods are supplied.
A.8 : Transport Document Number : This indicates either
A.5 : Value of Goods: Mention the consignment value of one of the Goods Receipt Number, Railway Receipt
goods. Number, Airway Bill Number or Bill of Lading Number.

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A.6 : HSN Code :enter the HSN code of goods which are PART-B
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transported. If your turnover is up to INR 5 crores, you

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need to mention the first 2 digits of HSN code. If it is more B.1 : Vehicle Number : the vehicle number in which goods
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than INR 5 crores, 4 digits of HSN code are required. are transported needs to be mentioned. This will be filed
by the transporter in the common portal.
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FORM GST EWB-02

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(See Rule 138)

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Consolidated EWay Bill

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Number of EWay Bills: :

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EWay Bill Number

182 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.129
IT & ITES Related Theory for Exercise 2.3.130
COPA - Using Accounting Software

Utilities
Objectives: At the end of this lesson you shall be able to
• utilities in Tally
• split company data
• export master data
• import master, vouchers
• enable Tally vault password.

Utilities & Others @ Tally.ERP9

• Back Up / Restore

• Split Company Data

• Tally.ERP 9 Vault

• Exporting Master Data

• Importing Data

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• Consolidation of Accounts

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• Password or Security Control

• Enabling Cheque Printing ish

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• Credit Limits
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• Bills of Materials (BOM)

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• Re-Order Levels and Re-Order Quantity

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• Price Levels or Price List

• Interest Calculations
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• Voucher Classes & Voucher Types (Creations)

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• Point of Sale ( POS Invoicing )

Splitting Company Data based on Financial Years • The company data is verified to ensure that no errors
occur during splitting using the Verify Company Data
Prerequisites for splitting company data option.
Before splitting the data, the user must ensure that: To split the company data

• A backup of the data exists. 1 Go to Gateway of Tally > F3 : Cmp Info . > Split
Company Data > Select Company .
• All unadjusted forex gains/losses have been fully 2 Select the required company from the List of
adjusted by recording journal entries. Companies .
• No purchase/sales bills are due. Check the Profit & 3 Enter the required date in the Split from field.
Loss A/c and inventory statements (purchase/sales
bills pending). You have to account them in the
respective party accounts or in the bills pending
account.

183
The Split Company Data screen appears as shown below: Fig 2
(Fig 1)

Fig 1

Importing Masters

Import masters previously exported from Tally.ERP 9 in

4 Press Enter to split the company data. XML format into the data of a company. Before importing,
ensure that all the same features are enabled and disabled
Important points to remember: in the Company Features as the company from which
the data is being imported.
• The Split from date is based on the existing data, and
is considered as the beginning of the current financial For example, if you want to import masters created in
year. ABC Company to a new company - XYZ Company. The

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options Maintain stock categories and Maintain batch-
• Once the company data is split, two separate
wise details must be enabled in ABC company before
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companies will be created and opened, without any
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exported the masters. To import masters into XYZ
changes to the original data.
ish Company, you need to ensure that both the options
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• After the split, all the companies act as separate Maintain stock categories and Maintain batch-wise
companies. You can make entries, display reports and, details are enabled in XYZ Company before importing.
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alter any data in these companies.

To import masters
Export Data from Masters in Tally.ERP 9
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1 Go to Gateway of Tally > Import Data > Masters .

To export masters
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2 Enter the name of the .xml file to be imported, if the file

is located in the Tally.ERP 9 application folder.
1 Go to Gateway of Tally > Display > List of
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Accounts.
Note: By default, the export location is the
2 Click E : Export to open the Export Report . Tally.ERP 9 installation folder, which is also the
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default import location. Therefore, it is not

3 Press Backspace to configure the export options.
required to specify the file path during import.
4 Select the Language . If the path is other than the installation folder,
you must specify the exact location path, for
5 Select the Format .
example, C:\Export_Files\XML\Master.xml or
6 Enter the Export Location . C:\Export_Files\XML\DayBook.xml
7 Enter the Output File Name .
3 Select the Behaviour to define the method by which
8 Select the Type of Masters to be exported. the existing entries in the company will be treated.
9 Set the option Include dependent masters? to Yes .
The Import Masters screen appears as shown below:
10 Enable Export Closing Balances as Opening , if (Fig 3)
required. The Export Report screen appears as shown
below: (Fig 2) Fig 3

11 Press Enter to export.

The exported file is saved in the location specified.

4 Press Enter to import.

184 IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.130
Importing Vouchers 2 In the Change Tally Vault screen select the required
company from the List of Companies.
Importing vouchers from one company to another in
3 Enter the Password in the New Password field.
Tally.ERP 9 could be due to the following reasons:
Tally.ERP 9 displays the strength of the password
entered depending on the combination - Alphabets,
• Data corruption/loss.
Numbers and Special Characters.
• Migrating into a later release.
4 Re-enter the password to confirm in the Repeat New
• Importing data from third party. Password field.
To import vouchers 5 Accept to Change the Tally Vault password.

1 Go to Gateway of Tally > Import Data > Vouchers . 6 Tally.ERP 9 displays a message Created New
Company followed by the new Company Number, press
2 Enter the name of the .xml file to be imported, in the any key to return to Company Info menu.
Import Vouchers screen, as shown below: (Fig 4)
Once the company data is encrypted the Name of the
Fig 4
Company and Financial Year will not be visible in the Select
Company screen.

7 In the Company Info, press Select

8 The Select Company screen with the encrypted
company is displayed as shown in Fig 6.
Note : By default, the export location is the Fig 6
Tally.ERP 9 installation folder, which is also the

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default import location. Therefore, it is not
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required to specify the file path during import.

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If the path is other than the installation folder,
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you must specify the exact location path, for
example, C:\Export_Files\XML\Master.xml or
C:\Export_Files\XML\DayBook.xml
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9 Select the encrypted company, Tally.ERP 9 will prompt

3 Press Enter to import.
the user to provide the TallyVault password. (Fig 7)
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Enabling Tally Vault Fig 7

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The user can enter the Tally Vault password while creating
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the company or execute the following steps to provide the

TallyVault password for existing companies.
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1 Go to Gateway of Tally press F3 : Company Info >

Change TallyVault (Fig 5) 10 Provide the required password and the company data
is available for use in a readable format.
Fig 5
To enable Tally Vault while creating a new company, you
must provide the TallyVault password and repeat the
password, the new company created will be secured using
Tally Vault.

IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.130 185
IT & ITES Related Theory for Exercise 2.3.131
COPA - Using Accounting Software

Creating Users, Backup and restore

Objectives: At the end of this lesson you shall be able to
• create users and passwords
• backup and restore data.

You can create users, assign security levels, restrict/allow Taking backup is easy in tally and you just provide the
remote access and local TDLs for the users created. source and destination location of the backup data.

To create the user and assign a password execute the You can create a main backup directory with subdirectories
following steps: to take daily backup, for example, you can create a
directory named tally backup with the subdirectories
Go to Gateway of Tally > F3: Company Info > Security named.
Control
Perform the following steps to take the backup of data in
1 Select Users and Passwords Tally ERP 9
2 The List of Users for Company screen is displayed as
- Click the F3 Comp info: button on the button bar in the
shown Fig 1.
gateway of tally screen the company info menu appears
Fig 1 - select the backup option from the company info menu

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as shown in Fig 3

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3 Select the required Security Level from the Security

List
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4 Enter the user’s name in the Name of User field.

5 Enter the password in Password (if any) field. (Fig 2)

Fig 2

- The backup companies on disk screen appears

containing two main option source and destination
- Type the path of the company beside the source option
to specify the location from where you want to take.

To do Auto Backup In Tally ERP 9

Data on the computer is dangerous from different types

of threat and any data loss cannot be recovered hence
there is need to store date at a different location by
Backup & Restore data In Tally.erp 9 taking a backup.

Tally.erp 9 provides the mechanism of taking a back up To activate a backup option of auto backup
data from on store medium into another storage 1 Go to a gateway of Tally > Alt + F3: comp info > Alter
medium.You can take a backup on the local drive or in an and select company from the list.
external media.
186
2 Company Alternation screen appears. To restore Auto Backup Data
3 Enable auto backup? set to Yes
1 Go to Gateway of Tally > ALt + F3: Comp info >Restore.
4 Accept the company
2 In destination, field type the path in which you want to
5 Press ESC to come on Gateway of Tally Screen restore the back up data.
6 GO to Gateway of tally F12: Configuration > Date 3 In source, field type the path: D:\autobackup.
Configuration
4 In auto Backup section list of auto, backup appears
7 In location of auto backup files type the path in which select company from the list.
path you want to get back up D:\autobackup
5 In backup version select the latest backup.
8 Accept the data configuration Screen.
9 Message appears that do you want to restart Tally for
the change to have effect press Y.
10 Now when you close the Company Tally take the
backup automatically.

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IT & ITES : COPA (NSQF Level - 4) - Related Theory for Exercise 2.3.131 187
IT & ITES Related Theory for Exercise 2.3.132
COPA - Using Accounting Software

Multilingual capability in Tally

Objectives: At the end of this lesson you shall be able to
• list of accounts/ledgers
• configuration in tally
• multilingual capability in tally.

List of Accounts : Tally.ERP9 gives great flexibility in list • E-Mailing : with this option you can configure the e-
of accounts which displays the list as groups in mailing facility.
alphabetical order. The groups are in bold and begin on
• Data Configuration : with this option you can configure
the extreme left. The sub-groups are also in bold and the
the path where the language, data and configuration
ledger accounts are in italic and in the lowest level. The
files reside.
report is drill down and if press the enter key and then it
display ledger Alteration (Secondary) screen through the • Advanced Configuration : with this option you can
ledger accounts. configure the Client / Server, ODBC, Connection, Log,
Tally.NET.
Configuration in Tally : Tally.ERP9 allows you to modify
• Licensing : with this option you can configure the
these when your requirements to change the configurations.
update, surrender, reset license.
In Configuration consists of the following menus. Multilingual Capability in tally : Tally.ERP9 allows you
to record, view, print information in any one of the 9 Indian

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• General : with this option you can configure the language (like Hindi, Gujarati, Punjabi, Tamil, Telugu,
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Country Details, Style of Names, Style of Dates. Marathi, Kannada, Malayalam and Bengali), besides few
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Numeric Symbols : with this option you can configure
international languages such as Arabic, Bahasa Indonesia,
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Bahasa Malayu etc. Tally enables you to enter data in

the number styles.
one language and have it transliterated into different
• Accts / Inventory Info. : with this option you can languages.
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configure the details in Accounts Masters and Inventory

Masters. Some others features :
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• Voucher Entry : with this option you can configure the

• It is a user friendly.
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vouchers entries in Accounting and Inventory Vouchers.

• It offers concurrent multilingual support.
• Invoice / Orders Entry : with this option you can
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configure the invoice, delivery notes, sales & purchase • It maintain your books of accounts while the data is
orders. accepted, sorted, maintained, displayed and printed
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in any one of the language.

• Payroll Configuration : with this option you can
configure the statutory details, passport details, • It generate bill, invoices, vouchers, ledgers, receipts,
contract details and deactivated employees. reports, purchase orders or delivery notes in the
language of your choice after entering data for in any
• Banking Configuration : with this option you can
one of the specified languages.
configure the settings related to Bank reconciliation
statement. • It has easy to use keyboards layouts - inscript and
• Printing : with this option you can configure the printing phonetic.
parameters of a voucher, invoice and statement layouts
before final printing.

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