1.4 Accounting Module Business Accounting ‘Accounting s the art of recording, summarizing, reporting, and analyzing financial transactions. An accounting system. can bea simple, ufltarian check register, or, as with Microsoft Office Accounting, it can be a complete record of all the activities of a business, providing details of every aspect of the business, allowing the analysis of business trends, and providing insight into future prospect. 1. Books of Accounts and Journal Entries ‘Bookkeepingis the practice of recording transactions. Bookkeepers tend to focus on the details, recording transactions in an efficient and organized manner, and they may or may not see the overall picture. Accountants use the work done by bookkeepers to produce and analyze financial reports. Although accounting follows the same principles and rules as bookkeeping, an accountant can design a system that will capture all of the details ‘to satiefy the needs of the business — managerial, financial reporting, projection, analysis, and tax. Teer 3 Sowne) 7 {s used fo be an actual book that the bookkeeper would use to make accounting entries Whese days center transactions on the computer using accounting software like Tally ERP, Journals are‘Smply debits and credits in chronological (date) order. The purpose of journals isto keep a day to day record of a business and its Each journal can also be matched to the relevant supporting document (such as invoice or a receipt) by use of a ‘ng code of folio number. This code or folio number simply cross-references between one document and ‘another. If the first transaction is Rs. 15,000 capital was made by issuing check number 38, then one could write ‘Ch- 38' for example) under the folio number.2. Depreciation and Stock Valuation = W*QATTS Stoel, const gf all materials held for eventual resale, whether these be raw materials, work in progres or socket finished goods JThe accounting standard SSAP 9 sets out that stocks should be valued at whichever isthe lover cost oF net realeable values. The standard defines cost as that expenditure which has been incurred inthe nora course of busines in bringing the product or servic to its present location and condition. For a trading busines sh 22 retaler, cost wil therefore be the purchase price plus the cost of delivery tothe retail store. For a manulrag ‘business, the cost of finished goods will be the direct costs of labour, materials and expenses, and in addto indude factory overheads absorbed into the product. Netrealisable value is the selling price ofthe stocklesal fur ‘costs to be incured before a sale is completed. There are a numberof ways of determining the costgfa stock en Stockmay be valued on a first in first-out’ or average cost basis, or reasonable approximation of isa measure ofthe wearing out, consumption or other reduction in the useful economic life of fixed ast) These economic ile isthe period over which the present owner will derive economic benefits from its use. RéSidual ae isthe net walisable value of the asset at the end ofits potential economic life, ie. disposal proceeds les seling ot. ‘Another helpful term is net book value which s the cos of an asst less the amount it has depreciated ata momen time. Netbook value = original cost ~ accumulated deprecation to date, 5 9) “YIWOF Is. De prewaho ‘Methods of Calculating Depreciation Lm 4H ada 14 ~~ 1 (Pe, mot common methods of caleting‘epelaton ae the sight Ine mead! cnet reds nt ‘Using the straight ine method, the asset's value is depreciated in equal amounts over its economic ie TM is calculate by: Depreciation charge per year = Cost - residual valug'gEstimatd life in years, For example 2 costing Rs. 40,000 with an estimated life often years and a Rs, 10,000 ,etdual value would bg depreciated as obo Depreciation charge per year = Rs, 40,000 Rs. 10,000 divided by £0 Rs, 3,000 per year)The reducing bl’ ‘method does not depreciate assets eveiy over their useful economic life, bu instead charges frore for deren the early years of an assets life. The method is appropriate where the relative benefits of owning the asset re the asset ages -e-9. motor vehicles and computers is calculated by applying a percentage rate othe asset’ value (i.e cost less depreciation to date). Depreciation per year = net book vale X deprecation rae. 2 Act cet dt tsi Sens EEG. (ABontreconctatonisa process that explain thediferene betwen thebankbalanc shown ancients Cee en einer ranean ae Cnty aang aed dunerind i ptt ‘been presented to the bank, a banking transaction, such as a credit received, or a charge made by the bank, fee SSLanaaa acaauantiearmaate apna ae _—~ -—— may be easy to econ the diference by looking al vary recent wansactonsin ether the bank statement orthe “orgentaton'oum accounting records (ash book and seeing ifsome combination of them tales with he erence {0'be explained. Ore it may be necessary to go through and match every single transaction in Both sets of +o peda lst econlion, nd se whalranactons remain unmached, The necessary adjustments should ‘Ferm snc ne cash bok, or an ming differences recorded to asi with ure recoeliatons eth eason, and to minimise the amount of work involved is good practic to cary out such reconiations atrecconahy frequen ners Recoelbtions are genealy performed by specialised accounting sofware tough ‘he undortnding of whol occurs is important fora succesiuleconliaton. Ako, Bank econciaton sotement ‘Saterent prepared on articular day to recone the bank balance as per Cash book or Hank statement showing ‘nines eusng dference between the two balances ‘Spstem weed for Bank Reconciliation ~ Tally ERP 9 “This sofware usd in doing bank reconclation, Tally ERP 9 i accounting software in which all the ene ae done. Gnesi Ba een 2 soba write Toe wow. dow mel Wares,we tobe perform forBankReconetiaton Un Be an, QCHMitus +4 srareaton eke bog chet Pore Bank” (>) 1 Reif Bank stems» Re cern noc: ry ~ Vie eceve the banktaterens regulary fom the bank in hard form. 1)_Revew of Bank tatements ; ie reviw the bank statements to find out ifbank has charged any interest bank chargesete.,In case ary Mer eg nh a own Sy (Office Banking verbally for rectification. 1a), Accounting of Bank Charges Interest cherged by bank, me “Frease the bankas debited any nfareel charges en a financial entry is posted in outgoing expense account of ‘Rleventnk account in Tay ERP 9. The documentary evidence of bank charges interest. bank advise isaio collected om bank 1) Performing Bark Reconciliation “a Through fie bank Hatementswe cleared the cheque! transaction in Tall ERP 9 as per bank cheque desing ate '. Updating the bank econcition statement in Tay ERPS, Ht completes the bank reconciliation proces, ‘) Reconciled bank statements & bank advises fr bank charged intrest etc sled inthe respective benk fle fiedieee’ ; wiat is Fmd Preeowi” ‘All business transactions are first recorded in Journal or Subsidiary Books. They are transferred to Ledger and \ Slaeat Trvaan es often be bskof aca owetanthe otter bso ses nd oat ‘eared pon oe banca endl the yar The shea beter srved athe Tack nwa bat esr ter ap ute era cone as afc Wen tans ar eae under double enty ten tr et revert han on Vmobe ae econ eal anoun ‘Ifa Statement is prepared with debit balances on one side ang! credit balances on the other side, the totals of the acu Schaum nel aba) Coed Re m “ial ane canbe dal aaneesandn teed sais and ah Boer Pein : then writs Te 94 Thi) Babes VOL tate ret mated mig he rtneta sy Lente ane Le Tl ae? ‘gee, itis an indication thatthe Accounts re corey writen up batt isnot a conchisive prot. 2. Whelp o prepare the Trading Ne, Prof & Lass a/c and Balance Sheet, 4 3. presents othe businessman consolidated Inte of al Ledger Balances. 17h are wo methods or epring he Tl Balance \ ; a a Tea i ‘balanced. They are totaled. The debit meet nS Ia Lae tien Thy meth he a a ce ent Second Method: ‘Thsmathed more idl sed, nthsmethod, Ledger accounts are balanced, The brought doumbalances ae hen troughttoe sheet ven bellow To ‘Suresh Babu ‘s Books ‘Trial Balance as on 20 ie | main [uF [oormas [oiaee [SF [wr G2 on renting Ee are Gan ts Sun Lebtom rader sll on cet basis, The Buyer's Account in Is debited )For each buyer, there is one Ledger af. Some ofthe buyer accounts may be automaticaly Butt ute aural that many of these Customers 5 have a debt balances. When we bring these balances tothe Tal Balance if we are going to write all, individual names of customers, then the Téal balance wl be too lengthy. Therefore, rst list of Debtors with their Individual debt blanoes are prepared and totaled. Inszad of writing the lndvdual names of Debtors, the ttl written under th heading “Sundry Debtors" which appears inthe Tal Balance Sd cxonoe ; War ts 8 Cuditenw Grae number partes fom whom th ders goo on crt or each one ohm, zou edn the Ledge Asin tees of Delo, Lit of Cecil wih he anew uso hem prepred Ine TEleatnc inated iin eda rarer fred, el fhe lances teens 8 wien Xedertheeatng "Sindy Caton” ithe Ta Balance agrestis an indlcation tha the accounts are corecy written up; butts nota conchsive ‘roo. I thea balance dlsagrees, then the difference amounts generally placed in ‘Suspense Account _ SANNA Nae TEARFormat: a ‘Trial Balance of Mr. Aakash ‘As on 31st December 2013 “Eine | Name otaccount | LR | DebitBalance | Credit Balance ashes odes nfome Ja 4 “The total amount of debit balances shouldbe equal to the total amount fered balances. This method iron followed by all FINAL ACCOUNTS "ily the eros and how to prepare Tal Balance. ls qute natural thatthe businessman is infereid inIoug ‘thether his busines running on Profit or Los nd alo the te fnanclpositon of hi tusiness. The main ain | Booldepingtoinorm he Proprietor, about he business prgess andthe nancial poston athe igh no So, wa hve ee how the bine asa re corded noua and Ido and how fd 2 ‘height way. Preparation of Final accouns is highly possible only after the preparation of Tal Balance 3 Fr sme Trang Prom Loe Acount | Balan ast 1. Tring and Pott and Lass N's prepared o find out Profit or Lose. 2 ‘Sheets prepared to find out nancial poston aif concern 2nd PRL. Alc and Balance see ae prepared a heen of the yer o a nl ofthe part. Sot cle Wille 4 CLomteatio OF Seer std cnar din oat Revenue Qereurt 2 Pot osu Taomanceowt het 38 Trading flow. oo (rong refers buying and seling of goods Trading Ae shous the esl of vind fi sein of goods. This cou * pared o find out the diference between the Seling prices and Cos pric) sling pice excod the cost PS twa bring Gros roi. For example, if the cost price of Rs. 50,000 worthy goods ae so for Rs, 60,000 ‘bringin Gross Profit of Rs, 10,000. If the cost price exceeds the selling pric, the result will be Gross Loss. Fr xa" ifthe cost pice Rs. 60,000 worth f goods are sold for Rs 50,000 that wl res n Gros Lose of Rs, 10,000. Gros rotor Grom Lowndes ang AcesIn the Debit ade of Trading Account > "Opening Sock: Stockon hand athe commencement of the yar or period istered asthe Opening Stock ‘Purchases indicates totl purchases both eas and cred made during the yet Paucheses Reta or Returns out words: Purchases Returns must be subtracted from the total purchases to get the net purchases Net purchase willbe shown nthe trading ceount. Direct Expeies on Purchases: Some of the Direct Expenses re |L Wages: Iisa known a productive wages or manufacturing wages. { Cariege or CariageInvards 1%, Cctroi Duty Duy paid on goods for binging them within municipal mits Ie Customs duty, dock dues, leering charges, Import duty ee, ‘Fuel, Power, Lighting chargek related to production, ‘A. Oi, Grease and Waste. ‘Such expenses are incuted with view fo pu the goodsin the Saleable Condition. 0m the Credit Side of Trading Account ‘Sales: Total Sales (lnloding bth cash and credit made during the year. 2. Seles Returns or Return Inwerds: Soles Returns muse subtracted from the Total Sales to get Net sles. Net Sales walbe shown '3. Closing stock: Generally, Closing stock does not appear in the Tl Balance It appears ouside the ial belonce~ Threpresents the value of goods atthe end ofthe wading period Specimen Form of a Trading A/e ‘Trading Account for the Year ending be Gs “Amount | Amount ‘amount Pervcutare Rem [Re P| Parscuars ne 7 Opening Stock ex «(By See wx Lowe Retumstnwarde [so | ot ToPuctase mee ese Retume Osrarie [sox __|sox | By Cong Stock | | xx By Grom Loss (be a Towagee rex | vanseredtoP ALA) Torre ot | To Carige vars wx “To Ciearing Charges ox oP aking Charges x TeDockte | ToPoner = Tociow Pot tote x tanstoredtoP& Le) + EES ¢ ERIC——_— eS “. : ‘OBJECTIVES OF BALANCE SHEET: 4. shows acute financial postion of fi | &: [Risa gst of vriou transactions at given period 2 teeta ct apy et anaes |S Sitmetinatineheeacnne Specimen Balance Sheet of | For the Year ended 3st March 2013 Potala Tanoint | Amaunt [Parades "Raunt | Amoi Sindy Credo ‘ex | Coshinhana m its Payte | ox | Casnatbont ~ fm ‘Bank overt mx Bis recevable wx tre x | Sundty Debtors x oraove wx | Chong Stock = Reserve Fund vx | Fume & Frings fe Oustndng em. Capiat | ox Investments 5 an a | Pant Macinery = e | toot Tens ee tose tet Lo se Land & Buisings ee po eate 20 Business premises ion ese: eae Tax wor | me | Heres 8 crs = Prepaid ex. wot Patents & Trade marks al | Soot ls The Balance shee contains to paris Lefthand side Le. the Libis 2. Righthand side. the Assets nt everything which a a rare dona a optsiness owns and has money value. Assets are always shown as debit blanc1. Tangible Assets: ‘Assets which can be seen and flby touch are called Tangible Assis. Tangible sets re csi into ‘a. Fixed Assets: Asets which ae durable in naire andl used In business over and agin are known as Fed ‘Assets eg, land and Baling, Machinery, Truck, bi. Floating Assets or Current Assets: Curent Ase are i Mean! Yo be convero into cath, i. Meant for resale, 1. Likely to undergo change e 3. Cash, Balance, stock, Sundry Delors. 2. Intangible Assets: ‘Assets which eannot be seen and has no fixe shape. E.., good, Pte 3. Fictitious Assets: ‘Asatsubich have no ral value and will appear on the Asst sie of B/S are known as ettious ase. Eg Preliminary expenses, Discount or creditor. ass: So recalled Libis, abo incidesProprctors Capital They are known ascret of Liabilities: Long Ter obi: Labs willbe redeemed afer lor pr oftne 10105 yeu Capo Los ‘Tem Loans. 2b Cant Lisblite: Lbs, pic are edeemed within a yea, are called Curent Libis or shore, Tables Eg, Trade creditor, Bi, Bank Loan. 8. Contingent lcbite: Ln, hich hove te folowing leas, oe cal contingent abate, Thy Not actual bility at present ~ f Matneboce layin ture on condontsthe contemplated event ecu, Eg iy ners of pending sl WWall — _ ENCE BETWEEN ATRIAL BALANCE AND A BALANCE SHEET nee ball : ee ee nemo] Sy" ‘shows he elnces oa B98 we ) 1 rermeroemtnt |tuometsecmtnet Tay | | ero arate blr Ne. 3 eaten atten acc. | seis reed rani postont tng, 4 | rereston nt Tssane are atin | itn 8 the as sown ms be nod oor is 5 | hstore opening sock sow cig sock. Tr © | reeds ot 8 cst Ia te adios Aas & bien (ma 5. Ethamactions& Mis. Banking operations Cnt trig nee baking or -orng) lows coer of «nancial nttion to cont ‘ensoconson see ete opie hon uhh canbe alban tal bark cutee Seige Teac anc stutrsonne bs aya comer having personal nee cs mt sth intone he servi, and setup some pod (ade vos aa) or cision eee Te ‘eswor fr aine barns normal ot these sor tephoe barking Phan nas nos eng ‘ustomers intend to acces the oe2.4 Introduction to Tally ERP 9 Tally ERP 9 is the world’s fastest and most powerful concurrent Multi-lingual business. Accounting and Inventory Management software. Tally ERP 9, designed exclusively to meet the needs of small and medium businesses, 3 fully integrated, affordable and highly reliable software. Built on the proprietary technology of Tally Solutions -C MuLATE (Concurrent Multi-lingual Accelerated Technol logy Engine) - Tally.ERP 9 is a perfect fusion between the pat ‘breaking Concurrent Multilingual Platform and an Obj ‘Simplicity: ‘ally ERP 9s simple, easy to setup and ies basicknowiedge of Accounts and Englsh to use, SO alows easy oa 7 Stlced: Tally ERP 9 provides the capability to generate instantaccounts in any nds language, viewing them in nother language an printing ther in yet another Indion language + Real time processing: Immediate posting & updation of books of accounts as soon asthe rnsectons ae tntered hereby lactating instant statements & Report. asofcitae real-time multi-user environment + Accounting without Codes: Tally ERP 9 allows Mounting with the regular names (the way you spell them or use In normal prance) without any acount codes. + Technical support: Timely suppor i avallable from our expert a the Tally Service Partners (TSPS) + Online Help: The Tally ERP 9 Online Help (Al+H) provides isan! assistance on basic and advanced {features ora ater relevant topics of Tally ERP 9. + Tally.NET: isan enabling framework which establishes a connection through which the remote user can coe the Cents data without copying/transerting the daa, + Remote Access: Tally ERP 9 provides remote capabilites o access he data rom any-where and anytime. + Control Centre: works as an interface between the user and Tally ERP 9 installed at different ses and enables the user to centrally configure and administer SitetUser belonging oan account. “+ Support Centre: allows 2 user can directly post is support queries onthe functional and technical aspects ofthe Produc. + Auditors Edition: Tally ERP offer special Auditors Eton of Tall ERP9, which provides auditing and ‘compliance capabliiesexcisvly for Chartered Accountants. Creating a Company a ‘Creating a Company involves providing basic information about the company whose books of accounts are to be Tay ERPS, (Gateway of Tally > (Al'+F3) Company nf, > Create Company “The Company Creation scren appears as shown- i field. Pry ahox ou vatecoromy boonies Hace ne IY “) . qate he company in the dat path given i the Tall INI spe by dt hen ou a fe er apace) anime te Pah ea: . isthe abiliy to reateload compares in pay ‘Backup, Restore and Reunite For example fhe default TallyERP 9 dala directory could be C\TALLY.ERPIDATA, You may now wish o cay ca i ee cee nl 'ERPBRANCHES, Thee {ine, the default dreciory displays C\TALLYERPIDATA, andi you wish to work on the data of your branches, [Beclopace and enter C\TALLYERPIBRANCHES forthe directory name. This displays the companies whose da stored in that location in the List of Companies, You can even give the path ofa network server or any others device. Name Enter the name ofthe company whose books are being Malling Name and Address TBR report print the malin name and addres as ue ABE Con [ SN, Mahler Cra ears ] LRPerc the mur of nes for hearst deta TAMER 9 accommodates al the press the same ‘Statutory Compliance enabled in counties. The Statloy Features and Base Currency Simbel hd a ab ‘company in India, the bese uFTENCy sancng nd for Lt of Conte eins Sts Pn Ceo Teeone No ed state ‘You can cet he appropiate ta from the predefine’ Ii PINCode ‘Speci the PIN Code (Postal Index Number ofthe speiied addres. ‘Telephone Enter the Tetephone number ‘Mobile No Enter the mobile nmber of the company. Emall Address : ‘Enter he Ema res tha willbe used to ema documents, reports an data rom Tall ERP 9. Enable Auto Backup Set histo Ves, fyou watt enable the automatic backup of aly ERP 9 data (per company), Es, stihis to No The dota beh is stored inthe daa folder of the respective company. The auto backup data can be restored by pressing ‘Cal At+ from Company Ino mens or Gateway of Tl. FI ase te npr test esta ‘Select Accounts only i'you do nothave any inventory transactions However, ta ater date (if required) you can choose to alter the informati Inventory, an tion as Aecounts-with- I Selec Aecounte-with-nventory, o maintain both Grandia aecounts and inventon m7Financial Year From stipulated period the, 12 my Ino out he oo of count of compara manana 9 ied Ped 2 ‘months, andso.on, This stipulated period seferred tthe Financ “The sped pero ofthe eneial years 12 months in most counts. Tal. ERP 9 automata conn months om the date you gle hee as the nail Yer. re pr vvelecs wet sigs se Pec ae btn to ang wa SPS et at tea te et on fr Sg Ses ci ce de ec Racer eee Ge cee TREE er ni ni ia yo pa a er Books Beginning From ‘Talk:ERP 9 presumes that you wis to maintain books from the beginning of the financial year. Hene, Ta ER9 Ledges > Cretea Debit Note y T° teate a Debit Note for Purchase Rtas,one Create Noto ‘To create a Credit Note for Sales Returns, Go to Gateway of Tally > Accounting Vouchers > Ctr+F8: Credit Note Enter the reference number in the Ref. fel. Select the Party's A/c Name from the List of Ledger Accounts. ‘Select the Sales Ledger and the appropriate VAT /Tax Class appears. ‘Select the stock item from the List of Items and enter the Quantity and Rate. The amount is aut« displayed in the Amount field. eepe= —_—_ _— : ‘Special Keys for Voucher Narration Field nthe voucher respective of he von, x narton saved forthe ist ee me a A Recs be Lan ochre ect (Creating a Journal Entry 1. Journal entries re wsuely used for finalization of accounts ‘Tepassa Journal Voucher, Goto Gateway of Tally > Accounting Vouchers + Click on F7: Journal onthe Buon Bar or press FT. For example, there may be enties made for intrest accued or interest due, If you have to receive Int party: the same can be entered using Journal Voucher. ' 1, Debit the Party 2. Credithe Interest Receivable Account ‘The Journal entry is displayed as shown:¥. a a , - OO “and Cost Category in Tally.ERP 9 centre in Tal ERP 9 refers to an orgerizaton vale the cost category fused to accumulate costs or SJoueanuse cos centre to trackexpenses ofeach employee while cost each project “rok cost centre Tal ERP 9, consider a Sale department an organization which has diferent Selesmen, ‘orecod their expenses and incomes lets follow the steps below: al unit to which cos or expenses can be located ria profi forpralel ses of cost centr For exe colegry canbe sed to see ectveness of Enabling Cost Centre and Cost Category Goto Gateway of Tally > FI1: Features > F1: Accounting Features, + Set maintain Cost Centres to Yes + Setmore than ONE Payroll Cost Category to Yes cg 2% | teametape Suter ated P&L Enter Pachate ininlce Feat ae ‘Aor a Carney 7 yee Vee Debt Nets Ye “Gee ce mode fr Crt Nets te ‘Ute moter Dab Notes Te Mat se Daa ae ‘Maton Bot an ois ae. Use Rowing Jools Opel Vouchon 7 Yon (her Fost nal Chou Pig 2 "SaiAter Choque Ping Conbgabon ne ‘on 200 a et we ect We ig eta br Compa Lede? Ho ‘Sainte Consay Maing Dea ihe Enea Comme tne tt 4 woeare allocated to your business units q memverermcenegent Tala, costs ai Cost Centre REPOS | 4 annyss of HOw Or her related transactions in differen faster identification an ‘ll the cost cent "as, % re ‘complete details of: ‘ks ; Oy / are E Category Summary 2. Cost Centre Break-up 3. Ledger Break-up 4. Group Break-up For example, the Cost Category Summary report is shown below: To view these cost centre reports: Go to Gateway of Tally > Display > Statements of Accounts > Cost Centres