UNIT 2

2.1 What is tally?

 Tally is powerful accounting software, which is driven by a technology called concurrent

multi-lingual accelerated technology engine.

 It is easy to use software and is designed to simply complex day to day activities associated
in an enterprise.

 Tally provides comprehensive solution around accounting principles, inventory and data
integrity.

 Tally also has feature encompassing global business.

 Tally software comes with easy to use interface thus making it operationally simple.

 Tally accounting software provides a solution around inventory management, stock

management, invoicing, purchase order management, discounting, stock valuation
methodology, etc.

 Tally accounting software also comes with drill down options, which can track every detail
of transaction. It helps in maintaining simple classification of accounts, general ledger,
accounts receivable and payable, bank reconciliation, etc.

2.2 Versions of Tally

 Tally 4.5 was the first version of Tally. It was released in 1990. This software is based on
MS-Dos.

 Tally 5.4 was the second version of Tally. It was released in 1996. It was a graphic interface
version.

 Tally 6.3 was the third version of Tally. It was released in 2001. This version was window
based. It supports printing and implementing with VAT (Value Added Tax). Tally 7.2 was the
next version of Tally. It was released in 2005. It was added with new features of the Statutory
complimentary version and VAT rules as par state wise.

 Tally 8.1 was the next version of Tally. It was developed with a new data structure. It was
added with new features of Point of Sale (POS) and Payroll.

 The next version was Tally 9. It was released in 2006. This version was released due to bugs
and errors. This version has maximum features such as TDS, FBT, Payroll, E-TDS filling, etc.

 The new version of Tally is ERP 9. It was released in 2009. Tally ERP 9 package is offering
maximum features for small to large business industries. It also updates with new features of
(Goods & Services Tax) GST.

 The latest version of Tally is Tally Prime. It was released in 2020 Prime package is offering
maximum features for small to large business industries. It also updates with new features of
(goods and service tax) GST.

2.3 Advantages of Tally

 Streamlining financial management – Tally is a software that helps to organize and

simplify financial tasks, such as invoicing and bookkeeping.

 Enhancing accuracy – Tally’s features, such as automatic calculations and error checking,
help to reduce mistakes and increase precision in financial record keeping.

 Enhancing security – Tally’s password protection and data backup options help to secure
financial information and prevent data loss.

 Facilitating collaboration – Tally’s ability to be accessed by multiple users simultaneously

allows for easier collaboration among team members in financial management.
 Customization – Tally offers customizable options and report templates, allowing users to
tailor the software to their specific needs and preferences.

2.4 Disadvantages of Tally

 Initial cost – Tally is a software that requires an initial purchase or subscription fee, which
may not be feasible for all users.

 Limited features – Tally may not offer all the features that some users require for their
specific financial management needs.

 Complexity – Tally may have a steep learning curve for some users, requiring time and
effort to master its various functions.

 Dependence on technology – Tally requires a computer or other device with an internet

connection to function, which may not always be available or reliable.

 Vulnerability to cyber threats – Tally, like all software, is vulnerable to cyber attacks,
which could compromise the security of financial information.

2.5 Uses of Tally

Tally is a comprehensive accounting and business management software widely used

across various industries for its powerful financial tracking and reporting capabilities. Here are
some of its key uses in detail:

1. Accounting and Bookkeeping

 Tally helps businesses manage basic accounting operations, including recording and tracking
income, expenses, liabilities, and assets.
 Users can create ledgers for cash, bank accounts, sales, purchases, expenses, and income.
 It simplifies journal entry processes and helps ensure accuracy in day-to-day transactions.
2. Inventory Management

 Tally enables detailed tracking of inventory items, including quantity, batch, location, and
price.
 It supports stock categorization and helps manage reorder levels, providing alerts when stock
levels are low.
 Users can generate inventory reports, track movement, and control stock-in-hand efficiently,
reducing the risk of overstocking or understocking.

3. Voucher Management

 Tally provides various types of vouchers to record different financial transactions, such as:

a) Contra Vouchers: For cash-to-bank and bank-to-cash transactions.

b) Payment Vouchers: For payments made to suppliers or vendors.
c) Receipt Vouchers: For cash inflows, such as payments from customers.
d) Sales and Purchase Vouchers: For recording sales and purchases.

 Vouchers in Tally ensure that each transaction is correctly categorized and traceable, which
is essential for accurate financial reporting.

4. Payroll Management

 Tally helps businesses manage payroll operations by tracking employee salaries, benefits,
deductions, and other details.
 Users can calculate salaries, bonuses, leave, and gratuity based on customizable rules.
 Tally can generate pay slips, handle compliance with employee taxes, and ensure payroll
accuracy.

5. Taxation Management

 Tally simplifies tax calculations, including GST, TDS, VAT, and Service Tax.
 It helps businesses calculate, apply, and generate tax returns as per local laws, reducing
manual efforts.
 Tally also provides tax-related reports that assist in compliance and filing returns,
minimizing errors in tax submissions.
6. Budgeting and Forecasting

 Tally allows businesses to set budgets for different accounts, helping monitor and control
expenses effectively.
 It tracks variances between actual and budgeted figures, providing insights into financial
performance.
 Budgeting in Tally supports informed decision-making and financial planning, essential for
long-term business growth.

7. Bank Reconciliation

 Tally simplifies the process of bank reconciliation by matching a company’s bank records
with its ledger entries.
 Users can quickly identify any discrepancies between the bank statement and company
records, ensuring accuracy.
 It saves time in reconciling monthly bank statements, improving cash flow visibility and
reducing errors.

8. Financial Reporting

 Tally generates detailed reports, including Profit & Loss statements, Balance Sheets, Cash
Flow statements, and Ratio Analysis.
 These reports provide real-time insights into the financial health of the business.
 Customizable reports allow businesses to analyze trends, identify areas of improvement, and
make data-driven decisions.

9. Multi-Currency and Multi-Language Support

 Tally’s multi-currency support is particularly useful for businesses operating internationally,

allowing them to handle transactions in various currencies.
 It also supports multiple languages, making it accessible to users from different regions.

10. Compliance and Audit Support

 Tally helps maintain audit trails by recording all transactions, with options to check the
history and modifications made to each entry.
 Tally's Audit and Compliance tools assist in meeting statutory requirements, ensuring that
businesses can produce accurate, traceable, and compliant records when needed.

11. Data Security and User Access Controls

 Tally provides high levels of data security, allowing businesses to set up role-based access
for different users.
 It enables businesses to restrict access to sensitive data and provides secure backup options
to prevent data loss.

12. Remote Access and Multi-User Support

 Tally enables remote access, allowing authorized users to work from different locations.
 It supports multi-user access, making it suitable for businesses with large accounting teams
who need concurrent access to the system.

13. MIS Reporting

 Tally offers Management Information System (MIS) reporting, which helps managers access
critical data in real time.
 Reports can be customized based on management needs, assisting in decision-making and
performance analysis across various departments.

 These features make Tally an essential tool for businesses looking to streamline their
accounting, compliance, and operational efficiency. Its versatility and ease of use are among
the reasons why it’s widely adopted by both small businesses and large corporations.

2.6 Importance of Tally

The importance of Tally, as an accounting and business management software, can be

highlighted through several key aspects that demonstrate its value to businesses of all sizes.
Here are some of the main points regarding the importance of Tally:

1. Streamlined Accounting Processes

Tally automates various accounting tasks, reducing manual effort and minimizing errors. This
automation allows businesses to manage their financial transactions efficiently, leading to more
accurate financial records.
2. Comprehensive Financial Management

Tally provides a complete suite of features that cover all aspects of financial management,
including:

a) Accounting: General ledger management, journal entries, and financial statement

generation.

b) Inventory Management: Tracking stock levels, managing stock valuation, and generating
inventory reports.

c) Payroll Management: Processing employee salaries, managing attendance, and generating

payroll reports.

3. GST Compliance

With the introduction of the Goods and Services Tax (GST) in India, Tally has integrated GST
compliance features that simplify tax calculations and filing. Businesses can generate GST-
compliant invoices and file returns directly from the software, ensuring adherence to regulatory
requirements.

4. User -Friendly Interface

Tally's interface is designed to be intuitive and user-friendly, making it accessible even to users
with limited accounting knowledge. This ease of use reduces the learning curve and allows
employees to quickly adapt to the software.

5. Real-Time Data Access

Tally provides real-time access to financial data, enabling businesses to make informed
decisions based on the latest information. This feature is crucial for effective financial planning
and management.

6. Robust Reporting Capabilities

Tally offers a wide range of customizable reports, including profit and loss statements, balance
sheets, cash flow statements, and inventory reports. These reports help businesses analyze their
financial performance and make strategic decisions.
 7. Multi-Currency and Multi-Language Support

Tally supports transactions in multiple currencies and languages, making it suitable for
businesses that operate internationally. This feature enhances its usability for global enterprises.

8. Scalability

Tally is scalable, meaning it can accommodate the needs of small businesses as well as large
enterprises. As a business grows, Tally can easily adapt to increased transaction volumes and
more complex accounting requirements.

9. Enhanced Security Features

Tally provides various security measures to protect sensitive financial data, including user
access controls, data encryption, and backup options. This ensures that financial information
remains secure and confidential.

10. Remote Access and Collaboration

With Tally.NET, users can access their accounts remotely, allowing for greater flexibility and
collaboration among team members. This feature is particularly valuable for businesses with
multiple locations or remote employees.

11. Cost-Effective Solution

Tally is a cost-effective solution for businesses, providing a comprehensive range of features at

a competitive price. This affordability makes it accessible for small and medium-sized
enterprises.

2.7 Creation of a company, Alteration and deletion

COMPANY CREATION

1. Go to Gateway of Tally > Alt+F3 > Create Company.

2. Directory: modify the data path, if required.

3. Enter the following details pertaining to your company:

 Primary Mailing and Contact Details: The correspondence details of your company such as
mailing name, address, state, and Pincode, telephone number, email ID, and so on can be
entered here.

 Select the country for which you require the statutory features in the field Country.

 Base currency symbol is enabled in accordance with the country selected.

 Books and Financial Year Details

 Financial year begins from: Tally.ERP 9 considers a financial year to be of twelve months.
Any date can be entered here.

 Books beginning from: By default, the date provided in the Financial year begins from field
is captured here. However, this can be changed if your book beginning date is different.

 Security Control : Tally.ERP 9 provides various security options which can be enabled in
this section:

 Tally Vault password : An enhanced security system that allows encryption of your
company data. Encryption involves converting normally accessible Tally information into
unrecognizable information, which can only be reconverted by authorised persons.

 Use security control : Security control enables you to initiate a password-protected system
to control access to your company data.

Note: The administrator password is case-sensitive, and if forgotten, it cannot be retrieved.

Once Security Control is enabled in the Company Alteration screen, the fields against
Password and Repeat password will display a single star.
 Use Tally Audit features : Tally Audit allows the administrator or an auditor profile user to
track changes in accounting information.

 Disallow opening in educational mode : Set this option to Yes , if you do not want the
company to be opened in the educational mode. In the educational mode, you can record
transactions only on the first and last day of a month. On accepting the company creation
screen, if you have specified Tally Vault password, Tally.ERP 9 prompts you to enter the user
name and password.

 Base Currency Information : Base Currency Information varies based on the country
selected. The various fields under this section include:
 Base currency symbol: The currency symbol of the respective country selected appears in
this field.

 Formal name: The name of the currency specified.

 Suffix symbol to amount? : For countries which specify the symbol after the amount
(value) – this option can be enabled. For example, Yen is specified after the amount (5000
Yen).

 Add space between amount and symbol? : Enable this option if you require space between
amount and symbol.

 Show amount in millions? : This is useful for companies, which require reporting the
financial statements in millions.

 Number of decimal places: This is set to 2, by default. However, it can be specified up to 4

places.

 Word representing amount after decimal: The name of the decimal portion of amount
appears based on the country selected. For example , if India is selected as the country and
Number of decimal places is entered, then paise appears by default.

 No. of decimal places for amount in words: You can specify the number of decimal places
for printing the amount in words. This number should be equal to or lesser than the number
specified in field No. of decimal places for amount in words.

The Company Creation screen appears as shown:

COMPANY ALTERATION

1. Go to Gateway of Tally > click F3 : Cmp Info . > Alter .

2. Press Enter .

3. Select the company from the List of Companies .

4. Press Enter to view the Company Alteration screen.

5. Make necessary changes in the required fields.

6. Press Enter to save.

COMPANY DELETION

1. Select the company to be deleted.

2. Go to Gateway of Tally > F3 : Cmp Info .

3. Select Alter .

4. Press Enter .

5. Select the company to be deleted.

6. Press Alt+D to delete.

7. Click Yes.

8. Press Enter to delete the company

2.8 Creation of a Ledger

After the creation of company, the next step will be the creation of ledger

 To create ledger- Gateway of Tally > Accounts Info. > Ledgers > Create (single or multiple)
> Choosing specifics of Accounts > Accept.

Note – The cash and profits & loss accounts are present by default. No need of creation
creating all the ledgers needed according to the transactions of the company

Step 1: Use the following path to create ledger accounts in Tally

Gateway of Tally → Accounts Info → Ledgers → Single Ledger → Choose
Create

Step 2: Click on Accounts Info under Gateway of Tally screen.

Step 3: Choose Ledger option under Account Info.

Step 4: Under Single Ledger, choose the option Create

Step 5: Update the following details on Ledger creation screen.

1. Enter the Name of the ledger account. Duplicate names are not allowed.
2. Enter the alias of the ledger account, if required. You can access the ledgers
using the original name or the alias name.

3. Select a group category from the List of Groups.

Note: To create a new group from this field, press Alt+C.

4. Enter the Opening Balance. The opening balance is applicable when the
ledger is an asset or a liability, and also if it has a balance in the account as on
the date of beginning of books.

SINGLE LEDGER ALTERATION

Step 1: Use the following path to alter the single ledger in Tally

Gateway of Tally → Accounts Info → Ledgers → Single Ledger → Choose

Alter

Step 2: Under the List of Ledgers, choose the ledger account option.

Step 3: Now modify/ alter the required details for ledger account. To save the
changed details, click on A: Accept.
SINGLE LEDGER DISPLAY

In Tally, after the creation of a single ledger account, we can view the details of
the ledger by choosing the display option.

Refer the following steps to show how to display single ledger:

Step 1: Use the following path to display the single ledger in Tally

Gateway of Tally → Accounts Info → Ledgers → Single Ledger → Choose

Display
MULTIPLE LEDGER CREATION

Step 1: Go to Gateway of Tally and Choose Accounts Info.

Step 2: Under account info, choose the option Ledgers

Step 3: Click on create under multiple ledgers option to create multi
ledgers in Tally

Step 4: On multi ledger creation screen, enter the following details

Under Group: Choose the Fixed Assets under the list of groups,
however you can search group by entering the group name in the given
under group text field.
1. Name of Ledgers: Enter the name of ledger that you like to create
in Tally
2. Under: The under group field will be automatically filled by Tally as
Bangalore Debtors ( As we are creating ledgers under Bangalore
Debtors).
3. After entering the details, press enter to continue. You will get
messages as Accept: Yes or No, choose Yes to accept the updated
details in Tally.ERP 9.

MULTIPLE LEDGER DISPLAY

 Path : Gateway of Tally –> Accounts Info –> Ledgers –> Multiple
Ledgers (Display).
 On select group of lists screen, choose the group name “Fixed Assets”
from the list of groups.

 Now the multi ledger screen displays as shown below.

MULTIPLE LEDGER ALTERATION

The path for alter multiple ledger is same as create and display. Through
this alter mode, you can change the details as per the requirements.

Path: Gateway of Tally –> Accounts Info –> Ledgers –> Multiple Ledgers
–> Choose Alter
 From the list of the groups, choose the required group name for
alteration.
 On multi ledger alteration screen, you can update the following details

 Press enter and Accept the details to save in Tally.

2.9 What are accounting voucher and its type?

A voucher is a document that contains details of a financial transaction and is required for
recording the same into the books of accounts. For every transaction, you can use the
appropriate Tally voucher to enter the details into the ledgers and update the financial position
of the company.

In Tally, Accounting Vouchers are documents that record financial transactions and maintain
the company's accounting records. Each voucher represents a specific type of transaction, like
sales, purchases, payments, and receipts, and includes information about the accounts involved,
amounts, dates, and any supporting details. Tally uses these vouchers to update the ledgers and
generate financial reports.

The main types of Accounting Vouchers in Tally and other accounting systems are designed
to record specific financial transactions. Here are the primary types:

1. Contra Voucher: Used for cash and bank transactions, especially for fund transfers between
bank accounts or between cash and bank.
 Example: Withdrawing cash from the bank or depositing cash into the bank

2. Payment Voucher: Records all payments made, whether by cash, bank, or other methods.

Example: Paying rent, utility bills, or vendor payments.

3. Receipt Voucher: Records all receipts, such as cash or bank receipts from customers or
other sources.
Example: Receiving payment from customers or other parties
4. Journal Voucher: Used for non-cash transactions, adjustments, or other general entries that
do not involve immediate cash or bank transfers.

Example: Depreciation, adjustments, or corrections.

5. Sales Voucher: Records sales transactions, both cash and credit.

Example: Selling goods to customers.

6. Purchase Voucher: Used to record purchases, either cash or credit.
Example: Buying raw materials or inventory from suppliers.

7. Credit Note Voucher: Issued for sales returns or to reduce the amount payable by the
customer.

Example: When a customer returns goods, a credit note is recorded

 8. Debit Note Voucher: Issued for purchase returns or to increase the amount receivable from
a supplier.
Example: When goods are returned to a supplier, a debit note is recorded

Inventory Components

1. Stock Items: Stock items represent individual products or goods stored in inventory. These
can be managed as single items or in bulk.

Stock items in Tally can be created by two methods, i.e.

  Single stock item
 Multiple stock items

Path: Gateway of Tally.ERP 9 > Inventory Info > Stock Items > Single stock item > Create

Step 1: From the initial screen of Tally, i.e. Gateway of Tally, choose inventory info.

Step 2: Next screen, choose “Stock items”

Step 3: Under single stock item, choose create.

Step 4: In next screen, single stock creation enter the following details.

 Name: Enter the name of stock item

 Alias: It can be short name of stock item or another name or product id.
 Under: Enter the stock group under which this stock item to be specified
 Category : Enter the stock category of stock item
 Units: Units of measure to count the stock item
  Opening Balance: Enter the opening balance of stock item
 Quantity: Enter quantity of stock item

 Rate: When you are entering the rate values for stock item, a new window opens as
shown below. Update the following details.
 Godown: Choose Godown from the list of Godowns.
 Rate: Enter the rate of stock item
 Per & Amount values are automatically calculated based on quantity and rate amount.

After entering the required details, press enter to continue. Choose “yes” to save the details in
Tally.ERP 9.
Steps to create multiple stock items

Path: Gateway of Tally.ERP 9 > Inventory Info > Stock Items > Multiple stock items > Create

Step 1: Under multiple stock items, choose create option as shown below image.

Step 2: In next screen multi Stock item creation, enter the following details.

 Under group: To update the different types of stock items with different category groups,
choose under group as all items.
 Now update all the required details – Name of item, stock group, stock category, units, opening
qty and rates.

Click on A:Accept to save the entered details in Tally.ERP 9 system.

 2. Stock Groups: Stock groups help organize and categorize multiple stock items under
common characteristics, such as product type, department, or brand. This organization
simplifies inventory tracking and reporting.

Types of Stock Groups:

 Single Stock Group: Contains similar types of products or stock items.

Examples: Electronics, Vegetable, Cloth, Liquid, Stationery etc.

 Multiple Stock Groups: Includes various stock groups categorized under a broader type.

Example: All items are grouped and listed into multiple stock groups.

3. Units of Measure: Units of measure define how stock items are quantified in the
inventory system.
Examples include: Piece (pcs), Kilogram (kg) Liter (L), Meter (mtr),etc.
 4. Godown: Godown is a location where stock items are stored safely. In Tally, the reports
of stock items can be prepared as per Godowns.

Before creation of multiple Godowns in tally, you need to set “Yes” for Maintain multiple Godowns
in F11: Features. Gateway of Tally > F11: Features > Inventory Feature.

Types of Godowns

1. Single Godowns

Steps to Create Single Godown

Step 1: From Gateway of Tally, under masters choose the option Inventory Info.
 Step 2: Under inventory Info, choose Godowns option to create Godowns in Tally as per
requirements of a company.

Step 3: Under single Godown, click on create option to create single Godown in Tally.

Step 4: In next screen Godown creation, enter the following details.

 Name: Enter the name of Godown, you can the name of Godown as the location name where it has
been located.

 Under: Enter under which godown comes

 After entering the details press enter and press Y or enter to accept the configured Godown in tally.

Example, creating a new Godown with name “Amravathi” under Primary.

2. Multiple Godowns

Steps to Create Multiple Godowns in Tally

Step 1: Gateway of Tally > Inventory info > Godowns and click on create under multiple Godowns.

Step 2: In next screen multi godown creation, enter the following details.

 Name: Enter name of Godown / location name

 Under: Choose “Primary”
After updating all the Godowns / locations in tally, choose yes to accept the data in Tally.

2.11 Inventory Vouchers

Types of Inventory Vouchers and Examples

1. Receipt Note (Goods Receipt Note)

 Purpose: Records the receipt of goods into the inventory.

 Example: Party A/c: Yash Institute and Items: Keyboard, Mouse, Monitor.
2. Delivery Note

 Purpose: Documents the delivery or dispatch of goods to customers.

 Example: Party A/c: Yash Institute and Items: Keyboard, Mouse, Monitor.

3. Stock Journal

 Purpose: Facilitates stock adjustments and transfers between warehouses.

 Example: Example: Party A/c: Yash Institute, Items: Keyboard, Mouse, Monitor, and
Godown: Main Location
4. Physical Stock Voucher

 Purpose: Used during stock audits to record actual physical counts.

 Example: Party A/c: Yash Institute, Items: Keyboard, Mouse, Monitor, and Godown:
Main Location

5. Rejection In/Rejection Out

 Purpose: Logs the return of rejected items, either by customers (Rejection In) or to
suppliers (Rejection Out).
 Example: Party A/c: Yash Institute, Items: Keyboard, Mouse, Monitor, and Ledger
A/c: Computer Traders Account.
6. Material In/Out

 Purpose: Tracks the movement of raw materials used in production or sent out for
processing.
 Example: Party A/c name: Tarun and Arika, Items: Keyboard, Mouse, Monitor and
Godown: Main Location.