Preparation of Funds Flow Statement :

Definition of fund flow statement

A fund flow statement is a statement prepared to analyse the
reasons for changes in the financial position of a company
between two balance sheets. It portrays the inflow and outflow of
funds i.e. sources of funds and applications of funds for a
particular period.
It is also righteous to say that a fund flow statement is prepared to
explain the changes in the working capital position of a company.
Objectives of fund flow statement
A question arises as to why prepare fund flow Statement when we
already prepare profit and loss and balance sheet. The need here
arises because the profit and loss and balance sheet will not
explain the reasons for a change in the financial position.
Profit and loss a/c and balance sheet will give two years figures
i.e., current years and previous years. But it will not explain as to
why the movement has happened, let’s say, the extent of use of
long-term funds for a long-term needs and the use of short-term
funds for a long term and short term. Here is why fund flow
statement is prepared.
Broadly, a fund flow statement will give us the following two
information:
 Sources of funds - From where the funds have come in
 Application of funds - Where these funds have been used
Components of a fund flow statement
A fund flow statement comprises of :
 Sources of funds: It talks about the extent of funds availed
from
o Owners
o Outsiders
 Application of funds: It talks about how the funds have
been utilized
o Funds deployed in Fixed assets
o Funds deployed in Current assets
Fund flow statement explained with examples
National Enterprises raised its funds from the following equation
listed below:
 Long term funds for its non-current assets.
Explanation: Non-current assets are a company's long-term
investments for which the full value will not be realized within the
accounting year. Examples of non-current assets include
investments in other companies, intellectual property (e.g.
patents), and property, plant and equipment.
So, going by the accounting parlance, long term funds are
generally raised by a company to meet its long-term requirements.
So National Enterprises using its long-term funds for its non-
current assets are the right utilization of funds and these details
are explained by fund flow statement.
 What if National Enterprises uses its short-term funds to
finance its long-term assets?
Here the fund flow statement when prepared conveys the users of
financial information that the usage of the fund has not been made
properly by the company as it is living dangerously by utilizing its
short-term funds for financing long term assets.
It means that when the company is in need for funds for repaying it
to the short-term obligation, it will be in cash crunch situation since
once an investment is made into long term assets by the company
it, it will not be in a position to convert it into liquid cash at a later
stage due to the nature of the investment.
This is how the fund flow statement explains the source of funds
and its utilization or application, allowing the users of financial
information to interpret and know the impact on the business.
Benefits of preparing a fund flow Statement
 It helps to explain the managers of funds as to why the
company is sitting in liquidity strain despite making profits as
reflected in profit and loss statement.
 On the contrary, it helps the managers to understand as to
how a company is financially strong despite losses made by
it in its operation front.
 A fund flow statement helps us to analyse whether any short-
term funds are being used for long term purposes. The grey
area which can only be highlighted by preparation of fund
flow Statement.
Users of funds flow Statement
The most interested users of fund flow statements are the lenders
of capital. They pay more attention to the fund Flow Statements
than the Profit and Loss and Balance sheet.
For Example, Bankers who lend money to the company as
Overdraft or Cash Credit in return for interest. The bankers use the
information provided by the company in its profit and loss
statement and balance sheet in preparing fund flow statements,
which then enables them to take decisions as whether to provide
its overdraft or cash credit facilities to its clients or not.
Fund flow statement format
Sources of Funds Application of Funds
Capital xxx Funds utilised in creation of xxx
Debts xxx Fixed assets
Funds generated from xxx Funds utilised in creation of xxx
operations other Non- current assets.
Sale of assets (if any) Funds utilised in repaying xxx
existing loans.
Funds utilised for paying xxx
dividends, taxes
xxx
· (Bal.fig) Excess usage *(Bal.fig) Excess of Funds
of funds over sources. over application of funds –
[Decrease in working
capital] [ Increase in working
capital]

Total xxx xxx

 Increase in working capital
Possibilities may arise when long term sources are in abundance
of uses or application resulting in a gap. Which we call in fund flow
statement as ‘Increase in working capital’. As it is a free flexible
source which can now be used by the company for funding its
working capital requirements. Say short term loans outstanding (if
any) can be paid from the long-term sources slot or dividends be
paid etc.,
 Decrease in working capital
Possibilities that the company has more uses of funds, but it has
very limited long-term source available. At that time, the company
will go for funds which are available in the nature of working
capital.
As a result, the company will reduce the funds available for
working capital and divert it for long term uses. So, by decreasing
the working capital, we get the funds which are available for long
term uses which form part of the source of funds.
The increase or decrease in working capital can be known by
preparing a statement of changes in working capital. This
statement compares the values of two years of the difference
between Current asset and Current Liabilities and tells as to
whether there is an increase or decrease in working capital.
How do modern businesses prepare a fund flow statement?
Given the importance of fund flow statements brings to the table,
most of the businesses prepare and analyse this statement more
frequently. Today, most businesses use ERP
software or accounting software which automatically prepares the
fund flow statement along with various other financial statements.
This allows business owners and other users of financial
information to analyse and make on-time smart business
decisions.

Funds Flow Statement in Tally.ERP 9

A Fund Flow statement is a report, which explains the
movement of funds during an accounting period. You can view
this report in browser .
This statement consists of two parts
● Sources of funds
● Application of funds
The difference between the two shows the net change in the
working capital during the period. Only those transactions that
affect the net working capital of the firm, find place in this
statement.
The Fund Flow statement is a supplement to the two principal
financial statements. While supplementing the position
statement, it describes the sources from which additional fund
were derived and for which these funds were used. The
transactions, which increase working capital, are sources of
funds and the transactions, which decrease working capital, are
application of funds.
To view Funds Flow
1. Go to Gateway of Tally > Display > Cash/Funds
Flow > Funds Flow .
2. Press Alt+F2, change period - From: 1-04-2008 to 31-8-
2008. The funds flow statement is displayed as shown
below:
 3. A Monthly Funds Flow Summary with the movement of
working capital for each month is displayed. It shows the
Opening and Closing Balances of each month with a column
for Funds Flow.
4. Select a month and press Enter to drill down.
5. Select F1: Detailed to see the funds flow for the selected
month.

3.1.9 To Understand limitations of funds flow statement

Limitations of Funds Flow Statement

Despite its importance in analyzing the financial position of a firm,
the following are the limitations of fund flow statement:
 The statement focuses only on the movement of funds. It doesn’t
consider other parameters that are part of the Balance Sheet and
Profit and Loss Account. Therefore, it has to be analyzed
alongside the Balance Sheet and Profit and Loss Account.
 The funds flow statement doesn’t depict the cash position of a
company. Hence, a separate cash flow statement has to be made
for analyzing the cash position.

Funds Flow Report

For any business, it is of utmost importance to track its funds,
especially working capital to monitor the status of the
business. TallyPrime provides you with the Funds Flow report
which tracks the movement of funds during an accounting
period, including the opening and closing values of working
capital and the flow during the period. You can change the
scale factor, or compare the values across different factors for
better analysis. There is a separate view available to analyse
the ledgers with negative flow.
Tracking working capital can indicate improvements or detect
areas of improvement in funds flow by highlighting the
sources and application of funds. If you are unaware of your
working capital it may lead to decisions that might have
adverse effects on your business. On the other hand, if you
are aware of your working capital, you can plan your sources
and applications of funds accordingly.
The Funds Flow report which tracks the movement of funds
during an accounting period includes the difference between
the sources and application of funds to show the net change
in the working capital during the period. A positive working
capital indicates that the source of funds was more than the
application of funds and a negative sign indicates that the
source of funds was lesser than the application of funds.
Consequently, the Funds Flow report will let you know the
status of your working capital so that you can plan the course
of your business accordingly.
Now you may want to know the factors impacting your
working capital, all you have to do is just drill down from the
monthly report. The Funds Flow Summary report displays the
sources from which additional funds were derived and where
these funds were used. It is represented in terms of the
sources of funds and the application of funds. The
transactions that increase the working capital are marked as
sources of funds, while the transactions that decrease the
working capital are marked as applications of funds.
In the Funds Flow Summary report, you can also see the
balance of your current assets and liabilities which will assist
you in prioritising the source of funds or its application as
required. You can also view this report in the browser.
View Funds Flow

You can view the Funds Flow report in TallyPrime to track the
changes in your working capital as it displays the opening and
closing working capital of a period and the net change as
funds flow.
1. Press Alt+G (Go To) > type or select Funds Flow >
press Enter.
Alternatively, Gateway of Tally > Display More
Reports > Funds Flow.
2. Press F2 (Period) to set the required period. The Funds
Flow statement appears as shown below:

The Funds Flow displays the movement of working capital for

each month. You can see
the Opening Balance and Closing Balance of each month with a
column for Funds Flow.
In some cases, you might see that the Funds Flow column is blank
which indicates that there was no movement in the source or
application of the fund. Similarly, a fund flow becomes negative
when the application of funds is more than the source.
You can drill down from the required month to further analyse the
factors responsible for the change in working capital which will be
displayed under the Sources and Applications columns as Nett
Profit and Nett Loss. The Funds Flow Summary report also
displays other aspects that impacted the funds flow during that
period like assets and liabilities. You can drill down further from the
Nett Profit or Nett Loss till you reach the exact transactions
responsible for the change in the working capital.

You can also customise the Funds Flow report in TallyPrime

as required by selecting the Scale Factor in the Basis of
Value configuration. To do so,
 Press Ctrl+B (Basis of Value) > Scale Factor and select
the required option.
You can also change the view of the report and add periodic
columns like monthly, quarterly, weekly, and so on for a
comparative view of the funds flow across periods. To do so,
 Press Alt+N (Auto Column) and select the required
period in the Auto Column field.
For example, if you want to see the fund flow in your business
for every quarter you can select Quarterly.
On the Funds Flow Summary report, you can also view the
Negative Ledgers under Exception Reports. To do so,
 Press Ctrl+J (Exception Reports) and select Negative
Ledgers.
To know further about reports and their features in
TallyPrime, go to Working with Reports in TallyPrime.

Cash Flow Statement

Every enterprise has to prepare a Cash Flow Statement to

report cash flows during the period classified by Operating,
Investing and Financing Activities in a manner which is most
appropriate to its business.
An enterprise can report cash flows using either
1. Direct method – Where the major classes of gross cash
receipts and gross cash payments are disclosed.
2. Indirect method – Where the net profit or loss is adjusted for
the effects of transactions of a non-cash nature, any delays or
accruals of past or future operating cash receipts or payments,
and items of income or expense associated with investing or
financing cash flows.
While reporting the cash flows of Operating, Investing and
Financing activities, enterprise has to disclose the details
Foreign Currency Cash Flows
Extraordinary Items
Interest & Dividends
Taxes on Income
Investments in Subsidiaries, Associates and Joint
Ventures
Acquisitions and Disposals of Subsidiaries and Other
Business Units
Non-cash Transactions
Components of Cash and Cash Equivalents
Other Disclosures
Prepare Cash Flow Statement in Tally.ERP 9
To prepare the Cash Flow Statement,
Go to Gateway of Tally > Display > Statutory Reports > MCA
Reports > List of Accounts > Cash Flow Statement

Tally.ERP 9, allows the user to prepare the Cash Flow

Statements using Direct Method or Indirect Method. In Cash
Flow Statements screen, Indirect Method will be displayed as
the default method used for generation of Cash Flow Statement.
If the company is following different Type of Cash Flow
Statement, the same can be configured in General
Configuration. When the Type of Cash Flow Statement is
configured, the same will be captured in method used for
generation of Cash Flow Statement field in Cash Flow
Statements screen.
Note: Tally.ERP 9 will not allow the user to change the Type of
Cash Flow Statement in Cash Flow Statement screen.
Cash Flow Statement Type can be configured only
from General Configurations.
In Cash Flow Statement screen enter the information of:

Adjustments of amortization, bad Debts recovered,
depreciation, dividend received by the company &
subsidiary, employee compensation, employee
stock option plan, gain or loss of foreign exchange
fluctuations, gain or loss on sale of fixed Assets,
impairment loss, interest expense, income tax
refund, liabilities written off, write-off debts, etc.
Changes in advance of tax, advances received,
amount receivable from related parties, current
liabilities provisions, inventories, loan advances,
current assets, liabilities, prepaid expenses,
provisions, working capital etc.
Expenses of Debt Issue and Refunded Direct
Taxes.
Dividend & Dividend distribution Tax paid on equity
and preference shares.
Effect of Foreign Exchange in cash and Cash
equivalents.
Extraordinary financing and investing activities
Cash Flow Increase or Decrease because
of Discontinued Operations.
Interest Expenses paid on bank borrowings, inter-
corporate deposits, long-term & Short-term loans
etc.
Loans & Advances made to others, subsidiaries etc.
Net Cash Flow of financing, investing and indirect
operating activities.
Net Changes in reserves, subsidy and discontinuing
operations.
Other Financing and Investing activities
Non-operating and Non-cash adjustments made.
 Payments to acquire the business, buy back equity
shares, investing in Bank Deposits, to develop
Fixed Assets, etc.
Proceeds of joint ventures, associates, disposal of
fixed assets, Investments, Subsidiaries, dividend
Investments, dividend mutual funds, bank deposits,
issue of equity and Preference shares, sale of
business etc.
Purchase of associates, fixed assets, Equity and
Preference Shares, Government securities,
intangible fixed assets, investment properties,
subsidiaries etc.
Repayment of long & short-term borrowings from
banks, related parties etc.
Share issue Expenses and debt issue expenses.

The Cash Flow Statement with Previous Year Amount details

appears as shown:

Note: If the company has previous year data, then the data can
be loaded using the option Ctrl+F3: Previous Cmp. The
previous year closing balances will be displayed in Previous
Year Amount column.
Disclose Details in Cash Flow Statement Manually or Auto
Fill
Company can disclose the Cash Flow details
by manually entering the Value or by selecting the applicable
ledgers to auto-fill the values.
Let us take a scenario where ABC Company has to disclose
details of Purchase of Intangible Fixed Assets during the
Period.
In this case to auto-fill the value,
In Reporting Year column tab down to Purchase intangible
fixed assets field and click on S: Show Ledger button or
press Alt+S keys to view the List of Ledgers. By default the
List of Ledgers screen displays the ledgers grouped under Bank
Account.
From List of Ledgers screen select the Bank Current Account
Ledger to view the List of Transactions for selected Ledger
screen.

In List of Transactions for Selected Ledger screen, select the

appropriate transaction (use spacebar to select the transaction)
and press enter.

The transaction amount will be displayed against the Ledger.

Press Ctrl+A or click on Ctrl+A: Accept button.

Amount of Rs. 25,00,000 will be auto-filled automatically

for Purchase intangible fixed assets in the Amount column.
 Note: All the information for the Cash Flow Statement is
mandatory and to be filled compulsorily. If value is not
available, then Zero (0) needs to be specified.
Button options in Cash Flow Statements
Ctrl+C: Default CF
Click on Ctrl+C: Default CF button or press Ctrl+C keys to view
the Default Cash Flow report available in Tally.ERP 9
Note: To navigate back to XBRL Cash Flow
Statements press Escape from Default Cash Flow report.
F9: Status
Click on F9: Status or press Alt+F9 keys to mark
the Status to Completed. The same will appear in
the Status Column in Additional Details screen.
L: Checklist
Click on L: Checklist or press Alt+L to view the check list for
generation of Reports. This report displays the details which are
mandatory and the indication of completion of disclosure of
details. Before generating MCA reports, this report can be
referred to check whether all the information are disclosed.

Cash Flow in Tally.ERP 9

Cash Flow is the inflow and outflow of cash during an
accounting period.
A cash flow statement concentrates on the transactions that
have a direct impact on cash. It deals with the inflow and outflow
 of cash between two Balance Sheet dates. That is, it explains
the changes in cash position between the two periods. Here the
term cash stands for cash and bank balances. You can view
this report in browser .
Cash flow statements can also be used as receipts and
payments statement. This is particularly useful for businesses
such as Non Profit Organizations where receipts and payments
statements need to be generated.
1. Go to Gateway of Tally > Display > Cash/Funds
Flow > Cash Flow .
2. Press Alt+F2 , change the period - From: 1-4-2008 to 30-9-
2008. The Cash flow statement is displayed as shown:

For Quarterly Cash Flow statement:

● Change Period by pressing F2: Period and set the
period, e.g., 1-4-08 to 30-06-2008.
● Select the option Auto Column from the button bar.
● You can also select Quarterly (or Monthly or any other
period) from the list. The Cash Flow screen appears as
shown below:

Cash Flow & Cash Flow Projection

Cash Flow refers to the movement of money in and out of a
business in a particular period. Apart from helping you
monitor the incoming and outgoing money in your business,
the cash flow statement can also be used as a Receipt and
Payment statement across any kind of business dealings. At
the same time, the Cash Flow Projection report helps you
forecast the incoming and outgoing of money for your
business. In TallyPrime, you can view the Cash Flow
Statement to summarise and view the inflow and outflow of
money for a particular financial period or for a particular
month.
View cash inflow and outflow using Cash Flow Summary
Through the Cash Flow statement in TallyPrime, not only you
can keep view the inflow and outflow of cash during a
particular period, such as sales and customer payments, but
at the same time, you will be able to track your positive cash
flow and negative cash flow, as well. When you have more
cash coming into your business than you have leaving it, it is
called positive cash flow. In TallyPrime, you can also have a
detailed view of your inflow and outflow for a particular month
along with your Nett Inflow, as you drill down further from your
Cash Flow statement.
View Cash Flow Projection Report in TallyPrime
Unlike the Cash Flow, which highlights the already occurred
flow of cash, the Cash Flow Projection is a prediction of a
business’s expected cash inflows and outflows. Through the
Cash Flow Projection report in TallyPrime, you can anticipate
the cash to be generated or spent for a specific period in the
future, such as a month, quarter, or year. This will help you to
make informed decisions about various business scenarios
such as resource allocation and risk management. Apart from
that, you can also set the limit for your Bank Overdraft
accounts through the Cash Flow Projection report in
TallyPrime to monitor the cash flow according to the desired
limit. As a businessman, you can use Overdraft accounts to
draw money from the bank up to the set overdraft limit, apart
from the balance available.
Cash Flow is the inflow and outflow of cash during an
accounting period, that portrays how businesses manage their
cash. Here, the term ‘cash’ stands for cash and bank
balances. Playing a crucial role in analyzing the economic
standing of a business, a cash flow statement keeps track of
the amount of money that flows in and out due to business
handling.
 Press Alt+G (Go To) > type or select Cash Flow >
press Enter.
Alternatively, Gateway of Tally > Display More
 Reports > Cash Flow.
A sample image of the Cash Flow statement appears,
as shown below:

To select any period like a mo

nth
, a quarter, or a year, you can press F2 (Period) and
view Cash Flow for the particular period. You can select a
particular month and drill down further to access Cash Flow
Summary report. Going further, you will have an intrinsic idea
about the overall Cash Flow along with the current assets,
current liabilities, voucher types used for a particular
transaction, and so on. You can have your Nett Flow in
negative, if you have more cash outflow and less cash inflow
for a particular month, as shown in the Cash Flow report
above for the month of July.
One of the key features of the Cash Flow Report in TallyPrime
is the graph that comes at the end of the Cash Flow Report.
The graph represents the overall inflow and outflow of cash
happened for each month, as demonstrated in the horizontal
axis of the graph. The vertical axis represents the overall
cash limit under which the incoming and outgoing of funds
happened. Like shown in the graph above, two different colors
represent inflow and outflow of money. For example, the color
red here represents the inflow of money and color blue
represents the outflow of money. You can click on the graph
for a particular month and drill down further to access Cash
Flow Summary report.
You can also customise the Cash Flow report in TallyPrime
and modify the data in terms of Hundreds, Lakhs, Millions,
Thousands, and so on by selecting the Scale Factor in
the Basis of Value configuration. To do so,
 Press Ctrl+B (Basis of Value) > Scale Factor and select
the required option.
You can also change the view of the report and add periodic
columns like monthly, quarterly, weekly, and so on, for a
comparative view of the cash flow across periods. To do so,
 Press Ctrl+H (Change View) and select the required
period in the List of Views field.
For example, if you want to see the cash flow in your
business for every quarter you can select Quarterly.
If you want to compare your cash flow, either on a weekly
basis or fortnightly basis, you can configure the columns to
appear quarterly, weekly, daily, fortnightly, and so on, from
the Auto Repeat Columns screen. To do so,
 Press Alt+N (Auto Column) and select the required
period in the Column Details field.
To know further about reports and their features in
TallyPrime, go to Working with Reports in TallyPrime.
Cash Flow Projection in TallyPrime
Cash Flow Projection is an integral part of business
planning. It takes into account the flow of cash and helps you
anticipate the cash to be generated or spent over a period of
time. TallyPrime allows you to view your Cash Flow Projection
report through distinctive filters which include
setting Overdraft limits of your bank, along with
including Cash Account, Scenarios, and Overdues to your
report. These features give you an inclusive overview of
your Cash Flow Projection. Now, you can take more
informed decisions such as, expanding into new markets,
investing in new products, recruiting new staff, and so on.

The Cash Flow Projection Report forecasts the amount of

cash that you expect to come into and flow out of your
business, for a particular period.
1. Press Alt+G (Go To) > type or select Cash Flow
Projection > press Enter.
A sample image of Cash Flow Projection report
appears, as shown below:
 The Cash flow Projection report displays the data for
the remaining days of a financial year, for which no
transaction has been passed. For instance, assume that
the DATE OF LAST ENTRY for your company’s financial
year is 25th February, 2023, and your financial year
ends by 31 March, 2023. In this case, the projection
data for the remaining days of the report, which are 25th
Feb, 2023 to 28th Feb, 2023, and for the month of
March will be displayed.
2. Press Alt+N (Auto Column) to compare your data on the
basis of a particular period.
In Cash Flow Projection report, the columns appear on
a monthly basis, by default. If you want to compare your
cash flow projection, either on a weekly basis or
fortnightly basis, you can configure the columns to
appear quarterly, weekly, daily, fortnightly, and so on,
from the Auto Repeat Columns screen. This feature is
helpful for you if you want to keep a close eye on your
cash inflow and outflow.
 3. After selecting the desired option, the Cash Flow
Projection screen displays the data for the
particular period.

For example, if you select weekly from the Column

Details, Cash Flow Projection screen appears, as
below.

4.
Current Balance: This row displays the projected opening
balances of Cash/Bank/Bank OD accounts available for each
period.
Receivables: This row displays the amounts that are
receivable from customers for each period. You can drill down
to view the party details, due dates, and transaction amount
in the Receivable column for the periods you have chosen in
the Column Details.
Payables: This row displays the amounts that are payable to
suppliers for each period. Drill down to view the party details,
due dates, and transaction amount in the Payables column for
the periods you have chosen in the Column Details.
You can Press Alt+F5 to have a detailed view of the report. A
sample image of Cash Flow Projection report with detailed
view appears, as shown below:

After pressing Alt+F5, you can see the rows Bank

Accounts and Bank OD A/c rows appearing just below A.
Current Balance section, which sum up to become
the Current Balance. Similarly, Sundry
Creditors and Sundry Debtors rows appear under the B.
Receivables section, and Sundry Debtors row under the
section C. Payables. Just like mentioned in the report below,
your Nett Balance is the difference between the sum of
your Current Balance and Receivables, that is (A+B) and
your Payables (C).

The Cash Flow Projection report in TallyPrime allows you to

set the overdraft limit for your bank Overdraft accounts, so
that you can project the cash flow based on the required
limit. Overdraft accounts are for providing overdraft facilities
to businessmen, through which they can draw more money
from the bank apart from the balance available.
1. Open Cash Flow Projection > press Alt+S (Set OD
Limit). The Bank OD Limit screen appears.
 2. Enter the OD limits for the required banks, as shown
below:

3. Accept the screen. As always, press Ctrl+A to save.

The Overdraft limit specified for a bank account either
excludes or includes the opening balance brought forward,
depending on whether it is a credit balance or a
debit balance.
You can also set OD limit from Ledger Alteration screen.
1. Press Alt+G (Go To) > select Alter Master >
select Ledger under Accounting Masters from Master
Alteration screen.
2. Select the Bank for which you want to set the OD limit
from the List of Ledgers. The Ledger
Alteration screen appears.
3. Set the OD limit.

4. Accept the screen. As always, press Ctrl+A to save.

The alteration of Overdraft limit from either of the screens is
acceptable and is reflected automatically in the bank ledger.
 Viewing Cash Flow Projection
TallyPrime allows you to have a detailed view of your Cash
Flow Projection report by adding few other parameters such
as Cash Account, Overdues, including the Scenarios, and so
on. You have to include these parameters in the Cash Flow
Projection report, by pressing Ctrl+B (Basis of Values), as
they do not get reflected in the projection report by default.
After enabling Cash Account, you can see your overall Cash-
in-Hand under Current Balance. When you set the Include
Scenarios option to Yes, you can see your entries passed
using Memorandum vouchers, Reversing Journal, and
Optional vouchers, getting reflected in the Cash Flow
Projection report. Similarly, the Include Overdues option is
for projecting your Overdue Receivables and Overdue
Payables in the report.
By default, the Cash Flow Projection displays the Bank
Accounts and Bank OD A/c. Hence, payments made
towards expenses and purchases through cash is not
displayed. However, you can configure the Cash Flow
Projection to include the cash account.
 Open Cash Flow Projection > press Ctrl+B (Basis of
Values).
 Change Include Cash Account to Yes.

After the option Include Cash Account is changed to Yes,

you can see the row Cash-in-Hand option appearing
below Current Balance section along with Bank
Accounts and Bank OD A/c, which now sum up to become
the Current Balance.
Memorandum, Reversing Journal, and Optional
Vouchers

By default, the Cash Flow Projection excludes Memorandum

Vouchers, Reversing Journals, and Optional Vouchers.
However, you can configure the Cash Flow Projection to
include these vouchers. If you want to include Memorandum
Vouchers, Reversing Journals or Optional Vouchers, then you
need to create Scenarios first. Once the Scenarios are
created, you can see the option Include Scenarios in Basis
of Values.
 Open Cash Flow Projection > press Ctrl+B (Basis of
Values).
 Change Include Scenarios to Yes.
Now, if you have recorded any entry using Memorandum
vouchers, Reversing Journal, and Optional vouchers, you can
see those data reflected in the Cash Flow Projection report.
You can also know more about Memorandum, Reversing
Journal, and Optional vouchers.
Overdues

By default, the Cash Flow Projection excludes uncleared

and overdue bills. However, you can configure the Cash Flow
Projection to include such bills.
 Open Cash Flow Projection > press Ctrl+B (Basis of
Values).
 Change Include Overdues to Yes.

After the option Include Overdues option is changed to Yes,

you can see the Overdue Receivable row added to
the Receivables section and Overdue Paybles row added to
the Payables section.
This report briefly summarizes the various aspects of your
current business scenario according to Cash Flow and Cash
Flow Projection report and gives you an idea to plan for the
future of your business accordingly.

Enable Payroll in Tally.ERP 9

You can enable or activate payroll in Tally.ERP 9 from
the Cost/Profit Centres Management section under F1:
Accounting Features in F11: Features . You can then enable
the statutory features provided for Payroll from F11 > F3
features.

Enable Payroll Feature

1. Go to Gateway of Tally > F11: Features > F1: Accounting
Features .
2. Tab down to Cost/Profit Centres Management section.
3. Set the option Maintain payroll to Yes.
4. Set the option Maintain more than one payroll or cost
category to Yes , to allocate employee cost by creating
separate employee categories.
Note: You can enable the option Maintain more than one
payroll or cost category to Yes , where parallel allocation
of employee cost/cost centre is required.
5. Press Enter to accept and save, and return to the Gateway
of Tally screen.
The Gateway of Tally screen appears as shown below:

Enable Statutory Features of Payroll

To use the Provident Fund, Employee State Insurance (ESI),
National Pension Scheme (NPS), Income Tax and Professional
Tax features for Indian Payroll, you must enable Statutory
Features for Payroll.
Note: The Payroll Statutory Features are available only for India.
For other countries, this option is not available.
1. Go to Gateway of Tally > F11: Features > F3: Statutory &
Taxation .

Note: In Release 6.5.5 and later versions, you can enable the
payroll statutory features for a company located in Ladakh .
2. Set Enable payroll statutory to Yes .
3. Enable the option Set/alter payroll statutory details . Enter
the relevant details.
In the Provident Fund section,
1. Enter Company Code as allotted by the PF department.
2. Enter Company Account Group Code as specified by the PF
department.
3. Enter Company Security Code as specified by the PF
department.
In the Employee State Insurance section,
1. Enter Company Code as allotted by the Employee State
Insurance Corporation (ESIC).
2. Enter the name of the ESI Branch Office.
3. In the Standard Working Days (per month) field, enter the
number of days to be considered for the calculation of daily
wages, and monthly gross amount for ESI benefits. If
this field is left blank, the system considers the Calendar
Period as the basis for calculation.
Note: ESI Eligibility Amount is specified in the Stat file.
In National Pension Scheme section,
 1. Specify the Corporate Registration Number as allotted by
the Central Recordkeeping Agency (CRA) during
registration.
2. Specify the Corporate Branch Office Number allotted by the
Central Recordkeeping Agency (CRA) during registration.
In the Income Tax section,
1. Specify the 10 digit TAN assigned to the employer in Tax
deduction and collection Account Number (TAN) .
2. Specify the TAN registration number .
3. Specify the name of the Income Tax Circle/Ward , to which
the employer is associated.
4. Select the Deductor Type as:
o Government for central or state government
companies.
o Others for other companies.
5. Enter the name of Deductor branch/division .
6. Enter the Name of Person Responsible for TDS deduction
in the company.
7. Enter the father's name of the person who is responsible for
TDS deduction in the company, in the field Son/Daughter
of .
8. Specify the official Designation of the person who is
responsible for TDS deduction in the company.
9. Specify the PAN .
10. Press Enter to accept and save.
Payroll Configuration
You can use the Payroll Configuration screen to configure some
basic aspects of Payroll.
1. Go to Gateway of Tally > F12: Configure > Payroll
Configuration .

2. Set the option Add notes for employees to Yes to enter

any additional information about the employee in
the Employee Creation/Alteration screen.
3. Set the option Show statutory details (for India/ SAARC
companies only) to Yes to enter the PF, ESI, NPS and
 Employee PAN details in the Employee Creation screen,
and print the same information in the employee pay slip.
Note: For International Companies, the option Show Statutory
Details will allow to capture only the Employee’s Income
Tax Number in the Employee Creation screen.
4. Set the options Provide passport and visa
details and Provide contract details to Yes to capture and
display the following information in the Expat Reports:
● The employee's Passport Number , Passport Expiry
date , Visa Number , and Visa Expiry date .
● The employee's Contract Start and Expiry dates in
the Employee Master .
5. Set the option Show resigned/retired employees to No , to
avoid displaying the names of resigned employees in the
attendance and payroll vouchers.
6. Set the option Show employee display name to Yes , if the
payroll reports need to include a different name for the
employee, while printing.
Note: This option is useful when the company has multiple
employees who have the same name.
You can configure additional printing preferences using
the Payroll Print Configuration screen.
Payroll Print Configuration
You can use the Payroll Print Configuration screen to configure
the message to be included while printing the Payment
Advice and the Pay Slip .
1. Go to Gateway of Tally > F12:
Configure > Printing > Payroll . The Payroll Print
Configuration screen appears as shown below:

2. Alter the pre-filled content in the Information in Payment

Advice field, if required. It will be printed in the Payment
Advice sheet.
 3. Enter required information in the Pay Slip Note field, to be
displayed instead of the Authorised Signatory details in
the Pay Slip .
4. Enter the required Pay Slip Message to be included in all
printed payslips. For example , in the month of January you
may include the message Happy New Year!
5. Press Enter to accept.
Note: The Payroll Print Configurations are not company
specific, and the changes made will be applicable to all the
companies loaded.

What is Payroll?
Payroll is simply an aggregation of total amount of wages paid by
the company to its employees. It is one of the most significant
expenses for businesses; hence it is very complicated expense for
companies to process. Processing payroll slips is a very time
consuming task and can be prepared weekly, semi - monthly or
monthly depending upon the resources which the company has in
its reserve.
How do we process Payroll Accounts?
Companies usually hire payroll services from third parties by way
of outsourcing which make the process of accounting for payroll
and easy and effortless task. Payroll service provider manages
multiple tasks such as tax obligations, employee’s time calculation,
preparing checks and salary report management. It eventually
reduces the operating cost of the business.
What changes do we see today in processing of Payroll
Services?
With Advent of ERP systems such as Tally.ERP 9 the process has
made a shift. Today the ‘Payroll Module’ in the software is totally
integrated with the business management solution and been
enabled to manage trouble free payroll processing along with the
accounting processes.
The software provides remote facility that can be relied upon and
is now easy to access, process and manage the payroll
information from anywhere and anytime in the world.
There is also no requirement of hiring specialised IT/ HR
professionals to manage and organize the payroll module from the
Tally software. As this module can be managed on its own and
provides impeccable solution, an accountant or any HR personnel
of the company can install, organise and manage it.
Update: TallyPrime is the latest version of Tally . Simplicity, speed,
flexibility, and reliability are a trademark of Tally products and with
TallyPrime you will experience them at a whole new level. You can
multitask without losing the progress, navigate and discover the product
much easier, invoice with amazing simplicity and much more to delight
you.
Read ' 5 Things in TallyPrime for Enhanced Business Efficiency to know
how TallyPrime helps your business. Also, take a look at a list of how-to
videos on TallyPrime
Salient Payroll features in Tally.ERP 9
 Payroll accounting in Tally offers the benefits of
simplified Payroll processing and accounting due to its added
benefit of integration with accounts.
 The Payroll module in Tally.ERP 9 reports comprehensively
as it has user defined classifications and sub classifications.
This might be associated with the employees, employee
groups, pay components, departments etc.
 The payroll module also lets flexible and user defined criteria
for users.
 It also offers the facility to create user defined earnings and
deductions pay heads.
 The module lets us use unlimited grouping of Payroll
Masters.
 Supports production/attendance/time based remuneration
units which are user defined production units.
 It offers all-inclusive cost centre as well as employee wise
costing reports.
 Ensures timely and precise processing of salary along with
employee statutory deductions and employer statutory
contributions with the help of predefined processes.
 It helps generate Statutory forms and challans for EPF & ESI
as prescribed.
 The payroll module helps in tracking the loan details of
employees as well.
How to enable payroll feature in Tally ERP 9
We can enable payroll in Tally.ERP 9 from the Cost/Profit Centers
Management section under F1: Accounting Features parked under
“F11”: Company Features Panel.
To enable Payroll in Tally.ERP 9:
Step 1 Go to Gateway of Tally > F11: Features > F1: Accounting
Features.
Step 2 Tab down to Cost/Profit Centers Management section.
Step 3 Set the option Maintain payroll to Yes.
Step 4 Set the option Maintain more than one payroll or cost
category to Yes, to allocate employee cost by creating
separate employee categories.
Step 5 Press Enter to accept and save, and return to the
Gateway of Tally screen.
Now at Gateway of Tally.ERP 9 we can see Payroll Info master
next to Accounts Info. With this now we can process payroll
accounting by creating Employee master, and then creating payroll
units, creating pay heads and defining the salary structure and tax
related to these components.
How to generate a payslip in Tally.ERP 9?
We can generate a payslip in Tally with just 6 simple steps:
Step 1 The first step is to create employee master.
· Path for employee creation: - G.O.T. (Gateway of
Tally) --> Payroll Info --> Employees --> Create (Single).
· Path for employee group creation: - G.O.T.
(Gateway of Tally) --> Payroll Info --> Employee Group --
> Create (Single).
We are here required to enter the requisite Employee
Details & Employee group by grouping employees under
the function they perform such as their department or
designation.
Step 2 The next step in this process is to create payroll units.
Path for attendance/ production types creation: -
G.O.T. (Gateway of Tally) --> Payroll Info --> Attendance/
Production Types --> Create.
Here we are required to brief on Attendance/Production
type which will be used to record the Attendance and
Production details.
Step 3 In this step we will create pay heads for salary
components.
Path for pay head creation: - G.O.T. (Gateway of Tally)
--> Payroll Info --> Pay Heads --> Create.
All the components of structured salary are created under
Pay Head. Pay head creation in Tally ERP 9 is very user-
friendly as it allows creating any complex type of pay
heads.
Step 4 Ant this stage we will journalize or record salary
details.
Path for salary detail creation: - G.O.T. (Gateway of
Tally) --> Payroll Info --> Salary Detail --> Create
Here we will key into the Tally ERP 9 system the details of
 salary applicable for both Employee Groups as well as
Individual Employees with earnings, deductions and basis
of computation.
Step 5 Path for voucher creation: - G.O.T. (Gateway of Tally) --
> Payroll Voucher --> Press “Ctrl + F5” and then press
“Ctrl + F4” to open payroll voucher: and finally Press “Alt +
A” to auto fill information.
This is the final step in the process to pass payroll
voucher
Here we will be required to enter all Earnings and
Deductions in payroll transactions that are paid along with
the salary payslip for all employees.
Step 6 To generate the payslip created.
Path for view report of payroll: - G.O.T. (Gateway of
Tally) --> Display --> Payroll Report --> Statement of
Payroll
Finally we have to generate the Payslip which will provide
details of employee such as attendance details, and we
will also see that Tally ERP 9 system itemizing each
components of employee’s earnings and deductions, and
displaying the net amount paid to him for a given pay
period.

Record Employer's PF Contribution (Payroll)

In Tally.ERP 9, you can process the Employer PF Contribution
using a payroll voucher, and selecting the appropriate Payroll
Ledger .
1. Go to Gateway of Tally > Payroll Vouchers > Ctrl + F4:
Payroll .
2. Press F2 to change the Voucher Date .
3. Click A : Payroll Auto Fill .
4. Select the required process in the Process for field.
5. Enter the From and To date.
6. Select the appropriate Employee Category .
7. Select the Employee/Group from the List of
Employees/Group .
8. Select the appropriate Payroll Ledger from the List of
Ledger Accounts .
 9. Press Enter to open the Payroll Voucher Creation screen.
10. By default, the Amount field is pre-filled with values.
11. Narration is pre-filled with the Pay Period . You can
change or add to the Narration .

12. Press Enter to save

You can also process the Employer PF Contribution manually
similar to Attendance Voucher creation .
Record Employer’s ESI Contribution and ESI Payments in
TallyPrime (Payroll)
In TallyPrime, in order to process ESI payments, you have to
configure the payment voucher with the appropriate Payroll
Ledger (for example, ESI Payable) and set other parameters,
as required. For ESI contributions, you can record a single
payment voucher.

Employer’s ESI Contribution

1. Gateway of Tally > Vouchers >
press Ctrl+F4 (Payroll).
Alternatively, press Alt+G (Go To) > Create Voucher >
press Ctrl+F4 (Payroll).
In case the voucher type is inactive, you will be
prompted to enable the Payroll feature for your
Company. Select Yes or press Y to proceed.

2. Press F2 (Date) to change the Voucher Date.

3. Press Ctrl+F (Autofill) to enable Payroll autofill.
4. Select the required process in Process for field.
5. Enter the From (blank for beginning) and To (blank for
end) date.
6. Select the appropriate Employee Category.
7. Select the Employee/Group from the List of
Employees/Group.
8. Select the appropriate Payroll Ledger from the List of
Ledger
Accounts.
9. Press Enter to go to Payroll Voucher
Creation screen.

10. Accept the payroll voucher screen. As always, you can

press Ctrl+A to save.

ESI Payment
1. Gateway of Tally > Vouchers > press F5 (Payment).
Alternatively, press Alt+G (Go To) > Create Voucher >
press F5 (Payment).
2. Press F2 (Date) to Change the Voucher Date.
3. Press Ctrl+F (Autofill) to enable autofill.
4. Select the ESI Challan in Process for field
5. Enter the From (blank for beginning) and To (blank for
end) date.
6. Enter the Voucher Date.
7. Select the appropriate Employee Category.
8. Select the Employee/Group from the List of
Employees/Group.
9. Select the appropriate Bank/Cash Ledger from the List
of Ledger Accounts.
10. Select the appropriate Payroll Ledger from the List of
Ledger Accounts.

11. Press Enter to show the Employee’s ESI Contribution,

and select End of List.
12. Select Yes in Provide Details field, if you wish to print
the Payment Details in ESI Challan.
In the Bank Allocations screen enter the Cheque/DD
No., Cheque/DD Date, Challan Date, Bank & Branch
Code.
13. Press Enter, and fill Narration, if any.

14. Accept the voucher screen. As always, you can

press Ctrl+A to save.

ESI Payment Challan

1. In the Accounting Voucher Creation screen, and
press Ctrl+P.
2. In the Voucher Printing screen, select Yes in the Print
Challan field.
 3. Press Yes to print the ESI Challan.

The ESI Challan displays the employees’ ESI share, and

employer’s contribution for the selected month along
with the other details.

Note: The Number of Employees is printed based on the

employee count for whom the ESI Number is entered in the
employee master.

Record Professional Tax Payments (Payroll)

You can record Professional Tax Payments in Payroll using a
payment voucher.
1. Go to Gateway of Tally > Accounting Vouchers > F5:
Payment.
2. Press F2 to change the voucher date.
3. Press A : Payroll Auto Fill .
4. Select the Professional Tax Payment in Process for field.
5. Enter the From and To date in the Employee Filter screen.
6. Enter the Voucher Date.
7. Select the appropriate Employee Category.
8. Select the Employee/Group from the List of Employees /
Group.
9. Select the appropriate Bank/Cash Ledger from the List of
Ledger Accounts.
10. Select the appropriate Payroll Ledger from the List of
Ledger Accounts.

11. Press Enter to go to Provide Details screen.

12. Select Yes in Provide Details and enter Challan Details .

13. Enter Narration if any.

 14. Press Enter to save.

Pay Sheet Report (Payroll)

Pay Sheet is a matrix report which displays cascading records of
category, groups, and employees a rows, and Pay Heads as
columns. The default report contains details of all earnings and
deduction for a given month or period with a number of options
to re-configure the appearance of rows and columns.
If you reconfigure the format appropriately, the pay sheet report
can serve as a Salary and Wage register. You can also filter the
report data based on a given category or group of employees.
View Pay Sheet
1. Go to Gateway of Tally > Display > Payroll
Reports > Statements of Payroll > Pay Sheet .

2. In the Employee Filters screen,

3. In the Name of Employee/ Group select the
required Employee Group from the List of Employees /
Groups . The Pay Sheet appears.
 4. Scroll towards the right to view other details.

Configuration options in Pay Sheet report

1. Use the F12: Configure button in the Pay Sheet to access a
configuration sub-form that you can use to customize the
display or printing content and the appearance of the Pay
Sheet report.
2. In the Appearance of Pay Head Types field , Select an
option to indicate if you want the report to include only
Earnings, Deductions, or All Pay Heads
3. Set the Show ‘Net Amount’ Column option to Yes to
include the Net Amount Column.
4. Set the Show Column SubTotals option to Yes to include
the sub-totals of Earnings/Deductions columns.
5. Set the Show Pay Slip Names for Ledgers option
to Yes to include the Name to Appear in Pay Slip , defined
in Pay Heads, as the column headings. Setting this
to No will display Pay Head name.
6. Set the Show Gross Salary Details option to Yes to
display Pay Head-wise Gross Salary details. This displays
all Pay Heads that have the Income Type set to Fixed in
the Pay Head Master.
7. Set the Show Grand Total option to Yes to display Grand
total at the bottom of the report.
8. Set the Show Attendance Details option to Yes to include
details of the employee's attendance.
9. Set the Display Production Types in Tail Units option to:
● Yes to include the Production Data in Tail Unit for
compound units used in Production Type.
● No to include the Main Unit for compound units used in
Production Type.
10. Set the Show Employees By Categories &
Groups option to Yes to include the rows of categories and
groups. Setting this to No lists only employee information.
11. Set the Show Category/Group Total option to Yes to
display totals for categories and groups.
12. Set the Show Category / Group in Columns option
to Yes to display Category and Groups in Columns. You can
set this option to Yes only when the option Show Employees
By categories & Groups is disabled.
13. Set the Remove Zero Entries Employees option
to Yes to remove employee records that have Zero
Earnings/ Deductions.
14. Set the Format option to either Detailed or Condensed .
15. Set the Show Employee Number option to Yes to display
the employee number along with the employee name.
16. Set the Show Employee Bank Details option to Yes to
display the Bank Name and Account Number of the
employees along with the employees' names.
17. Set the Show Tax Regime option to Yes to display the tax
regime of the employee in the pay sheet.
18. Set the Show Income Tax Number (PAN) option
to Yes to display the employee's IT PAN number.
19. Set the Show Aadhaar Number option to Yes to display
employee's aadhaar number.
20. Set the Show Universal Account Number (UAN) option
to Yes to display employee's PF universal account number.
21. Set the Show Employee PF Account Number option
to Yes to display the employee's PF Account number.
22. Set the Show Employee ESI Number option to Yes to the
display employee's ESI number.
23. Set the Show Employee PR Account Number option
to Yes to display the employee's Permanent Retirement
Account Number.
 24. Set the Show Employee Designation option to Yes to
display the employee's designation.
25. Set the Show Employee Function option to Yes to
display the employee's job function specified under General
Information.
26. Set the Show Date of Joining & Resignation option
to Yes to display the employee's dates of Joining and
leaving the organization.
27. Set the Expand all levels in Detailed format option
to Yes to expand all levels and display all relevant details of
the employee. Set the same to No , to generate a summary
report for a Category or Group.
28. Set the Appearance of Employee Names . Select the
appropriate names from the Display Employee Name
Style list.
29. Select the appropriate Sorting Method f rom the list.
Button options in Pay Sheet report
● F1 : Detailed/Condensed : Use this toggle
button ( F1 ) to quickly shift between the detailed and
summary views.
● F2: Period : Use the Period (F2) button to change the
time frame of the report. You can generate the report for
a day, week, fortnight, month, quarter, half-year, or the
entire year.
● Ctrl+F7: Employee Filters : Use the Employee
Filters button or click F7 : Employee Filters , to quickly
select employees/groups that you want to include in the
pay sheet report.
● C : New Column : Use this button (Alt+C) to add a
column to include any other Pay Head that is not included
in the default Pay Slip format. The new column appears
on the right-hand side of the report.
● A : Alter Column : Use this button (Alt+A) if you want to
replace an existing column in the report with a new Pay
Head column. Position the mouse cursor in the column
that you want to replace.
● D : Delete Column : Use this button (Alt+D) if you want to
delete an existing column in the report. Position the cursor
on the column that you want to delete.
● P : Print : You can print the Pay Sheet by
pressing Alt+P from the report display screen. While
printing the Pay Sheet report, choose an option to
increase the line height (for each employee line) to
 allocate space for the employee's signature or to affix a
stamp, and use the printed report for manual salary
disbursement..
● M : E-Mail : You can E-Mail the Pay Sheet by
pressing Alt+M from the report display screen.
● E : Export : You can export the Pay Sheet by
pressing Alt+E from the report display screen.
Display Employee Names in Another Language
You can view employee names in different languages in the Pay
Sheet report.
Note: Release 5.0 onwards, Tally.ERP 9 does not support
dictionaries for multiple languages, by default. In order to
display the names in the required language, you need to
download the required .dct files (language files) to Tally.ERP
9.
1. Go to Gateway of Tally > G: Language .
2. Select the required language, for example, Hindi.
3. Go to Gateway of Tally > Display > Payroll
Reports > Statement of Payroll > Pay Sheet .
4. Select the required Employee Categories and Employee
Names .

The Paysheet report displays the employee names in the

selected language.
Note: Release 4.93 and earlier support the language files, by
default. To display the employee names in the selected
language, you have to set the option Sorting
method to Employee Number , under Paysheet > F12:
Configure .