Tally Prime Notes

Introduction of Tally Prime

Tally Prime is a popular accounting software used by businesses to manage
their financial transactions and accounting.

1. Tally Prime is a comprehensive accounting software that helps businesses

automate their financial transactions and maintain accurate financial records.
2. The software is designed to be user-friendly, and it comes with a range of
features that allow businesses to manage their finances efficiently.
3. Tally Prime supports various accounting functionalities, including accounting
ledgers, inventory management, payroll processing, invoicing, and financial
statements.
4. The software also provides features such as GST compliance, bank
reconciliation, budgeting, and reporting, among others.
5. Tally Prime allows businesses to track their expenses and income, generate
invoices, and manage their inventory efficiently.
6. The software can be customized to suit the specific needs of the business and
can be integrated with other applications such as Microsoft Excel and PDF.
7. Tally Prime offers a range of training and support options, including online
tutorials, user manuals, and a dedicated support team.

In summary, Tally Prime is a comprehensive accounting software that can

help businesses manage their financial transactions and accounting more
efficiently.
Full form of Tally
T – Total
A – Accounting
L – Leading
L – List
Y – Of Year

Version of Tally
  Tally 3.0 (1990)
 Tally 3.12 (1991)
 Tally 4 (1992)
 Tally 4.5 (1994)
 Tally 5.4 (1996)
 Tally 6.3 (2001)
 Tally 7.2 (2005)
 Tally 8.1 (2006)
 Tally 9 (2006)
 Tally ERP.9 (2009)
 Tally Prime (2020)

Who is the Founder Tally?

Tally Solutions was co-founded in 1986 by Shyam Sunder Goenka and his
son Bharat Goenka.

Meaning of useful technical words.

What is accounting?
Accounting is the art of keeping a written record of financial transactions of a
business or enterprise, classifying them, presenting a summary, preparing
their details, and analysing them.

Trade
Business is the purchase and sale of goods or services carried out with the aim
of earning a profit.

Profession
Profession is any work or means of earning money that requires before
training, such as a doctor, lawyer, teacher, etc.

Business
Business is any legal work done with the aim of earning profit. Business is a
comprehensive term which includes buying and selling of goods or services,
banking, insurance, companies, etc. Business or profession also comes under
this category.

Transaction
A transaction is a completed agreement between a buyer and a seller to
exchange goods, services, or financial assets in return for money.

When immediate payment is made for any deals, it is called a cash

transaction.

When payment is made in the future, it is called a credit transaction.

Goods
Goods are things that are made to be sold. for gain Profit. For example – Cloth
bought by Cloth Seller, etc.

Purchase
Purchase refers to the act of buying goods or services in exchange for money
or other forms of payment.
In business, goods can be purchased for cash or credit, which are known as
cash purchases or credit purchases, respectively.

Sales
Sales refer to the activity of selling goods or services in exchange for money or
other forms of payment.

Sales can be done through various channels, including direct sales, retail sales,
online sales, and business-to-business sales. The goal of sales is to generate
revenue for the business and to meet customer needs by offering products or
services that satisfy their requirements.

In business, goods can be Sale for cash or credit, which are known as cash Sale
or credit Sale, respectively.
 Turnover
Turnover refers to the total amount of sales generated by a business over a
specific period, like a year. It represents the total revenue earned by the
business from selling its products or services.

Revenue

Revenue refers to such an amount that is regularly received from the sale of
goods or services, as well as from the day-to-day activities of the business,
such as rent, interest, commission, discount, etc. These amounts received are
also known as revenue.

Income
"Income" is the money that a person or organization earns or receives. Income
is a comprehensive term that includes profits also.

There are two types of Income:

1. Direct Income:
This includes all the receipts that come from our primary activity, such as
selling goods or services. For example, if you are selling something in a
business, the value received for that will be considered as direct income.
2. Indirect Income:
Any income earned other than the primary business is called indirect income.
Expenses
An expense is an amount spent by a business in the process of earning
revenue.

There are two types of expenses:

1. Direct expenses:
Direct expenses refer to those expenses that are directly related to our main
work, such as the cost of goods purchased for sale or any other direct
expenses incurred during business operations.

2. Indirect expenses:
Any expenses which is incurred other than the main business is called indirect
expenses.
Interest
Interest is the price you pay to borrow money or the cost you charge to lend
money. Interest is most often reflected as an annual percentage of the amount
of a loan. This percentage is known as the interest rate on the loan.

Many times, we purchase goods from a supplier on credit for more days, then
we have to pay interest for that long period too.

On the other hand, if we sell goods on credit to a customer for a long period,
then we can charge interest on it.

Discount
Discount results in the reduction of the selling price of the product, which
makes it more attractive for the customer.
Reduction in price makes a psychological impact on the customer which
results in the purchase.
The two types of discount offered are trade discount and cash discount.

There are two types of Discount.

Trade Discount
Trade discount is referred to as the discount that is offered by a seller to the
buyer of the product in the form of reduction in the price of the item.

Cash Discount
Cash discount is referred to as the discount that is offered by the seller of a
product to the buyer at the time of payment for the purchase. This reduction is
provided at the value of the invoice.

Commission

When a person or organization receives some compensation for helping

someone with a task, such as assisting in buying or selling something or
performing any other work, it is called a commission.
Customer

The person who buys the goods from us is called a customer.

Supplier
The person or entity from whom we purchase goods is called a vendor or
supplier.
Double Entry System
Whenever any financial transaction takes place in a business or trade, we have
to write down it somewhere to keep a record of it. There are different
methods for this all over the world, but the most important and scientifically
proven method is the Double Entry System.

As the name suggests, it affects two accounts for each transaction. One
account is debited and the other account is credited. The amount of the
transaction is written on the Debit side of one account and on the Credit side
of the other account.

For example,

We withdrew 10,000 in cash from the bank. Here, the two accounts affected
are Cash and Bank. The Cash account is debited with 10,000 and the Bank
account is credited with 10,000.

Date Particulars Debit Credit

01-04-2023 Cash Account (Dr.) 10,000
To, Bank A/C (Cr.) 10,000
Being cash withdrawal from bank

Creditor
The person or institution that sells credit goods or services to another person
or institution and lends money is called a creditor. The creditor has to receive
the amount from the debtor in future.
In short, when we buy goods on credit from someone, he is called our creditor.

Debtor
The person who buys or borrows goods or services on credit from another
person is called a debtor. The debtor has to repay the money after a certain
period in the future.

In short, when we sell goods on credit to someone, he is called our Debtor.

Capital
The money, goods or property that the owner of the business invests in the
business is called capital.

Capital increases when there is profit in business and capital decreases when
there is loss.

Owner
The person or group of persons who invest the necessary capital in the
business, conduct the business, bear the risks of the business and are entitled
to the profits and losses are called owners of the business.

If the owner of a business is a person, then it is called Proprietor and if the

owner is two or more then persons. It is called Partners, but if many people
work together as a company, then It is done by the shareholders of that
company.

Drawings
The money or goods that a business owner takes out of their business from
time to time for their personal expenses is called Drawings or personal
expenses.
 Assets
All such things of business which are helpful in the operation of business and
which are owned by the owner are called Assets.

There are two types of assets.

1. Fixed Assets

2. Current Assets

Fixed Assets

These are assets that are kept in a business for a long period of time and
provide benefits to the business over many years. They are not intended for
resale. Examples :- land, buildings, furniture, computers, vehicles, machinery,
etc.

Current Assets
These are assets that are usually used up within one year or less and are not
intended for long-term use in the business. They can be easily converted into
cash, such as cash on hand, accounts receivable, stock inventory, etc.

Liability
All the debts that the Owen of the business has to pay are called liabilities.

There are two types of liabilities:

1. Fixed liabilities

2. Current liabilities

Fixed liabilities
Fixed liability refers to such liabilities which have to be paid after a long
period of time, at the end of the business, such as long term loan, long term
loan taken from the bank by mortgaging capital, building or land, etc.
Current liabilities
Current liability refers to such liabilities which are to be paid in the near
future, usually in less than 1 year. such as short-term loans or cash credit
limits (CC Limits).

Outstanding Expenses
Outstanding Expenses also known as Unpaid expenses, refers to all expenses
for which services have been received but the payment for them has not been
made yet. For example, if the salary of employees is pending at the end of the
year or if the rent of a landlord is pending but not paid, then provisions have
to be made for such expenses at the end of the year.

Value depreciation
Value depreciation occurs when the value of an asset or property decreases
due to use, passage of time, change in value or for any other reason. This
decrease in value is Called value depreciation.

Financial year
A financial year is a period of 12 months for which we present our accounts
because it is a 12-month period, therefore, it is called 1 year. In India, the
financial year starts from 1st April and ends on 31st March.

Accounting
Accounting can be defined as a process of reporting, recording, interpreting
and summarising economic data of any business.

Every account has two sides:

1. Debit side
2. Credit side

The debit side is on the left and the credit side is on the right.

Example: We borrowed ₹1,00,000 from Ram and repaid it in instalments.

 Dr. Ram’s A/c Cr.

Date Particulars Amount Date Particulars Amount

X-XX-XX To Cash 50000 X-XX-XX By Cash 100000

X-XX-XX To Cash 20000

X-XX-XX To Cash 10000

X-XX-XX To Cash 5000

X-XX-XX To Cash 5000

X-XX-XX To Cash 5000

X-XX-XX To Cash 5000 100000

Total 100000 Total 100000

There are three types of accounts:

1. Personal Accounts
Accounts related to individuals, organizations or their representatives are
called personal accounts.

2. They are divided into three categories.

A. Natural Account
Accounts related to all individuals such as Ram, Shyam, Mohan, Owner of
the business capital account, etc. will fall under this category of accounts.

B. Artificial account
Artificial accounts are related to businesses and organizations, such as
insurance companies, banks, and commercial institutions, and include all
debtor and creditor accounts.
 C. Representative Account
Representative accounts represent an individual or group, such as a salary
account that represents an employee whose salary is due but not yet paid,
or whose salary has been provisionally credited but not yet given.

3. Real Account
Accounts that are related to rights and property are called real accounts,
which are divided into two categories.
A. Tangible Accounts
Assets that can be touched or felt are called tangible assets,
such as building accounts, furniture accounts, vehicle accounts,
machinery accounts, cash accounts, etc.
B. Intangible Accounts
Assets that cannot be touched or felt are called intangible assets, and
accounts related to them are called intangible accounts.
For example - goodwill, trademark, patent, copyright, etc.

3. Nominal Accounts
Accounts that are related to income, expenses, profit, and loss are called
nominal accounts. Examples include discount allowed, discount received,
salary account, depreciation account, advertisement expense, insurance
account, etc. The duration of such accounts is only one year. At the end of the
year, all such accounts are closed by transferring them to the trading and
profit and loss account.

Golden rules of accounting

1. Rules for personal accounts
Debit the receiver. Credit the giver.
2. Rules for real accounts
Debit what comes in. Credit what goes out.

3. Rules for nominal accounts

Debit all expenses and losses. Credit all incomes and gains.

Loss
 When expenses exceed from the revenue of the business, the excess of
expense is called loss.

Profit
When revenue exceeds income, the excess of revenue is called profit. It is a
type of financial gain obtained as a result of business operations.

Income
A part from the revenue obtained from our main business, if any other
revenue is obtained, then after reducing the cost of that revenue, the
remaining amount is called income.

Ledger
When many accounts are kept in one book, that book is called a ledger. If we
are keeping all our accounts in one place, then that place is called our ledger.

Trail Balance
It is a list of the differences calculated after adding the debit and credit sides
of all the accounts in the trial balance ledger.

Manual Accounting:
1. On April 1, we brought in ₹100,000 in cash as capital to start the business.
2. On April 5, we opened an account by depositing ₹20,000 in State Bank of India.
3. On April 6, we gave Ram Sharma ₹2,000 in cash.
4. On April 6, we purchased goods for ₹51,000 in cash for the business.
5. On April 6, we paid ₹100 in cash for hiring a vehicle for the purchased goods.
6. On April 7, we sold the purchased goods for ₹75,000 in cash.
7. On April 9, we purchased a mobile phone for ₹10,000 in cash.
8. On April 10, we purchased a bicycle for ₹3,000 by giving a State Bank of India
cheque.
9. On April 11, we paid ₹5,000 in cash as rent for our office.
10. On May 1, we paid Mohan ₹5,000 as salary for April either in cash or by State
Bank of India cheque.
11. On May 1, we received a commission of ₹5,000 from Akash Traders for the goods
we had purchased for someone else, which we deposited in State Bank of India
account by cheque.
12. On May 1, we bought goods worth ₹10,000 on credit from the supermarket.