OVER

n 2 Millioss Busi n e Users

Official Guide to Financial Accounting using

TallyPrime MANAGING YOUR BUSINESS JUST GOT SIMPLER Fundamentals of Accounting Introduction to TallyPrime Maintaining Chart of Accounts Recording and Maintaining Accounting Transactions Banking, Data Security Generating Financial Statements and MIS Reports Company Data Management Storage and Classification of Inventory Accounts Receivable and Payable Management Purchase and Sales Order Management Cost/Profit Centres Management Booking Additional Cost Incurred on Purchase Budgets and Controls Management Generating and Printing Reports Goods and Services Tax, Generate e-Invoices Instantly Generate e-Invoice with QR Code and E-Way Bill Filling GST Returns & Uploading in the GST Portal Includes all features of TallyPrime 2.0

Tally Education Private Limited

INCLUDING PRACTICE EXERCISE

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TallyPrime

Managing your Business Just got Simpler

By

Tally Education Private Limited Bengaluru

www.bpbonline.com

ii

Official Guide to Financial Accounting using TallyPrime

FIRST EDITION 2021 Copyright © BPB Publications, India ISBN: 978-93-9103-044-5 All Rights Reserved. No part of this publication may be reproduced, distributed or transmitted in any form or by any means or stored in a database or retrieval system, without the prior written permission of the publisher with the exception to the program listings which may be entered, stored and executed in a computer system, but they can not be reproduced by the means of publication, photocopy, recording, or by any electronic and mechanical means.

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Published by Manish Jain for BPB Publications, 20 Ansari Road, Darya Ganj, New Delhi-110002 and Printed by him at Repro India Ltd, Mumbai www.bpbonline.com

Official Guide to Financial Accounting using TallyPrime iii

Preface Tally Education, subsidiary of Tally Solutions (creators and developers of Tally software), has been traversing the journey of an assiduous mission to enhance the employability of learners. We continuously envisage to blend conceptual learning with business applications to develop true professional competence. Tally Solutions Pvt. Ltd. is a pioneer in the business software products arena. Since its inception in 1986, Tally’s simple yet powerful products have been revolutionising the way businesses run. Having delivered path breaking technology consistently for more than 30 years, Tally symbolises unmatched innovation and leadership. Today, it caters to millions of users across industries and continues unchallenged as the industry leader in the enterprise resource planning software domain. In this age of intense economic competition and rapid technological developments, it has become customary for employers to place a premium on computer skills and abilities to enhance business productivity. This makes it imperative for job seekers and employees to stay abreast of developments in their areas of expertise and constantly update and upgrade their skills to stay relevant in the workplace. Tally Education is committed to bridging the gap between education and employment in the country. Over the years, the success of Tally software has fuelled the demand for Tally trained professionals across the globe. Catering to this demand has always been a priority for us and this courseware is one more step towards the same. Written as an official guide of the UGC curriculum of Financial Accounting, this book can be adapted to the needs of learners with diverse interests and backgrounds. It shall lead the learner towards varied career goals ranging from entrepreneurship to finance professionals. Fundamentals of Financial Accounting using TallyPrime have been explained with the help of diverse business scenarios which provide the learners a clearer insight on the real-life business situations. Thereby preparing the candidates to experience and understand the real life implementation of the theoretical knowledge. Sections of this book have been kept independent from each other, thus providing additional flexibility to the advanced readers to choose their own way around the book. Enriched with numerous figures, illustrations and practice scenarios, it enables candidates to understand the intricacies of business operations and nuances of financial accounting with ease and prepares them to handle business transactions in the daily work environment more confidently.

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Official Guide to Financial Accounting using TallyPrime

Table of Contents 3$57$ Chapter 1: Fundamentals of Accounting ......................... 3 1.1

Introduction .............................................................................. 3 1.1.1 Meaning of Accounting ............................................. 3 1.2 Terminologies used in Accounting ........................................ 4 1.3 Concepts of Accounting .......................................................... 5 1.4 Double Entry System of Accounting ..................................... 6 1.4.1 Uses of Debit and Credit ............................................ 6 1.4.2 Rules of Debit and Credit ........................................... 6 1.5 Golden Rules of Accounting .................................................. 6 1.6 Recording of Business Transactions ...................................... 9 1.6.1 Journalising Transactions ........................................... 9 1.7 Trial Balance ........................................................................... 11 1.8 Financial Statements .............................................................. 11 1.8.1 Trading Account ........................................................ 11 1.8.2 Profit & Loss Account ............................................... 13 1.8.3 Balance Sheet .............................................................. 14 1.9 Subsidiary Books & Control Accounts ............................... 16 1.9.1 Cash Book .................................................................. 16 1.9.1.1 Single Column Cash Book .......................... 16 1.9.1.2 Double Column Cash Book ........................ 16 1.9.1.3 Three Column Cash Book............................ 17 1.9.2 Petty Cash Book ........................................................ 17 1.9.3 Purchase (Journal) Book .......................................... 17 1.9.4 Purchases Return (Journal) Book ........................... 17 1.9.5 Sales (Journal) Book ................................................. 17 1.9.6 Sales Return (Journal) Book .................................... 18 1.9.7 Journal Proper ........................................................... 18 1.9.8 Control Accounts ....................................................... 18 1.10 Depreciation............................................................................ 18 1.10.1 Methods for Depreciation ........................................ 18 1.10.2 Preparation of Depreciation schedule..................... 19 1.11 Computerised Accounting .................................................... 19 1.11.1 Advantages of computerised accounting ................ 19 1.11.2 Accounting Structure for computerised accounting ...................................................................20 Conclusion ......................................................................................... 20 Key Takeaways ................................................................................... 20 Practice Exercises .............................................................................. 20

Chapter 2: Introduction to TallyPrime .......................... 22 2.1 2.2 2.3

Introduction ............................................................................ 22 Features of TallyPrime ........................................................... 22 Downloading and Installation of TallyPrime ..................... 23

2.4 2.5 2.6 2.7 2.8 2.9

Types of Licenses in TallyPrime .......................................... 27 Activate New License ............................................................. 28 Reactivate License in TallyPrime.......................................... 28 Use License from Network in a Multiuser Environment .. 30 Working TallyPrime in Educational Mode ......................... 30 Company Creation and Setting up Company Features in TallyPrime ............................................................................... 31 2.10 Getting Started with TallyPrime .......................................... 37 2.10.1 Navigating from Anywhere to Anywhere in TallyPrime ....................................................................37 2.10.1.1 Top Menu .................................................... 37 2.10.1.2 Right Buttons ............................................... 38 2.10.1.3 Keyboard Shortcuts in TallyPrime ............. 40 2.10.1.4 Go To ............................................................ 42 2.10.1.5 Switch To ..................................................... 43 2.11 F12 Configuration in TallyPrime ........................................ 44 2.12 Alter Company Details .......................................................... 44 2.13 Shut the Company .................................................................. 44 Conclusion ......................................................................................... 44 Key Takeaways ................................................................................... 45 Practice Exercises .............................................................................. 45

Chapter 3: Maintaining Chart of Accounts ................... 46 3.1 3.2 3.3

3.4 3.5 3.6

Introduction ............................................................................ 46 Chart of Accounts .................................................................. 46 Ledgers ..................................................................................... 47 Creation of Masters in TallyPrime ....................................... 48 3.3.1 Accounting Masters ................................................... 51 3.3.1.1 Group Creation ............................................ 51 3.3.1.2 Ledger Creation ........................................... 53 3.3.2 Inventory Masters ...................................................... 54 3.3.2.1 Creation of Stock Group .............................. 55 3.3.2.2 Creation of Stock Category .......................... 56 3.3.2.3 Creation of Unit of Measure ........................ 58 3.3.2.4 Creation of Stock Item ................................. 59 3.3.2.5 Creation of Godown .................................... 61 Alteration of Masters in TallyPrime ..................................... 63 Deletion of Masters in TallyPrime ....................................... 63 Multi-Masters Creation and Display of Chart of Accounts .................................................................................. 64 3.6.1 Multi Groups Creation .............................................. 64 3.6.2 Multi Ledgers Creation ............................................. 66 3.6.3 Multi Stock Groups Creation ................................... 68 3.6.4 Multi Stock Items Creation....................................... 70

Official Guide to Financial Accounting using TallyPrime v Conclusion ......................................................................................... 72 Key Takeaways ................................................................................... 72 Shortcut Keys ..................................................................................... 73 Practice Exercises .............................................................................. 73

Chapter 4: Recording and Maintaining Accounting Transactions ................................................ 74 4.1 4.2 4.3

Introduction ............................................................................ 74 Recording Transactions in Tally ........................................... 74 Recording Accounting Vouchers in TallyPrime ................. 74 4.3.1 Receipt Voucher (F6)................................................. 77 4.3.2 Contra Voucher (F4) ................................................. 81 4.3.3 Payment Voucher (F5) .............................................. 84 4.3.4 Purchase Voucher (F9).............................................. 88 4.3.5 Sales Voucher (F8) ..................................................... 98 4.3.6 Debit Note Voucher (Alt+F5) ................................ 105 4.3.7 Credit Note Voucher (Alt+F6) ............................... 111 4.3.8 Journal Voucher (F7)............................................... 116 4.3.8.1 Recording for Provisions .............................126 Conclusion ....................................................................................... 126 Key Takeaways ................................................................................. 126 Shortcut Keys ................................................................................... 126 Practice Exercises ............................................................................ 127

Chapter 5: Banking....................................................... 128 5.1 5.2 5.3

Introduction .......................................................................... 128 Banking Payments ................................................................ 128 Cheque Printing ................................................................... 129 5.3.1 Single Cheque Printing ........................................... 131 5.3.2 Multi Cheque Printing ............................................ 134 5.4 Deposit Slip ........................................................................... 137 5.4.1 Cheque Deposit Slip ................................................ 137 5.4.2 Cash Deposit Slip ..................................................... 139 5.5 Payment Advice .................................................................... 143 5.6 Bank Reconciliation ............................................................. 145 5.6.1 Manual Bank Reconciliation .................................. 145 5.6.2 Auto Bank Reconciliation ....................................... 148 Conclusion ....................................................................................... 157 Key Takeaways ................................................................................. 157 Shortcut Keys ................................................................................... 157 Practice Exercises ............................................................................ 158

Chapter 6: Generating Financial Statements and MIS Reports ................................................ 159 6.1 6.2

Introduction .......................................................................... 159 Final Accounts Reports in Tally ......................................... 159 6.2.1 Trial Balance ............................................................. 159 6.2.2 Profit and Loss Account .......................................... 162 6.2.3 Balance Sheet ............................................................ 164

6.2.3.1 View working capital figures from Balance Sheet ........................................................... 166 6.2.4 Cash Flow & Fund Flow Analysis Report............. 166 6.2.4.1 Cash Flow Analysis Report........................166 6.2.4.2 Funds Flow Analysis Report ......................168 6.2.5 Receipts and Payments ............................................ 169 6.3 MIS Reports in Tally ............................................................ 171 6.3.1 Stock Summary Analysis ....................................... 171 6.3.1.1 Stock Summary ..........................................171 6.3.1.1.1 Item-wise Profitability Analysis .172 6.3.1.2 Godown-wise Stock Availability .................174 6.3.1.3 Stock Query .................................................175 6.3.2 DayBook ................................................................... 176 6.3.3 Cash and Bank Book ............................................... 178 6.3.4 Purchase Register ..................................................... 180 6.3.5 Sales Register ............................................................ 182 6.3.6 Journal Register........................................................ 184 6.4 Bird’s eye view/Drill down display from anywhere to anywhere................................................................................ 185 Conclusion ....................................................................................... 185 Key Takeaways ................................................................................. 185 Shortcut keys .................................................................................... 185 Practice Exercises ............................................................................ 185

Chapter 7: Data Security .............................................. 187 7.1 7.2 7.3 7.4 7.5 7.6

Introduction .......................................................................... 187 Security Control ................................................................... 187 Activation of Security Control ........................................... 187 Creation of Security Levels (User Roles) .......................... 190 Creation of Users And Passwords for Company ............. 195 Accessing the company using Security Levels .................. 197 7.6.1 Change User ............................................................. 197 7.6.2 Login to the company using the Security Level Data Entry 1 and check the user roles. ................. 198 7.6.3 Login to the company using the Security Level Data Entry 2 and check the user roles. ................. 200 7.6.4 Login to the company using the Security Level Accountant and check the user roles..................... 202 7.7 Auto Login............................................................................. 205 7.8 TallyVault ............................................................................... 206 Conclusion ....................................................................................... 209 Key Takeaways ................................................................................. 209 Shortcut Keys ................................................................................... 209 Practice Exercises ............................................................................ 209

Chapter 8: Company Data Management .................... 210 8.1 8.2 8.3

Introduction .......................................................................... 210 Backup of Company Data ................................................... 210 Restoring of Company Data................................................ 215

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Official Guide to Financial Accounting using TallyPrime

8.4 Company Data Repair ........................................................ 216 8.5 Migration of Tally.ERP 9 Company Data to TallyPrime...... 218 Conclusion ....................................................................................... 220 Key Takeaways ................................................................................. 220 Shortcut Keys ................................................................................... 220 Practice Exercises ............................................................................ 220 Key Answers for Practice Exercises .............................................. 221

3$57% Chapter 1: Storage and Classification of Inventory .... 227 1.1 1.2

Introduction .......................................................................... 227 Supply Chain ........................................................................ 227 1.2.2 Types of Suppliers ................................................... 228 1.3 Inventory Management ...................................................... 228 1.3.1 Terms Used in Inventory Management ............... 229 1.4 Inventory Masters in TallyPrime ....................................... 230 1.4.1 Company Creation in TallyPrime ......................... 230 1.4.2 Introduction of Capital into a Business ................ 233 1.4.3 Creation of Inventory Masters in TallyPrime ...... 236 1.5 Tracking of Movements of Goods in Batches/Lots .......... 245 1.5.1 Activation of Batches/Lots for Stock Items .......... 245 1.5.1.1 Allocation of Batch/Lot Details in Purchase Invoice ........................................................ 247 1.5.1.2 Selling of Stock Items from Batch/Lot .......253 1.5.1.3 Identifying of Expired Batch in Sales Invoice ............................................... 257 1.5.1.4 Returning of Expired Batch Stock Items ...259 1.5.2 Batch Reports .......................................................... 263 1.5.2.1 Batch Voucher Report ................................263 1.5.2.2 Batch Summary Report .............................264 1.6 Price Levels and Price Lists ................................................. 264 1.6.1 Activating Price Lists and Defining of Price Levels .............................................................. 265 1.6.2 Creation of Price List .............................................. 267 1.6.3 Price Level & Price List usage in Sales Voucher .. 271 1.6.4 Revise Price List ....................................................... 276 Conclusion ...................................................................................... 281 Key Takeaways ................................................................................. 281 Shortcut Keys ................................................................................... 282 Practice Exercises ............................................................................ 282

Chapter 2: Accounts Receivable and Payable Management ............................................... 283 2.1 2.2 2.3 2.4

Introduction ......................................................................... 283 Accounts Payable and Receivable ...................................... 283 Maintain Bill-wise Entry .................................................... 285 Activation of Bill-wise Entry............................................... 286 2.4.1 Usage of Bill-wise entry in Purchase and

Payment Voucher .................................................... 286 2.4.2 Usage of Bill-wise entry in Sales and Receipt Voucher ....................................................... 295 2.4.3 Usage of Bill-wise entry in Payment and Receipt Voucher ....................................................... 300 2.4.4 Usage of Bill-wise entry - On Account ................. 308 2.5 Specifying of Credit Limit for Parties ................................ 312 2.5.1 Specifying Credit Limit for Individual Ledger..... 312 2.5.2 Specifying Credit Limit for Multiple Ledger ........ 314 2.5.3 Sales Voucher Restriction Based on Credit Limit 315 2.6 Splitting of Credit Sale Into Multiple Bills ........................ 317 2.7 Payment Performance of Debtors ..................................... 319 2.8 Bills Payable and Receivable Reports in TallyPrime ........ 320 2.8.1 Bills Receivable ........................................................ 321 2.8.2 Ageing Analysis of Outstanding ........................... 323 2.8.3 Generating Reminder Letter in TallyPrime.......... 324 2.8.4 Generating Confirmation of Accounts in TallyPrime ................................................................. 327 2.8.5 Bills Settlement ........................................................ 328 2.8.6 Bills Payables ............................................................ 331 Conclusion ....................................................................................... 334 Key Takeaways ................................................................................ 334 Shortcut Keys ................................................................................... 334 Practice Exercises ............................................................................ 334

Chapter 3: Purchase and Sales Order Management .... 335 3.1 3.2

3.3

3.4

3.5 3.6

Introduction ......................................................................... 335 Purchase Order Processing ................................................. 335 3.2.1 Recording of Purchase Order ................................ 336 3.2.2 Recording of Receipt Note Voucher ...................... 341 3.2.3 Recording Rejections Out Voucher ....................... 345 3.2.4 Recording Purchase Voucher ................................. 346 3.2.5 Recording Debit Note Voucher.............................. 348 3.2.6 Recording Payment Voucher.................................. 350 Sales Order Processing ....................................................... 351 3.3.1 Recording of Sales Order In TallyPrime ............... 352 3.3.1.1 Printing of Quotation ................................355 3.3.2 Recording Delivery Note Voucher ........................ 357 3.3.3 Recording Rejections In Voucher .......................... 359 3.3.4 Recording of Sales Voucher .................................... 361 3.3.5 Recording Receipt Voucher .................................... 362 Order Outstandings ............................................................. 364 3.4.1 Sales Order Outstanding ........................................ 364 3.4.2 Purchase Order Outstanding ................................. 366 3.4.3 Pre-Closure of Orders ............................................ 366 Reorder Level ....................................................................... 367 3.5.1 Display Reorder Status ........................................... 370 Godown Transfer in TallyPrime ......................................... 372

Official Guide to Financial Accounting using TallyPrime vii Conclusion ....................................................................................... 376 Key Takeaways ................................................................................ 376 Shortcut Keys ................................................................................... 376 Practice Exercises ............................................................................ 376

Chapter 4: Tracking Additional Costs of Purchase ..... 377 4.1 4.2

Introduction .......................................................................... 377 Configuration of Additional Cost of Purchases in TallyPrime ............................................................................. 377 4.2.1 Purchase Transaction with Additional Cost Details in Voucher Mode ..................................................... 378 4.2.2 Purchase Transaction with Additional Cost Details in Item Invoice Mode ........................ 381 4.2.3 Debit Note Voucher with Additional Cost ........... 384 Conclusion ....................................................................................... 389 Key Takeaways ................................................................................. 389 Shortcut Keys .................................................................................. 389 Practice Exercises ............................................................................ 389

Chapter 5: Cost/Profit Centres Management .............. 390 5.1 5.2

Introduction .......................................................................... 390 Cost Centre and Cost Categories ....................................... 390 5.2.1 Activation of Cost Centre ....................................... 391 5.2.2 Allocation of Expenses and Incomes using Cost Centre ............................................................... 393 5.2.3 Cost Centre Classes (Automatic Allocation) ....... 397 5.2.4 Allocation of Expenses to Multiple Cost Centres and Cost Categories ................................................ 401 5.2.4.1 Creation of Cost Category .........................401 5.2.4.2 Recording of Transaction and Allocation of Expenses ............................... 403 5.3 Cost Centre Reports............................................................. 405 5.3.1 Category Summary .................................................. 406 5.3.2 Cost Centre Break-up.............................................. 406 5.3.3 Ledger Break-up ...................................................... 407 5.3.4 Group Break-up ....................................................... 407 Conclusion ....................................................................................... 409 Key Takeaways ................................................................................. 409 Shortcut Keys ................................................................................... 409 Practice Exercises ............................................................................ 409

In the Reports. .......................................................... 423 Conclusion ....................................................................................... 426 Key Takeaways ................................................................................. 426 Shortcut Keys ................................................................................... 426 Practice Exercises ............................................................................ 427

Chapter 7: Generating & Printing Reports .................. 428 7.1 7.2

Introduction .......................................................................... 428 On the Fly Reporting ........................................................... 428 7.2.1 Bird’s eye View/Drill Down Display ...................... 431 7.2.2 Drill Down Display ................................................. 434 7.2.3 Date/Period Based Reporting & Comparing ....... 436 7.3 Inventory Reports................................................................. 440 7.3.1 Stock Summary ........................................................ 440 7.3.2 Godown-wise Stock Availability ............................ 444 7.3.3 Movement Analysis ................................................ 445 7.3.4 Stock Query ............................................................. 445 7.4 Financial Reports.................................................................. 447 7.4.1 Balance Sheet ........................................................... 447 7.4.2 Profit & Loss A/c ...................................................... 448 7.5 Books & Registers................................................................. 449 7.5.1 Sales Register ............................................................ 450 7.5.2 Purchase Register .................................................... 452 7.6 Printing of Invoice and Report ........................................... 453 Conclusion ....................................................................................... 456 Key Takeaways ................................................................................. 456 Shortcut Keys ................................................................................... 456 Practice Exercises ............................................................................ 456

Chapter 8: Goods and Services Tax.............................. 457 8.1

Chapter 6: Budgets and Scenarios ............................... 410 6.1 6.2 6.3 6.4 6.5

Introduction .......................................................................... 410 Creation of Budget ............................................................... 411 Recording Transactions ...................................................... 414 Display Budgets and Variances Reports for Group Budget........................................................................ 418 Scenario Management ......................................................... 420 6.5.1 Creation of Scenario ................................................ 420 6.5.2 Temporary Inclusion of Reversing Journal Voucher

8.2

Introduction to GST............................................................. 457 8.1.1 Why GST? ................................................................ 457 8.1.2 GST Tax Structure .................................................. 457 8.1.3 Determination of Tax ............................................. 458 8.1.4 GST Registration...................................................... 458 8.1.5 Managing HSN CODE/SAC .................................. 460 8.1.6 GST Rate Structure .................................................. 460 8.1.7 Supply of Goods and Services ................................ 461 8.1.7.1 Place of Supply ...........................................461 8.1.7.2 Time of Supply ...........................................462 8.1.7.3 Value of Supply ..........................................462 8.1.8 Invoicing .................................................................. 462 8.1.8.1 Tax Invoice ................................................462 8.1.8.2 Bill of Supply ..............................................463 8.1.9 Debit Note, Credit Note/Supplementary Invoice 464 8.1.10 Input Tax Credit ...................................................... 465 E-Way Bill .............................................................................. 465 8.2.1 Components of E-Way Bill ..................................... 465

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8.3

8.4

8.5

8.6

8.7

Official Guide to Financial Accounting using TallyPrime 8.2.2 Who must generate E-Way Bill .............................. 466 8.2.3 Validity of E-Way Bill .............................................. 466 8.2.4 E-Way Bill Process Flow ......................................... 466 GST in TallyPrime ................................................................ 467 8.3.1 Creation of Company and Activating GST .......... 467 8.3.2 Introducing Capital into the Business................... 471 8.3.3 Creation of Masters in TallyPrime......................... 473 8.3.3.1 Creation of Accounting Masters ................473 8.3.3.2 Creation of Inventory Masters...................477 8.3.3.3 Displaying Chart of Accounts ...................478 Hierarchy of Calculating Tax in Transactions .................. 478 8.4.1 Defining GST Rates at Stock Group Level............ 479 8.4.2 Defining GST Rates at Stock Item Level ............... 481 8.4.3 Defining GST Rates at Ledger Level...................... 481 Recording GST compliant transactions ............................ 484 8.5.1 Accounting Intrastate Supply of Goods & Services ..................................................... 484 8.5.1.1 Intrastate Inward Supply of Goods............484 8.5.1.2 Intrastate Outward Supply of Goods ........487 8.5.1.3 Intrastate Inward Supply of Services .........495 8.5.1.4 Intrastate Outward Supply of Services ......497 8.5.2 Accounting Interstate Supply of Goods & Services ..................................................... 499 8.5.2.1 Interstate Inward Supply of Goods ............499 8.5.2.2 Interstate Outward Supply of Goods .........502 8.5.2.3 Interstate Outward Supply of Services ......504 8.5.3 Accounting Purchase and Sales Returns of Goods with GST ................................................................... 505 8.5.3.1 Purchase Returns of Goods .......................505 8.5.3.2 Sales Returns of Goods ..............................508 8.5.4 Supplies Inclusive of Tax ......................................... 509 E-Way Bill Report in Tally................................................... 514 8.6.1 Export for e-Way Bill Report ................................. 514 8.6.2 Exporting Bulk or Consolidated e-Way Bill invoices................................................... 515 8.6.3 Update e-Way Bill Information.............................. 516 Input Tax Credit Set Off against Liability.......................... 517

8.8

GST Tax Payment ................................................................. 520 8.8.1 Timeline for payment of GST tax .......................... 520 8.8.2 Modes of Payment ................................................... 521 8.8.3 Challan Reconciliation ............................................ 523 8.9 Generating GST Returns for Regular Dealer in Tally ..... 524 8.9.1 GSTR-1 ...................................................................... 524 8.9.2 GSTR-3B ................................................................... 526 8.9.3 GSTR-9 – GST Annual Computation ................... 527 8.10 Filing GST Returns in Tally................................................. 528 8.10.1 Filing GSTR-1 Returns ............................................ 528 8.10.1.1 Generating the JSON file from Tally and uploading the same in the GST portal ...... 529 8.10.2 Filing GSTR-3B Returns ......................................... 529 8.10.2.1 Generating the JSON file from Tally and uploading the same in the GST portal ...... 529 8.10.3 Filing GSTR-9 Returns - GST Annual Computation ............................................................ 530 Conclusion ....................................................................................... 530 Key Takeaways ................................................................................. 530 Shortcut Keys ................................................................................... 531 Practice Exercises ............................................................................ 531 Key Answers for Practice Exercises .............................................. 532

TallyEssential Addendum TallyPrime Annexure 2.0 ...... 534 1.1

1.2

Connected and Complete E-Way bill System in TallyPrime ........................................................... 534 1.1.1 Introduction to e-Way Bill ...................................... 534 1.1.2 Creation of e-Way Bill Profile on the Portal ......... 534 1.1.3 Generating e-Way Bill online from TallyPrime ... 535 1.1.4 Generating e-Invoice with e-Way Bill in TallyPrime ......................................... 539 1.1.5 E-Way Bill Report in TallyPrime ........................... 541 1.1.6 Update e-Way Bill Part B ........................................ 542 1.1.7 Generate e-Way Bill in Bulk ................................... 542 Save View of Business Reports in TallyPrime ................... 543 1.2.1 Introduction to Save View Feature ........................ 543 1.2.2 Create Save View of a Report ................................. 543 1.2.3 Manage the Saved Views of a Report .................... 545

PART-A

Chapter 1

Fundamentals of Accounting LEARNING OBJECTIVES • • • • • • •

Introduction to Accounting • Meaning of Accounting • Terminologies used in Accounting Concepts of Accounting • Double Entry System of Accounting • Golden Rules of Accounting Recording of Business Transactions Preparation of Trial Balance, Trading Account, Profit and Loss Account, and Balance Sheet. Types of Subsidiary Books Depreciation Methods and Preparation of schedule. Introduction and advantages of Computerised accounting.

1.1 INTRODUCTION A Commercial Professional or Industrial activity, driven by an individual or a group of individuals engaging in producing and selling goods and services for profit is known as Business. An organization that is formed to operate some type of service or commercial activities for profit or for non-profit. For Example: Proprietorship, Partnership, Limited Liability Partnership, Private Limited Company, Public Limited Company, Co-operative societies, NGO etc. Types of Business Sector • Producing raw materials: These are the business sectors which are involved in the production and extraction of the raw materials. • Trading: The business of buying and selling commodities & products. • Manufacturing: The process of converting raw materials, components, or parts into finished goods that meet a customer’s expectations • Service: An enterprise of professional or team of experts that deliver work or aid in completing a task for the benefit of its customers. A type of economic activity that is intangible. Examples of a service business are consultancy and profession services rendered by Chartered Accountants, Tax Consultants, Doctors, Engineers, Recreation, Health care, Transportation etc. It becomes essential for a business owner to keep a record of the business income and expenditure, to find answers to numerous questions, a few of which are: • What is the total value of business assets? • Whether the business is earning profits or incurring a loss? • How much do third parties owe the business? • How much does the business owe to third parties? • Should a specific operation be withdrawn?

• Can the business be expanded? These answers can be occurred by, studying the financial information of the business operations. Therefore, accounting is an integral part of the business. Accounting is the practice of maintaining precise records of the financial dealings of a business. It involves identifying business transactions, recording them, and summarising the same in such a way that important financial information can be communicated to the stakeholders of the business. Accounting is also called the language of business/finance. The Common Stakeholders of typical business concern • Owners: The stakeholders are the owners of an organization. • Employees: These people are employed for wages or salary. • Investors (existing and potential): These investors can be owners or outside vendors who typically have a right to know the accurate and timely information such as regular financial statements. • Suppliers: These are the people or businesses who sell goods to your business and rely on you for revenue from the sale of those goods. • Customers: These are the people who buy business products. • Communities: These are stakeholders which are considered as business function by another set of stakeholders( Suppliers, customer employees). • Government authorities: These are the authorities which collect taxes from the company and its employees.

1.1.1 Meaning of Accounting Accounting is a process of identifying, systematic recording, summarizing, analyzing, and interpretation of financial reports of a business. Phases of the Accounting Cycle The following chart will depict the different phases/process of the accounting cycle as shown in Chart 1.1.

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Official Guide to Financial Accounting using TallyPrime

1.2 TERMINOLOGIES USED IN ACCOUNTING

Chart 1.1 Accounting Cycle Explanation of the Chart 1. Understanding the transaction: The details of transaction like date, debit and credit amount etc. 2. Journal Entry: In this process, we will record the business transaction by debiting and crediting the different account. 3. Ledger Posting: In this process, we will transfer the transactions which were recorded in the journal to its corresponding ledger accounts. 4. Trial Balance: In this process, we will determine the list of all the general ledger accounts into debit and credit account column totals that are equally contained in the ledger of a business. The purpose of producing a Trial Balance is to ensure the entries in the company’s book keeping system are mathematically correct. 5. Profit & Loss Account: In this process, we will determine the net profit/loss of a business that occurs during the accounting period. 6. Balance Sheet: In this process, we will determine the summary of the financial balances of a business or an organization. In the case of manual accounting, all six activities are carried out manually by accountants. But in case of accounting software, out of these above given six activities, only two activities are performed manually. i.e. • Understanding the Transactions • Voucher Entry Remaining four activities, i.e. Ledger Posting, Trial Balance, Profit & Loss Account & Balance Sheet are performed by the accounting software automatically.

Basic accounting terms are most important for Accounting beginners or an individual. The commonly used accounting terms in the business are : 1. Capital The amount of money or money’s worth introduced into the business by owner is called capital. 2. Transaction A Transaction is a business activity that involves the transfer of money or money’s worth between two accounts. A transaction can be of two types : • Cash transaction: A cash transaction is one where the money is immediately received or paid in the form of cash. • Credit transaction: A credit transaction is one where the money is paid later, but the benefits are enjoyed immediately. 3. Assets Any item of economic value owned by an individual or corporation especially, which could be converted into cash. 4. Liability The Liabilities are whatever the entity owes to outsiders. So, it includes loans, the amount payable to creditors, etc. 5. Drawings Money or money worth, which is withdrawn by an individual (business owner) or corporation from a business for his personal use. 6. Bad debts When a debtor becomes insolvent the trader will not be able to realize in part or full amount due from the customer. Part or full amount will remain unrealized. The unrealized amount is called bad debts. Bad debts are irrecoverable receivable. 7. Purchases A purchase is the number of goods bought by a business for further use or for reselling. Goods purchased with immediate payment of cash are called cash purchases. Goods purchased on credit are called credit purchases. 8. Purchase returns Goods that have been purchased but are returned to the seller before consumption due to reasons like poor quality and damage are called purchase returns. 9. Sales Sales refer to the number of goods sold by businesses. Sales made against immediate payment of cash are called cash sales. Sales on credit are called credit sales.

Fundamentals of Accounting 5

10. Sales returns The goods that are sold but returned by the buyer before consumption due to poor quality and damage, are called sales returns. 11. Debtor A Debtor is a person who receives benefits from the business immediately but is obligated to pay for the same in future. 12. Creditor A person who provides benefit without receiving immediate payment for the same, and who will claim the payment in future, is called a creditor. 13. Stock Unsold goods, raw material, etc., that lie with the business are collectively known as stock. 14. Revenue The earnings of a business through its business activities and operations is called revenue.

2.

3.

4.

1.3 CONCEPTS OF ACCOUNTING Accounting Concepts are those basic assumptions and conditions on which accounting is based. 1. Business Entity Concept The business concept is also known as the separate entity concept. It is assumed that business has a separate and distinct entity from its owner who owns it. Thus, the transactions related to business needs to be recorded in the books of Accounts. The types of Business Entities are: • Sole Proprietorship: A sole proprietorship, is also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by an individual. • Partnership: A business organization in which two or more individuals manage and operate the business. Both owners are equally and personally liable for the debts from the business. • Private Limited Company: It is a type of privately held small/medium business entity, in which owner liability is limited to their shares, the firm is limited to having 200 or fewer shareholders, and shares are prohibited from being publicly traded. • Public Limited Company: The standard legal designation of a company which has offered shares to the general public and has limited liability. A Public limited company’s stock can be acquired by anyone and holders are only limited to potentially lose the amount paid for the share • Corporation: It is a type of legal entity which is separate and distinct from its owners.

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• Limited Liability Partnership (LLP): A hybrid legal entity that has both the characteristics of a corporation and a partnership. An LLP provides its owners with corporate-like protection against personal liability. It is, however, usually treated as a non-corporate business organization for tax purposes. Going Concern Concept The going concern concept is also known as continuity concept. In this concept, the assumption is made that every business is carried on continuing for an indefinite period. It will not be dissolved in near future. Money Measurement Concept (Monetary Expression) It implies in accounting entries to record is made of only those transactions or events, which can be measured and expressed in terms of money. Cost Concept The cost concept is also called a Historical cost concept. According to this concept the assets which are acquired by a concern are recorded in the books of accounts at cost price. The cost of acquisition is related to the past; hence it is known as the historical cost concept. Dual Aspect Concept This concept states that every financial transaction has two aspects: one where the business receives a benefit, and the other where it provides a benefit. Therefore, every transaction should be recorded in such a way that its effect is reflected in two places in a business’ books of accounts. This concept forms the basis for the Double Entry System of Accounting. Accounting Period Concept The Accounting period concept can also be called a Periodicity concept. Life of the business is indefinite, thus indefinite period is divided into periodic intervals each interval is known as the accounting period. At the end of each accounting period, financial statements i.e, Balance sheet and Profit and Loss account are prepared to know the financial position of the business. Revenue Realisation Concept According to this concept, revenue is considered as the income earned on the date when it is received. As per this concept, unearned or unrealised revenue is not considered. This concept is vital for determining income pertaining to an accounting period. It reduces the possibilities of inflating incomes and profits. Accrual Concept This concept requires that income or expenditure are recorded when they become receivable or payable rather than when they are collected or paid i.e., transactions are recorded based on income earned or expense incurred irrespective of actual receipt or payment.

6

Official Guide to Financial Accounting using TallyPrime

9. Matching Concept As per this concept, the revenue earned and the cost incurred to earn such revenue, need to belong to the same period, and hence they need to be ‘matched’. This will help ascertain the result of the business operations. This concept serves as the basis for calculating accurate profit earned during a period. 10. Verifiable and Objective Evidence Concept This concept requires that all financial transactions be supported by documentary evidence. Such evidence should be easy to verify and provide unbiased proof of transaction. Note: The cash basis of accounting is a method wherein revenue is recognised when it is received, rather than when it is earned. Expenses are booked when they are actually paid, rather than when incurred. This method is usually not used by businesses and is, therefore, used only in selected situations such as for microbusinesses.

1.4.2 Rules of Debit and Credit The following table summarises the rules applicable to different kinds of accounts is shown in Table 1.2. Type of Account

Increase (+)

Decrease (-)

Asset

Debit

Credit

Liability

Credit

Debit

Income/Revenue

Credit

Debit

Expense/Losses

Debit

Credit

Credit

Debit

Capital/Stockholders’ Equity

Table 1.2 The 5 Elements of Financial Statement

1.4 DOUBLE ENTRY SYSTEM OF ACCOUNTING Every business transaction has a two-fold effect, wherein two accounts are affected in opposite directions. Thus, if a complete record were to be made of each such transaction, it is necessary to debit one account and credit another account. Recording of this twofold effect of every transaction is called the Double Entry System of Accounting. As explained in the Dual Aspect Concept, every financial transaction has two aspects: one where the business receives a benefit, and the other where it provides benefit. Therefore, every transaction should be recorded in such a way that its effect is reflected in two places in a business’ Books of Accounts. The receiving aspect is termed the ‘Debit’ aspect. The giving aspect is termed the ‘Credit’ aspect. Therefore, every business transaction will influence two accounts; one will be debited, whereas the other will be credited. The double entry mode format is shown in Table 1.1. Dr.

Cr.

Particulars

Debit

Credit

Table 1.1

1.4.1 Uses of Debit and Credit Every transaction involves two aspects – give and take. In the double entry system of accounting, every transaction is recorded in at least two accounts. While recording transactions, the total amount debited and credited must be equal. In accounting, the terms debit (abbreviated as Dr.) and credit (abbreviated as Cr.) indicate whether the transactions are to be recorded on the left or right of the account.

Chart 1.2 Financial Statements Illustration 1: Application of Rules of Debit and Credit Objective: Recording transactions using debit and credit rules for the business As on 1st April 2020, Suman commenced the business with ₹15,00,000 by Cheque of Citi Bank vide cheque number 540102. This transaction increases the capital as well as the Bank balance. Increase in assets is debited and the Increase in capital is credited. Therefore, record the transaction with a debit to Bank account and credit to Suman’s capital account. Journal Date st

1 April 2020

Particulars

L.F

Citi Bank Account _____________Dr To Owners Capital Account

Dr.

Cr.

₹15,00,000 ₹15,00,000

(Being amount invested by the owner)

Table 1.3

1.5 GOLDEN RULES OF ACCOUNTING An ‘account’ is a statement of transactions relating to one of the two aspects of a business transaction. Based on the aspect being recorded, an account can be ‘debited’ or ‘credited’.

Fundamentals of Accounting 7

To understand the Golden Rules of Accounting we must understand the types of accounts. The Accounts are classified based on the three categories of business transactions: • Transactions involving individuals or other business entities. • Transactions involving assets, goods, cash. • Transactions involving incomes, expenses, losses and gains. In effect, there are Three Types of Accounts maintained for transactions as shown in Chart 1.3. 1. Personal Account. 2. Real Account. 3. Nominal Account.

Chart 1.3 Golden rules of Accounting Let’s understand what each type of account means: • Personal Accounts: These are relating to individuals, a group of individuals, firms and institutions. They are of three types: o Natural person accounts: It represents the accounts of real persons of business deal with. The proprietor’s account, the accounts of suppliers and customers are some examples of natural person accounts. o Artificial person accounts: It represents the accounts of firms, the business deals with. The accounts of limited companies or banks that are not real persons are examples of artificial person accounts. o Representative personal account: It represents to persons or a group. It is different compared to natural and artificial person accounts. For Example: Mr. Manoj (Individual account), Citi Bank (an Institution’s account), Naveen & Sagar (a Partnership firm) i.e, Customer and Supplier. The Golden rule for Personal Account is : • Debit the Receiver • Credit the Giver For Example: Daksh Enterprises Pvt. Ltd. paid ₹ 54,000 to Roshan Electricals Pvt. Ltd. by ICICI Bank vide cheque no 462001, for the credit purchase made earlier. (Passing entry in the books of Daksh Enterprises Pvt Ltd)

Step: 1 Identify the 2 ledgers involved in the transaction: Being the Roshan Electricals Pvt. Ltd. Received the amount through ICICI Bank. These two ledgers involved in the transaction. 1. Roshan Electricals Pvt. Ltd. 2. ICICI Bank Step: 2 Identify the category they belong to: 1. Roshan Electricals Pvt. Ltd. – It is related to a company. Hence it is classified under the Personal Account. 2. ICICI Bank – It is an institutional account. Hence it is classified under the Personal Account. Step: 3 Apply the Rule: The Rule can be applied two ways• Rule of Debit and Credit Account

Type

Roshan Electricals Pvt. Ltd.

Liability

Increase (+)

ICICI Bank Asset

Decrease (-)

Narration

Debit

Being amount paid to the supplier and Liability is decreasing to business

Credit

Being amount paid through bank and asset is decreasing to business.

Table 1.4 • Golden Rule of Account Particulars Roshan Electricals Pvt. Ltd. A/c_________Dr To, ICICI Bank A/c

Debit

Credit

Applied Rules

₹ 54,000

----

Debit the Receiver

----

₹ 54,000

Credit the Giver

Table 1.5 • Real Accounts: These are relating to the property or assets and cash belonging to a business concern. They are of two types: o Tangible Real accounts: The things that can be touched, measured, sold or purchased. Examples of tangible real accounts are furniture account, plant and machinery account, and cash account. o Intangible Real accounts: The things that cannot be touched in the physical sense but can be measured in terms of money value. Goodwill, trademark, and patents, copyrights are examples of intangible real accounts.

Official Guide to Financial Accounting using

TallyPrime MANAGING YOUR BUSINESS JUST GOT SIMPLER INCLUDING PRACTICE EXERCISE

KEY FEATURES Ÿ Ÿ Ÿ

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Know the need and usage of Golden Rules of Accoun ng. Simplest way of crea ng a company, company features, configura ons, security control, User Roles. Basic Banking Feature, Cheque prin ng, Bank Reconcilia on, Genera ng deposit slips including payment advice, Crea on of Users. Know about securing financial informa on of the company and Change User. Fast and Powerful Business Management So ware for your growing Business. Amazingly simpler Naviga on and Experience. Automa cally reconcile your books of accounts with your Bank statement. Stay on top of Compliance with accurate GST filling capabili es. Securely access your data any me, anywhere. Get cri cal business informa on at your finger ps with Powerful reports.

Book from the house of Tally is a comprehensive guide explaining the fundamentals of Accountancy, its terms, concepts, right up to the double-entry system of accounting.

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It explains you accounting using Tally and shows you how simple it is to understand to download and install Tally in the system and different types of licenses. Further, you will learn about the chart of accounts and get to know how simple it is to create, alter and display the Chart of Accounts such as Ledgers, Groups, Stock Items and Units of measure creation. Then you will get to know the recording accounting transactions and how to record transactions such as Receipt, Contra, Payment, Purchase, Sales, Debit Note, Credit Note, and Journal Vouchers with the practical scenarios. In further chapters you will cover all Final reports in Tally which are Trial Balance, Balance Sheet, Profit & Loss account, Cash Flow Statement, MIS reports like Daybook, Receipts & payments, purchase & sales register etc. Book is enriched with numerous screenshots, solved illustrations and practice scenarios to help candidates experience the simplicity of working on TallyPrime.

WHAT YOU WILL LEARN Ÿ Ÿ

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How securely to take the company data and restore it without any data loss. Meaning and types of inventory, crea on of inventory masters such as stock groups, stock category, godown and Batches. Management of sales and purchase cycle. Placing an order, handling rejec ons, raising an invoice against the order and complete it with receipts and payments. How to maintain addi onal costs incurred on the purchase of stock.

WHO THIS BOOK IS FOR This book is highly recommended for candidates who aspire to build a successful career in Finance and Accoun ng or as entrepreneurs. A useful guide for all learners who aspire to master financial accoun ng using TallyPrime, this book serves both the students as well as the teaching community.

AUTHOR BIO Tally Educa on Private Limited, the educa onal arm of Tally Solu ons Pvt Ltd., has been incorporated with a vision to be “the premier solu on provider for all manpower related challenges of employers in India”. TEPL targets to promote and establish computer-based voca onal educa on in the country. Tally Educa on has ac vely par cipated in several ini a ves directed at promo ng voca onal educa on and skill development in India and has built a strong partner network of more than 630+ partner providers across 300 ci es.

ISBN 978-93-9103-044-5