Chapter - 1

Introduction to Tally:- TALLY is a Financial Accounting

Software, developed by ‘Pentronics Pvt. Ltd, Bangalore.
Introduction to Accounting:- Accounting is the language of
business
Office Operations:- As per the dictionary the
meaning of an office is “a place where business
is carried on”.
•The office is the administrative centre of a
business.
•An office is concerned primarily with the
work of marking records, using records and
preserving them for future reference.
•An office is the information centre for a
business.
 OFFICE OPERATIONS
An office is a Place where some clerks and few
officer sit on chairs and do some sort of paper work
related to the business of the organization.
Commercial Office:-
The importance of the Commercial Office function
is evident from the large number of persons employed to
fulfill the tasks of the office by working in a team spirit.
Office work is done in every department and by
every officer of the organisation. Office work is done
right from the chairman to the foreman.
 OFFICE OPERATIONS
A detailed classification of the principal
departments of a modern commercial office and their
functions are given below:-

Purchase Department
The Purchase office is responsible for different
kinds of purchases, [Link] assets like machines and tools;
consumable items like stationary etc.; and the goods the
office or resale or raw material for manufacture.
 OFFICE OPERATIONS
Sales Department:-
Customers make inquiries about the product of the
business from the office; price quotations and the tenders
for the product have to be sent to the customers by the
office. On receipt of the order.
Account Department:-
The Account department is mainly concerned with
the maintenance of books of accounts.
Cash Department:-
The main function of this department is to handle
cash transactions. The cash department is
 OFFICE OPERATIONS
correspondence entrusted with the work of receipt of
cash, payment of cash, preparation of petty cash- book
and Bank’s Ledger.
Stores Department:-
Very big organisations and factories require several
types of material, Spares etc. , for day to day work and so
maintain a stores department, which deals with
procurement, storage and issue, i.e. consumption aspects.
Correspondence Department:-
The main function of correspondence department is to
 OFFICE OPERATIONS
look into main letters, inquiries, memorandums etc. and
prepare suitable replies.
 Book Keeping
As mentioned above the accounts department maintains
certain book of accounts and this process is called book
keeping. The following are the main books which are
maintained by the accounts department of a company:-
Journal
Journal is a place where your transactions are first
entered. In a manual system this would simply be a book
consisting of columns, which hold the date, amount and
accounts affected by each transaction.
[Link] Date Particular amount narration
Ledger
 Book Keeping
Ledger is a book in which your original entries from the
journal have been sorted into separate accounts. A jounal
therefore holds all your transactions in date order and a
ledger is a resorting of your transactions by accounts.
Posting
your transactions are first entered into a journal. They
are then copied into a ledger. The action of copying
entries in a ledger is called Posting.
Trial Balance
A trial balance is a list of each account balance. Those
 Book Keeping
With credit balances are added together, and likewise,
accounts with debit balances. If the total credits equal the
total debits, the accounts balance and a balance sheet can
be prepared.
Balance Sheet
A Balance sheet is a summary or statement of all the
accounts used in a business. If an account has a debit
balance it is usually shown on one side of the balance
sheet under a heading called assets. If an accounts has are
the things the business owes. If all the original
transactions have been entered correctly into the journal.
 Chapter – 2 (Basics of Accounting)
Meaning of a Transaction
The two parties is termed as a transaction. Transactions
may be monetary and non-monetary transactions. The
transactions which do not an exchange of money directly
or indirectly are termed as non-monetary transactions
[Link] a cycle to a friend for a day or two for his use.
Monetary (Business transaction):- A business transaction,
we refer to money transactions only. Sending a price list
to an intending customer is not a business transaction but
selling goods to a customer either for cash or on credit is
a business transaction.
 Basics of Accounting
Accountancy
Accountancy is the art of recording, classifying and
summerising in a significant manner in terms of money
transaction.
Basic Accounting terminologies
1. Transactions:- Cash and Credit
Cash transaction:- a business transaction in which cash
is paid or received is a cash transacion.
Examples:- Purchase of goods for cash, payment of
salary, receipt of interest etc.,
 Basics of Accounting
Credit Transactions:
A credit transaction is one in which cash is not paid or
received immediately at the time of a transaction, but it is
paid or received at a latter date.
Examples:- purchase or sale of goods on credit
Goods
Articles or things in which a trade.
For exam.:- books are goods for a bookseller.
Purchase and Sales
The terms Purchase and sales are used in accountancy
 Basics of Accounting
to indicate purchase and sale of trading good.
Exam. Cash and credit Purchases goods of Rs. 1000/-.
Debtor
A person who owes money to the business becomes a
debtor of the business .
For exam.:- if a business has to receive money from Shri.
Pandit , pandit becomes a debtor of the business.
Sundry Debtor
if money is to be received from a person for credit sales,
that person is a sundry debtors of the business.
 Basics of Accounting
Creditor
A person to whom a business owes money becomes a
creditor of the business.
For exam.:- if furniture is purchased on credit from a
furniture dealer, that furniture dealer is a creditor of the
business till his dues are unpaid.
Sundry Creditor
A Creditor for purchase of goods is known as a sundry
creditor.
Debt
 Basics of Accounting
Bad Debts
The debts which cannot be recovered are termed as bad
debts.
Assets
Total possessions of and debts due to the business.
Exam.:- buildings, machinery, furniture, etc.,
Fixed Assets
Assets purchased by the business for its own use and not
for resale,
exam. Building, motor car etc..
 Basics of Accounting
Liabilities
Amounts payable by the business to its proprietors &
others e.g. Creditors, loan taken
Capital
whatever money or money’s worth proprietor brings into
hos business from his private estate forms his capital in
his business
for exam.
Shri pandit invests cash, furniture and building in his
business, these items form his capital in the business.
 Basics of Accounting
Excess of assets over liabilities is also termed as capital
of the business e.g. If total assets of the business are of
Rs. 2,20,000 and liabilities are of Rs. 1,50,000 the capital
of the business will be Rs,. 70,000
Discount
there are two types of discount- Trade and cash discount.
Trade Discount
It is an allowance given on catalogue price of goods. This
discount is allowed at the time of purchase/ sale of goods.
 Basics of Accounting
Cash Discount
This discount is allowed to trade debtors to induce them
to pay their dues within the time limit given. If payment
is not made within this time limot, the debtors do not get
this discount.
Account (A/c or a/c)
The term account refers to summarized record of all the
business transactions relating to one particular person,
thing or an item of income or expense.
Books of Accounts
 Basics of Accounting
It means suitably ruled account books in which business
transactions are recorded. Main books of accounts are:-
Journal and Ledger
Entry
Recording a transaction in the Journal or Ledger. Thus
the term entry may mean Jounal entry and ledger entry.
Turnover
it means the total sales (cash and Credit ) of the business.
 Basics of Accounting
Voucher
Any documetary ([Link]) evidence in support of a
business transaction is called a voucher.
Example:- Receipts, invoices, bills etc.
Person
The term ‘person’ relates not only to individuals but it
also includes institutions or associations like companies,
banks, schools,[Link].
 Chapter-3 (Rules for Accounts)
Introduction
A voucher is a basic recording document. Day to day
transactions are entered in vouchers. It is a key to all
business information. Entering the transaction through
voucher is called creating a voucher or voucher entry.
Double Entry System
Making a voucher entry basically includes entering the
two states of transaction, Debit(+) and Credit(-).
In doulble entry system every transaction two
aspects, the one aspects is receiver and other aspects is
giver .
 Rules for Accounts
The Account if receiver is debited(Dr.) and giver is
credited.(Cr.).
Example:- Mohan cash Rs. 500/- paid to Ram
Debit (Dr.) Credit (Cr.)
To cash a/c 500.00
by Ram a/c 500.00

500.00 500.00
 Rules for Accounts
Classification of Accounts
Accounts

Personal Impersonal

Natural Person
Real Nominal
Artifical Person Tangible Expense
Assets
Represenative Person Intangible Income
Assets
 Rules for Accounts
Personal Accounts
Accounts representing persons, firms, companies,
associations, Societies, clubs or any other institutions
with whom the business deals are called Personal
Accounts (PA).
Example:- Shri pandit, Bank, University, School, Ltd.,
company, firm etc.,
Real Accounts
Accounts relating to various classes of properties or
thing. Such as building, furniture, machinery, goods,
 Rules for Accounts
Cash etc., are called Real Accounts.
Nominal Accounts
Account representing expenses/losses and incomes/gains
such as salaries, rent, commission, interest, discount, etc
are called Nominal Accounts.
 Rules for Accounts
Golden rules of Accounts
There are three golden rules of Accounts
Personal Accounts:-
Debit all the receiver and Credit all the giver
example:- Mohan cash Rs. 500/- paid to Ram
Dr. Cr.
To cash (ram)a/c 500/-
By Mohan a/c 500/-

500/- 500/-
 Rules for Accounts
Real Accounts:
Debit what comes in and Credit what goes out
example:- Purchased goods Rs. 1000/-
Dr. Cr.
By goods a/c 1000/-
to cash a/c 1000/-

1000/- 1000/-
 Rules for Accounts
Nominal Accounts
Debit all expenses and Loss and Credit all gains
and income
example:- Purchase goods of fixed price of Rs. 1000/-
from mohan and 5% cash Discount for Creditor.
Dr. Cr.
By goods a/c 1000/-
to cash a/c 950/-
to discounts a/c 50/-
1000/- 1000/-
Q. 1 Purchase Furniture of Rs,7000 in credit ?
Q. 2 Purchase Furniture of Rs,5000 in cash ?
 Accounts Information
In any Financial Accounting, the amount is entered into
an account. When the company is created, Tally
automatically creates two accounts. They are cash A/c
and Profit and Loss A/c. Other accounts have to be
created by the user as per requirements.
Account Groups
Based on the requirements of Indian Accounting System,
Tally provides a set of 28 Predefined groups, of those 15
are primary groups and 13 are Sub-groups as follows:-
 Accounts Information
Capital Accounts
This is a Primary group to hold the capital and Reserves
of the company Accounts .
For Exam.:- Partners Capital A/c, Proprietors Capital A/c
etc..
Reserves and Surplus
This is a Sub-group of Capital Account.
For Exam.:- Investment Allowance Reserve and other
such Reserves belong to this group.
 Accounts Information
Current Assets
This is a primary group. All assets of the company are
placed under this head. But generally accounts are
created for its sub-groups. There are six sub-groups to
Current Assets. Any asset, which does not fall into six
Sub-groups, can be created under the group current
assets.
Bank Accounts
This is the first sub-group of Current Assets. Any banks
savings or current A/c’s can be placed under this group.
 Accounts Information
Cash-in-hand
This is the Second sub-group of Current Assets. This
will hold Cash A/c only. Cash account is automatically
created under this group, when a company is created.
Deposits (Assets)
This is the Third sub-group of Current Assets. Accounts
related to Deposits like Security Deposits, Fixed Deposits
etc..
Loan and Advances
This is the Fourth sub-group of Current Assets. Accounts
 Accounts Information
Nature.
For exam.:- advances against salaries, etc..
Stock-in-hand
This is the fifth sub-group of current assets. This is used
to hold the opening and closing stock figures of certain
accounts
for exam.:- raw materials, finished products etc..
Sundry Debtors
This is the sixth sub-group of current assets. This group
is used to create the account of customers. ([Link])
 Accounts Information
Current Liabilities
This is a Primary group to hold the outstanding and
statutory liabilities of the company. Like TDS, PF etc..
Duties and Taxes
This the first sub-group in Current Liabilities. Accounts
of trade duties and taxes
for exam.:- Excise, Local Sales Tax, Central Sales Tax
etc..
Provisions
This the 2nd sub-group in Current Liabilities. It is used
 Accounts Information
Sundry Creditors
This is the third Sub-Group of Current Liabilities.
Account of trade creditors/ Suppliers .
(Credit purchases are made)
Fixed Assets
This is a Primary Group. Accounts like building,
[Link].. Can be created under this group.
Investments
This is a Primary Group. It holds the ledger accounts of
all types of investments made by the company of shares,
 Accounts Information
Loans(Liability)
This is a Primary group. Accounts of loans taken by the
company are created in this group. It has three sub-group.
Bank Overdraft Accounts
This is the first sub- group of Loan.
Secured Loans
This is the 2nd sub- group of Loan. Accounts of loans
taken by the company from financial corporation, banks
etc.. Against its fixed assets are created under this group.
 Accounts Information
Unsecured Loans
This is the third sub-group of loans. Accounts of loans
taken by the company unconditionally from outside
parties including debtors and partners can be created
under this group.
Suspense Account
This is Primary group. Accounts of money received or
paid by the company, the nature of which is not known
like money paid as traveling advance, can be created in
this group. This is a balance sheet item.
 Accounts Information
Misc. Expenses (Assets)
This is a Primary group.
Sales Account
This is a Primary group. ( General Sales A/C, state Sales
A/C etc.. Can be created under this group.)
Purchase Account
This is a Primary group. ( General Purchase A/C, state
Purchase A/C etc.. Can be created under this group.)
Direct Income
This is a Primary group. Selling the goods of the
 Accounts Information
Indirect Income
This is a Primary group. Account of indirect income like
rent received, interest received, commission received
etc... Can be created under this group.
Direct Expenses
This is a Primary group. The account related to payment
of electricity bill, water bill etc.. Can be created under
this group.
Indirect Expenses
This is a Primary group. The account of payments made
 Accounts Information
Can be created under this group.
Branch/ Divisions
This is a Primary group. Account of branches,
divisions,etc.. Of the existing company can be created
under this group.
 Computerise Accounting
Receipt Book
if in any transaction one party is cash or bank and it is
debitor then that type of transaction should be written in
receipt book (F6) - Function key for Receipt Book
Show Dr. or Cr. Press F12 and Dr. or Cr. Is yes
Q. Received Rs. 100/- from mona
Dr. Cr.
By cash a/c 100/-
to mona a/c 100/-
100/- 100/-
 Computerise Accounting
Payment Book
if in any transaction one party is cash or bank and it is
creditor then this type of transaction is written in
payment book (F5)
F5 - Payment Book
Q. Paid Rs 100/- to mona
Dr. Cr.
By mona a/c 100/-
to cash a/c 100/-
100/- 100/-
 Computerise Accounting
Contra Voucher
if in any transaction first party is cash and second party is
bank, then that type of transaction is written in Contra
voucher. The function key F4.
There are three type of transaction:-
1. Cash or cheque deposited into bank:- if the amount is
deposited into the bank, then Bank a/c will be Debited
and Cash a/c will be credited.
2. Cash withdrawn from bank :- if the amount is
withdrawn from the bank, then Cash a/c is Debited and
Bank A/c is credited.
 Computerise Accounting
Transfer of funds from one bank account to another
bank:- if one bank’s cheque is deposited into another
bank, then first bank A/c is credited and later Bank a/c is
debited. Always a Contra voucher will prompt the user to
enter the credit aspect of the voucher first.
Q. Rs. 500/- cash deposited into syndicate Bank.
Ans.:-
 Inventory Control
Introduction
The inventory control application should provide high
quality service to its customers by utillzing fast-accurate
and efficient method of filling customers orders and
avoiding stock outs.
Stock Groups
Stock items can be grouped together under Stock Groups
to reflect their classification based on some commonality.
Grouping enables easy location and reporting of stock
items in statements. Hence, items of a particular brand
can be grouped together so that you can extract stock of
all items of that brand.
 Inventory Control
Example:- Create Stock Groups like Sony, Maxell, etc.,
your stock item could then be sony 3.5” disks, Maxell
3.5” disks Sony tapes, Maxell tapes etc.,
Classify the Sony products suitably classified. You may
even have group items as Raw Materials and Finished
Goods.
To create a stock group
1. Select Inventory info. From Gateway of Tally menu
2. Select Stock Groups from Inventory Info. Menu
then open a option bar
 Inventory Control
Then open a form
[Link].:- The serial numbers is automatically filled up
Name of the category :- give the name of the stock
category. In the in case, we have given floppy drives and
cartridge Tapes.
Under:- Since we selected “All Items” in under category,
we specify the parent here. We want the parent of both
items to be Primary and not as a sub-category of any
other category.
 Inventory Control
UNIT OF MEASURE
Each stock item must have a unit of measure to count the
quantity. There are two types of units of measure. They
are Simple Unit of Measure (default) and Compound
Unit of Measure.
Simple Unit of measure is a unit that consists of only one
single as a unit of measure e.g., KG, Meters, Liters,
Numbers, Pieces etc.,
Compound unit of measure is a dozen of 12 Pieces, one
Box of ten Pieces etc.
 Inventory Control
Create a Simple Unit of Measure
1. Select Inventory Info from Gateway of Tally menu.
2. Select Units of Measure from Inventory Info menu
3. Select Create from Units menu ( Press Cont.+U)
4. Type a Symbol of identify the unit of measure e.g.,
Kgs., Nos., etc.,
5. Full Name e.g., Kilograms Numbers etc.,
6. Decimal places. 0 to 4 decimal places can be given
7. Select Accept Yes
 Inventory Control
Create a Compound unit of a Measure,
1. First create Two simple Unit of measures a. Dozs or b.
Nos.
2. Press Backspace in place of Symbol, to display the
type options - Simple and Compound . Select Compound.
3. In place of First unit, select the higher measurement
e.g., Dozs
4. In Place of conversion, type the conversion number
e.g., 12
5. In place of second unit, select the lower measurement
 Inventory Control
It will create a compund unit of measure - a dozen of 12
numbers
Displaying and altering units of measure
Gateway of tally> Select inventory info.>unit of
Measure> Display/ alter Once created,