Module I

Introduction to Computerised Accounting

Manual accounting
A manual accounting system is a bookkeeping system for recording business activity
transactions, where financial records are kept without using a computer system with specialized
accounting software. These are the traditional form of maintaining a business accounts and
records.
They involve keeping various ledgers and files which typically include a cash book, sales and
purchase day books and petty cash sheets. Manual accounting implies that employees perform
the whole accounting cycle manually on a periodic basis, they calculate trial balances,
journalize transactions, and prepare financial statements reports and other routines.
Although the use of basic manual book keeping systems require little knowledge or skill in
accounting, they are still the preferred bookkeeping method of accounting for those knowledge
who have used them in the past.
Advantages of Manual Accounting
1. Correcting errors: It is very easy to correct errors and mistakes in manual accounting. With
the traditional books, it is simply a case of erasing the wrong entry and replacing it with the
corrected one.
2. Low data corruption: The risks of corrupted data are very less with manual systems. There
have been cases where volume of data has been lost as a result of computerised file corruption.
Keeping manual books can avoid this problem, particularly if the records are stored securely
in a fire proof environment.
3. Duplicate copies of data: Problems with having duplicate copies of the same accounting
records are generally avoided with traditional book-keeping. The ease of transportation and
backing up of computerised accounting systems may sometimes confuse the user. This can
result in an out dated data set being erroneously judged as being the most recent version and
result in incomplete accounting records.
4. Cost effective: Manual accounting system employs comparatively cheap workforce and
resources. It is reliable, independence from machines and skilled workers availability.
Limitations of manual accounting
1. Time Consuming: Accounting processes require more time to complete tasks. Accountants
will need to locate accounts and journals in the system prior to recording entries. Checking
account balances and reviewing information is also difficult.
2. Difficult Process: Double-entry accounting in a manual system is difficult, since every
transaction must be recorded by hand, twice. Many accounting programs use a double-entry
method, but second entry is created automatically.
3. Less speed: In a Manual Accounting System, recording of transactions is done through
books of original entries which exist physically. Therefore, as it takes more time to record the
transactions in the books of accounts; the speed of recording the transaction is lower in
comparison to computerised accountings system.
4. Less Accuracy: In a Manual Accounting System, errors may take place as all steps for
recording transactions in the books of accounts are required to be done manually and therefore,
there is possibility of errors while recording. Moreover, this system cannot perform the
repetitive operations accurately as human being suffers from tiredness, boredom or fatigue etc.
which results less reliability of recorded data.
5. Commission of Errors: Errors can be quite frequent in manual accounting processes.
Common errors are entering information into incorrect accounts, transposing figures or
recording information backwards. While these errors are also in modern accounting systems,
manual systems have no internal checks and balances. Accountants spend several hours to
locate and correct entries.
6. Lack of Security: A lack of security is another common disadvantage to manual accounting.
Companies may be unable to prevent employees from reviewing sensitive data in paper ledgers
and journals. Files copied and stored on a computer may also be less secure. This may allow
employees to manipulate financial information through fraud or embezzlement.
Computerised Accounting System
A computerised accounting system is an accounting information system that processes the
financial transactions and events as per generally accepted accounting principles to produce
reports as per user requirements. In a computerised accounting system, the framework of
storage and processing of data is called operating environment that consists of hardware as well
as software in which the accounting system, works. Both hardware and software are
interdependent. The type of software determines the structure of the hardware.
Features of Computerised Accounting
1. Automate and integrate accounting information: Computerized accounting is designed
to automate and integrate all the business operations, such as sales, finance, purchase, inventory
and manufacturing. With Computerized accounting, accurate, up-to date business information
is available.
2. Complete Visibility: Computerized accountings giving the company sufficient time to plan,
increase the customer base, and enhance customer satisfaction. With Computerized accounting
the company will have greater visibility into the day-to-day business operations and access to
vital information.
3. Enhanced User Experience: Computerized accounting allows the company to enter data in
a variety of ways which makes accounting work more comfortable.
4. Accuracy and Speed: Computerized accounting has user definable templates which
provides fast, accurate data entry of the transactions, thereafter all documents and reports can
be generated automatically, at the present of a button.
5. Scalability: Computerized accounting adapts to the current and future needs of the business,
irrespective of its size or style.
6. Powerful: Computerized accounting has the ability to handle huge volumes of transactions
without compromising on speed or efficiency.
7. Quick Decision Making: Computerized accounting produces real-time, comprehensive
reports which enables management to to make quick decisions.
8. Complete Reliability: The information and reports generated are accurate and quite reliable
for decision-making. Computerized accounting makes sure that the critical financial
information is accurate, controlled and safe from data corruption.
9. Flexible Reporting: The reporting is flexible in computerized accounting system. It is
capable of generating reports of any balance as when required and for any duration which is
within the accounting period.
10. Security: This system is highly secured and the data and information can be kept
confidential, when compared to manual accounting system.
Advantages of Computerised Accounting System
1. Quality accounting Work: The accounts prepared with the use of computers are usually
uniform, neat, accurate, and more legible than manual job.
2. Lower Operating Costs: Computer is a labour and time saving devise. Hence, the volume
of job handled with the help of computers results in economy and lower operating costs.
3. Speed: Accounting data is processed faster by using a computerized accounting syatem than
it is achieved through manual system. This is because computers require far less time than
human beings in performing a task.
4. Accuracy: Computerized accounting ensures accuracy in accounting records and
statements. It prevents clerical errors and omissions. The possibility of error is eliminated in a
computerized accounting system because the primary accounting data is entered once for all
the subsequent usage and processes in preparing the accounting reports.
5. Reliability: The computer system is well-adapted to performing repetitive operations. They
are free from tiredness, boredom or fatigue. As a result, computers are highly reliable compared
to human beings. Since computerized accounting system depends heavily on computers, they
are relatively more reliable than manual accounting systems.
6. Improved Efficiency: Computer brings speed and accuracy in preparing the records and
accounts and thus, increases the efficiency of employees.
7. Facilitates Standardization: Computerized accounting facilitates standardization of
accounting routines and procedures. Therefore, standardization in accounting is ensured.
8. Up-to-Date Information: The accounting records, in a computerized accounting system are
updated automatically as and when accounting data is entered and stored. Therefore, latest
information pertaining to accounts get reflected when accounting reports are produced and
printed.
9. Automated Document Production: Most of the computerised accounting systems have
standardised, user defined format of accounting reports that are generated automatically. The
accounting reports such as Cash book, Trial balance, Statement of accounts are obtained just
by click of a mouse in a computerised accounting environment.
10. Real Time User Interface: Most of the automated accounting systems are interlinked
through a network of computers. This facilitates the availability of information to various users
at the same time on a real time basis.
11. Quality Reports: The inbuilt features of data handling facilitate pure and true accounting
reports that are highly objective and can be relied upon.
12. Storage and Retrieval: The computerised accounting system allows the users to store data
in a manner that does not require a large amount of physical space. This is because the
accounting data is stored in hard-disks, CD-ROMs, pen drives that occupy a fraction of
physical space compared to books of accounts in the form of ledger, journal and other
accounting registers. Besides, the system permits fast and accurate retrieval of data and
information.
13. Relieve Monotony: Computerized accounting reduces the monotony of doing repetitive
accounting jobs, which are tiresome and time consuming.
Disadvantages of Computerised Accounting System
1. Reduction of Manpower: The introduction of computers in accounting work reduces the
number of employees in an organization. Thus, it leads to greater amount of unemployment.
2. High Cost: A small firm cannot install a computer accounting system because of its high
installation and maintenance cost. To be more economical there should be large volume of
work. If the system is not used to its full capacity, then it would be highly uneconomical.
3. Require Special Skills: Computer system calls for highly specialized operators. The
availability of such skilled personnel is very scarce and very costly.
4. System Dependency: Using a computer solution makes the user to depend fully on the
computer system and necessitates the availability of computer at all times. If the system is not
available (due to hardware failure or power cut), it would be difficult to verify the accounts.
5. Less Safe: Frequent repair and power failure may affect the accounting work very much.
Computers are prone to viruses. Often time's people will assume the computer is doing things
correctly and problems will go unchecked for long period of time.
6. Cost of Training: The computerised accounting packages generally require specialised staff
personnel. As a result, huge training costs are incurred to understand the use of hardware and
software on a continuous basis because new types of hardware and software are acquired to
ensure efficient and effective use of computerised accounting systems.
7. Staff Opposition: Whenever the accounting system is computerised, there is a significant
degree of resistance from the existing accounting staff, partly because of the fear that they will
lost their job and largely because of the perception that they shall be less important to the
organisation.
8. System Failure: The danger of the system crashing due to hardware failures and the
subsequent loss of work is a serious limitation of computerized accounting system. However,
providing for back-up arrangements can avoid this limitation. Software damage and failure
may occur due to attacks by viruses.
9. Inability to Check Unanticipated Errors: Since the computers lack capability to judge,
they cannot detect unanticipated errors as human beings commit. This is because the software
to detect and check errors is a set of programmes for known and anticipated errors.
10. Ill-effects on Health: The extensive use of computers systems may lead to development
of various health problems: bad backs, eyestrain, muscular pains, etc. This affects adversely
the working efficiency of accounting staff on one hand and increased medical expenditure on
such staff on the other.
Computerised Accounting V/s. Manual Accounting
Accounting, by definition, is the process of identifying, recording, classifying and summarising
financial transactions to produce the financial reports for their ultimate analysis. There many
differences between manual accounting and computerised accounting.
 Basis Manual Accounting Computerized Accounting
Meaning Manual Accounting is a system of Computerized Accounting is an
accounting that uses physical accounting system that uses an accounting
registers and account books, for software, for recording financial
keeping financial records. transactions electronically.
Recording Recording is possible through book Data content is recorded in customized
of original entry. database.
Calculation All the calculation is performed Only data input is required, the
manually. calculations are performed by computer
system.
Speed Slow Comparatively faster.
Adjusting It is made for rectification of errors. It cannot be made for rectification of
entries errors.
Backup Not possible Entries of transactions can be saved and
backed up
Trial Balance Prepared when necessary. Instant trial balance is provided on daily
basis.
Financial It is prepared at the end of the period, It is provided at the click of button.
Statement or quarter.
Types of accounts
1. Real Accounts: Real Accounts are Accounts relating to properties and assets, which are
owned by the business concern. Real accounts include tangible and intangible accounts. For
example, Land, building, goodwill, Cash etc.
2. Personal Accounts: Personal Accounts are Accounts which relate to persons. Personal
Accounts include suppliers, customers and lenders.
3. Nominal accounts: Nominal Accounts are Accounts which relate to incomes and expenses
and gains and losses of a business concern. For example, Salary Account, Dividend Account,
Accounts can be broadly classified as assets, liabilities, income and expenses.
Rules of Accounting
Nature of Accounts Debit Credit
Personal A/c The Reciever The Giver
Real A/c What comes in What goes out
Nominal A/c All Expenses and Losses All Incomes & Gains
 TALLY 9
Tally is one of the most simple and complete business accounting solutions available in the
world. This accounting software was developed by Tally Solutions Pvt. Ltd. With the help of
this complete accounting software, we can create accounts, prepare vouchers, keep inventory
information and produce various types of reports. It is also possible to extract trial balance and
produce various financial statements such as profit and loss account, fund and cash flow
statement and balance sheet.
Tally maintains all Books of accounts starting from records of vouchers, ledgers etc. Tally
handles different types of vouchers like Payment, receipt, adjustment entries like Journals,
Debit notes, Credit notes, Sales, Purchases, Receipt notes, Delivery notes etc. Tally follows the
double entry system of accounting and hence it will avoid any possible errors.
Features of tally
1. Simplicity: Tally is one of the most simple and complete business solutions available in the
world. Anybody who has a basic knowledge of accounts or an average knowledge of English
can use Tally. It is easy to learn, configure and use Tally. Tally is not a computerized
accounting package but is Accounts on computers.
2. Speed: A Tally user can get any reports immediately for any date or period and can toggle
between reports, either accounting or inventory or even from one company to another company
directly. The user can also shift across dates in any report without any time loss. For example,
if one is viewing a daybook for 1st of April he can immediately select 31st of March of the
next year and will be able to see the daybook instantly for that date.
3. Power: Tally has the power to generate management information, which would help the
management in taking correct and quick decisions. This in turn would enable faster growth of
business. The power of on-line information made available by Tally helps to keep business
under complete control.
4. Flexibility: Tally is very flexible to use. Tally works very similar to human thought process.
Tally is suitable to use for any business needs rather than the user trying to change the practice
of business to suit to the package.
5. No codes: Tally was the any first accounting package in the world to introduce No Codes
concepts for accounts. Tally accepts alphanumeric characters for accounts and inventory
masters and hence any accounts or stock items can be created and identified by their names.
The codeless concept introduced by Tally is now the widely accepted norm across the world
today. In case the user wants to use codes. Tally supports that too.
6. Real time: Tally updates all reports say, from day book to Balance sheets as and when the
transactions are entered and hence do not need any back end or day/period end process to be
done.
7. Online help: Tally provides user-friendly online help for the user. Hence a first time Tally
user can start using Tally without any training. It also helps the user to have his own
configuration to do better in Tally.
Technological Advantages
1. Data Reliability: Tally provides high reliability of data. Tally is very powerful and will not
be affected even if there is a power failure or if the machine is shut down. The system is still
functioning and hence there will be no data loss. Tally uses signalling quality data integrity
checks at regular levels to ensure complete reliability of data.
2. Data Security: Tally use data integrity checks that ensures no external change to the data
can pass through tally. It also uses a binary encoding format of storage to prevent tricky
grouping of information. It also offers access to the database through an ODBC layer, which is
fully activated.
3. Tally Audit: Tally audit feature provides the user with administrator rights, a capability to
audit for the correctness of the entries made by authorized users and alters them if needed.
Once entries are audited, if there are any alterations made to those entries, then Tally will
display all the altered entries along with the name of the users who has altered the entry and
date and time of alteration.
4. Tally Vault: Tally offers a data encryption option called Tally Vault. The Tally vault
password given cannot be broken by any means. Tally follows D E S (Data Encryption
Standard) encryption method.
5. User defined security levels: Tally offers high levels of security. The user can define
multiple levels of security as per his requirements and every authorized user in the company
can have individual passwords with rights to use specific features only. The user with
administrator level password will have full access and can set controls to other users.
6. Simple and speedy installation: Tally has a simple menu driven installation procedure. At
the time of installation the user can opt to install the program files on any drive (i.e. if the hard
disk has partitions) as well as specify the directory names where the program files are to be
installed. The user can also specify the location of the data directory. It does not take more than
60 seconds to install Tally on the local hard disk and takes only about 8 MB space in the local
drive.
7. Unlimited multi-user support: A Multi-user Version (Gold) of Tally can be installed on a
network having any number of machines (computers) working with different operating systems
like NT, Win 95, 98, Win 2000 and other Window series. Tally works on any kind of network
(i.e. NT, Novell, Peer-Peer N/W etc). The protocol needed to detect the lock is TCP/IP.
8. Internal backup/restore: Tally has an in built user friendly Backup and Restore option.
The user can take a backup in the local hard disk or in any external media. Tally provides the
user with capability to take backups of one or more companies or all companies in a single
directory.
9. Removal of data into separate company: Tally allows users to maintain a company for
any number of financial years. Once the books of accounts are completed for previous financial
years and if the user wishes, he could split the company data into multiple companies as per
financial periods required. Tally offers a feature of splitting company data. The user can specify
the date from which the company has to be split and Tally will split the company to form two
companies as per periods specified. Once the data has been split, the closing balance of the first
period (first company) becomes opening balance for the next period (second company).
10. Multi directory for company management: The user can create multiple directories
where he can store data. The data stored in these directories can be accessed directly by Tally
after specifying the path.
11. Import / export of data: Tally allows users to Import data from other software's as well
as Export data from Tally to other software's. Tally allows users to Import and Export in ASCII,
SDF and XML formats. XML is now the most widely used format of exporting data in the
world. Any transactions can be exported from Tally and imported in other software after
suitably altering the current structures to accept Tally data structure. The reverse is also
possible by writing a small TDL program to accept the data from other software's. The data
that is to be imported into Tally can be in either XML or DBF format.
12. Graphical analysis of data: Sometimes, pictures can say better than figures. Tally also
provides graphical (Bar graph) analysis of data. The user can do a graphical analysis reports
like Sales register, Purchase register, Ledgers, Funds flow, Cash flow, Item registers etc.)This
helps the user in deeper analysis of data. In Tally, a graphical analysis can also show month
wise graphs for the year in comparison with any other period. This will help the management
in quickly locating the highs and lean periods in a financial year and hence be better prepared
for difficult times.
13. Web enabled: Tally is now web enabled. This will help the user in reducing his paper work
further. Reports in Tally can be e-mailed directly from Tally. It is not just reports, but even
invoices and purchase orders can also be e-mailed directly from Tally, Hence, the user does
not have to send printed invoice or purchase orders from Tally.
14. Ability to publish reports and documents on the internet: Tally allows users to upload
reports on the web site directly from Tally. So companies that would want to publish reports
on the web site can do so directly from Tally, Many companies would also like to publish their
price list on their websites along with the product they deal with.
15. Direct internet access: Tally offers direct Internet access. A Tally user while working on
Tally can directly log on to tally website get details of all the facilities offered by Tally. The
user can also download the latest releases of Tally as and when available. Tally website also
offers a facility of Tally Chat. Any user can chat with a Tally representative and get any
information regarding Tally.
16. Print preview: Any user would ideally like to view format of reports / Invoices / Vouchers
before printing the same. Tally now offers a facility of print preview. Now any report can be
viewed before printing or before it is mailed. Once Tally shows the preview the user can either
opt to print or mail the same.
STARTING TALLY
We can start Tally Accounting Software in any of the following two ways.
Click on Start>Programs>[Link] 9
OR
Double clicking up on the Tally icon on your desktop.
The welcome screen Tally. ERP 9 - Power of Simplicity appears while the software loads. Then
Tally start up screen appears as shown below. This is the place where we start our accounting
operations. This is known as The Gateway of Tally.
Components of Tally Screen
1. Title Bar: Top Area contains Version number, Release details (every time a new release of
Tally is made, it is identified with a different release name like Tally ERP 9.)
2. Horizontal button bar: It is located just below the title bar. This include option to print, e-
mail, import and upload data, selection of language key, keyboard language. This bar also has
options to help you to access the help manual, control centre and support centre. The following
button appear on this bar.
 Print - Alt + P
 Export - Alt + E
 E-Mail - Alt + M
 Upload - Alt + O
 Language - Alt + G
 Keyboard - Alt + K
 Control Centre - Ctrl + K
 Support Centre - Ctrl + H
3. Gateway of Tally: It displays menus, screens, reports and accepts the choices and options
which you select to view data as required. Gateway of Tally is divided into two areas:
 The left-hand side area in Main Area provides information of Current Period, Current
Date and List of Selected Companies (Name of the company and the date of last entry
details).
 The right-hand side area in the Main Area screen displays the Company Information
menu (to select instructions to Tally) > Select a Company, Create a Company, Backup
a Company or Restore a Company.
4. Buttons bar: The buttons are designed to make the work easier and faster. These buttons
vary from one screen to another based on the screen functionality. The buttons appear on the
right hand side of the Tally screen. It displays buttons which provide quick interaction with
[Link] 9. Only buttons relevant to the current task are visible and the inactive buttons are
greyed. These buttons are enabled with the short cut keys like F1, F2 and so on. We can either
click on these buttons or can press the shortcut keys to access.
5. Calculator Area: Press (Ctrl + N) type to activate the calculator functionality. It is used for
calculator functions. Any type of Independent calculation can be done using calculator to get
quick answers.
6. Info Panel: Displays Version number, License details, Configuration details.
7. Task bar: System date and time are displayed here.
Quitting [Link] 9
 Press ESC until you see the message Quit? Yes or No? Press Enter or Y, or click Yes to
quit [Link] 9.
 Alternatively, to exit without confirmation, press Ctrl+Q from Gateway of Tally
 You can also press Enter, while the option Quit is selected from Gateway of Tally
Company Creation
 To Create a Company, Go to Gateway of Tally > press Alt+F3 (Company Info.) > Create
Company
 Select “Create Company” and double click up on it. We can also press Enter key after
selection to enter company information. When we press the Enter key the company creation
screen appears. Information relating to a company is entered in this screen.

 After entering the last item, the Tally may ask Accept? Press Y to accept the data and Press
N not to accept data.
Select a Company
 To Select a Company, Go to Gateway of Tally > press Alt+F3 (Company Info.) > Select
Company or
 Click F1: “Select Company” button or use F1 function key.
 Tally. ERP 9 displays the List of Companies screen with all the companies created in an
alphabetical order. Select the required company from the list. In case two or more
companies are loaded, click on the company which you need to work on. The selected
company will be highlighted and will appear on top of the list.
Alter a Company
 To Alter a Company, Go to Gateway of Tally > click on F3: Company Info on right
button bar or Press Alt+F3 (Company Info.) >Alter.
 Select the company which we need to alter from the List of Companies and press Enter to
view the Company Alteration screen. After editing the company details, Press Accept.
Shut a Company
Shut a Company is to unload it. It does not mean that company is deleted. Simply select it agin
to load and work on it again. We can shut a company in the following ways.
 Gateway of Tally>Alt+F3>Shut Company or
 Press the button F1: Shut Cmp (Alt+F1).
Select the company which we need to shut from the List of Companies.
Delete a Company
 A company can be deleted by pressing Alt+D in the company alteration mode.
 While pressing Alt+D a dialogue box appears ‘Delete’ Yes or No. Press Y or Enter key
to delete the company.
Current Period
It means financial period in which we are working. Tally refuses to accept the date which is
prior to or after the current period. So after creating a company the current period must be
changed. So that the financial year falls within the current period. It can be changed by using
the key combination Alt+F2 and entering the new period.
Current Date
It means the date we are working during the current period. Vouchers will have the same date
of current date. By pressing F2 the current date can be changed.
F11: Company Features
F11 feature helps in configuring and selecting different features of a particular company. When
the requirements change, the user can change the features as per the necessity. It is enabled in
the screen of Tally ERP 9 itself for easy access. Another important thing is that F11 features are
susceptible to a particular company alone. The requirement ought to be changed for one
company will not reflect or applicable to the other company unless the user intends to change
it.
To change any specific features of a company, Go to Gateway of Tally → F11 → Features
In the company’s features, the user can change any of the listed features according to their
requirements.
 Integrate accounts and inventory
 Income/Expense statement instead of P & L
 Allow multi-currency
 Bill wise details
 Activate interest calculation
 Use advanced parameters
 Maintain payroll
 Maintain cost centers
 Allow Invoicing
 Enable company logo
F12 Configuration
These are application-centric configurations that can be changed and managed at any time. The
user can change n number of times as per the thing that suits the changes. For instance, if a user
wants to record the purchase transactions in debit or credit, he/she can set it using the F12
configuration.
 To change any specific features of a company, Gateway of Tally→F12→ Configuration
Here are the general configurations in F12.
 Numeric symbols
 Accounts/inventory info
 Voucher entry
 Invoice/order entry
 Payroll configuration
 Banking configuration
 Printing
 E-mailing
 Data configuration
 Advanced configuration
 Product and features
 Licensing