What is Tally ?
Tally is a popular accounting software. It is used for the purpose of creating and organizing accounts in a business. The software was introduced in 1989 and has an important place in Indian business scenario. It is considered to be a pioneer in its field. Tally has immensely increased its reach. It is used for all sizes of business including small, medium and big. It also helps in meeting inventory management requirements of a business.
Tally is used for recording day-to-day operations of a business. It is convenient to use. Tally 9 is also a powerful tool. It is easy to install and use. Its database can handle different volumes efficiently. Following are the four fundamental formulas used in Tally:
1) First Formula:
This involves recording creations, alterations and displays.
2) Second Formula:
It records ledger accounts. It uses master accounts for this purpose.
3) Third Formula:
Is involves recording of voucher entries.
4) Fourth Formula:
It displays final accounts such as Profit & Loss Account and Balance Sheet.
Architecture and Customization of Tally
Tally is a window based accounting package. It is simple to use. The software can be used for creating and altering the data in a convenient way.
Journal entries can be made automatically using a single entry. The companies may also set passwords for maintaining their confidentiality. This helps in reducing the risk of unauthorized use. It also helps in minimizing the chances of errors and frauds by offering several control measures.
Customization helps in-simplifying the work flow. Tally has the ability of automatically generating the basic books, processing posting in the relevant books upon a single command of entering the voucher. Tally can also rectify stock and ledger records. It can automatically generate final accounts including Trial Balance, P&L Account and Balance Sheet.
Features of Tally
Following are the features of tally :
- Tally is an accounting software. It is used for recording daily transactions for the purpose of maintaining accounts.
- It is a user friendly software and is easy to use.
- It can be used for tallying the records.
- It is an application software and can make calculations without the aid of any special program.
- It keeps a detailed record of all the accounts.
- It is a secure software and protects against tempering.
- Tally helps in reducing the workload. It automates the process of recording and maintaining accounts.
Uses of Tally
Tally is helpful in the following ways :
1) Collaborative Technology :
Tally makes the process of collaboration easier with the use of technologies such as HTTP protocol support, SMTP, HTTPS and SMTP. It also offers rule based export, synchronization and PKI enablement for counter electronic signatures.
2) E-Tally :
The use of tally allows information sharing, increasing the efficiency of business processes. It enables information sharing between various stakeholders such as customers, creditors and management.
3) XML Tally :
This software also allows for the exchange of information between tally and non-tally users. It uses XML for this purpose. It also facilitates data sharing across various geographical locations.
4) Technology :
It can compress the data using dynamic compression system: save space.
Applicability of Tally
Tally is useful in many situations as shown below :
1) Create Company :
The first step is the creation of a company. This is done by selecting the Create Company from menu 'Gateway in the software package. Tally requires filling of various details such as name, address and start date of the company, etc.
2) Create Group :
The next step is to create groups which consist of similar type of accounts. The software offers various groups which helps in creating ledgers. Following are the key accounting groups offered by Tally :
i) Reserve and Surplus (Retained Earnings) :
It includes Investment Allowance Reserve and Select Ledger of reserve accounts.
ii) Current Assets :
It is the main group for consolidating current assets account. There are six sub groups in it.
a) Bank Account :
It contains all the bank account details.
b) Cash in Hand :
This group holds cash ledger account.
c) Deposits :
This group contains various accounts such as rental deposits, security deposits and likes made by the firm.
d) Loans and Advances :
It includes accounts related to non-trading loans and advances.
e) Stock in Hand :
It contains stock accounts including raw materials, work-in-progress and finished goods.
f) Sundry Debtors :
It contains the accounts of individuals and firms to whom goods have been sold on credit.
iii) Current Liabilities :
It is a key group and holds various statutory and pending liabilities pertaining to the business. Its main three sub-groups are given below:
a) Duties and Taxes :
It keeps record of all liabilities pertaining to taxes such as local sales tax, VAT, Excise tax, etc.
b) Provisions :
It keeps record of tax provisions such as Income Tax and Depreciation.
c) Sundry Creditors :
It contains record of trade creditors.
iv) Fixed Assets :
It keeps record of fixed assets including patents and trademarks.
v) Investment :
It contains records of shares, securities and bonus.
vi) Loan Liabilities :
This group provides records of various loans issued to the company. The group has the following sub-groups:
a) Bank OD Account :
It is used for grouping various overdraft accounts of the company.
b) Secured Loans :
It keeps record of various long-term loans taken from banks and other financial institutions.
c) Unsecured Loans :
These are loans granted to the company without any security.
vii) Suspense Account :
This account contains various inflows and outflows which have not been identified.
viii) Miscellaneous Expenses :
This records losses which have not been written off and are meant to be carried forward. Tally considers it a negative profit and transfers it to the Profit and Loss Account.
ix) Branches/Division :
This group accounts for all the branches and divisions of the companies.
x) Sales Account :
The group collects all the sales accounts.
xi) Purchase Account :
This group maintains the record of all the goods purchased.
xii) Direct Income :
This group holds accounts of those non-trading incomes which impact gross profit.
xiii) Indirect Income :
The group contains expenses which affect the gross profit. The main example is interest received.
xiv) Direct Expenses :
These are the expenses which affect the quantum of its gross profit. Wages paid are direct expenses.
xv) Indirect Expenses :
These are the expenses which impact the net profit of the firm. Main examples are administrative expenses and advertising expenses.
3) Create Ledgers :
These are the account heads and the transactions are identified with them. Ledger contains all the voucher entries.
4) Voucher Entries :
The process of making voucher entries starts by pressing F2. After this, the voucher date is entered. Following types of vouchers are entered in Tally.
i) Contra Voucher :
This voucher is used for recording bank to bank, bank to cash and cash to bank entries. Voucher type is selected by using F4.
ii) Payment Voucher :
Voucher selection is done using by F5. It is used for recording cash receipts.
iii) Receipts Voucher :
It is used for recording cash receipts by using F6 key.
iv) Journal :
It contains journal entries and uses F7 for selecting the voucher type.
v) Sales Voucher :
Goods sales entries are made by using F8 key.
vi) Purchase Voucher :
It is used for making goods purchase entries by selecting F9 key.
vii) Memo :
It is used for creating reverse journal voucher or memorandum. It is done by using F10 key.
5) Display Report :
Tally can be used for generating a wide range of reports including Ratio Analysis and Final Accounts.
Accounting in Tally
According to American Institute of Certified Public Accountants, "Accounting is the art of recording. classifying and summarizing in a significant manner and in terms of money transactions and events, which are in part, at-least, of a financial character, and interpreting the results thereof". Accounting performs the following functions :
1) Recording :
Recording is the basic step for starting the process of accounting. It records those activities which can be expressed in terms of money. The transactions may involve material or money or both.
2) Analysis :
This step compiles and summarizes the basic records for the purpose of presenting information in most convenient to understand manner. Such presentation is known as Report.