Computerised Accounting and Tally
Information Technology and Its Application in Business
B.Com (Non CBCS)
Unit – 4: Computerised Accounting and Tally
Computerized
Accounting System:
A
computerised accounting system is an accounting information system that
processes the financial transactions and events as per Generally Accepted
Accounting Principles (GAAP) to produce reports as per user requirements. Every
accounting system, manual or computerised, has two aspects. First, it has to
work under a set of well-defined concepts called accounting principles. Another, that there is a user-defined
framework for maintenance of records and generation of reports. 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. The type of the
accounting system used determines the operating environment. Both hardware and
software are interdependent. The type of software determines the structure of
the hardware. Further, the selection of hardware is dependent upon various
factors such as the number of users, level of secrecy and the nature of various
activities of functional departments in an organisation.
Advantages of Computerised Accounting System
Computerised accounting system offers
various advantages over manual accounting which are stated below:
1) Speed:
The most
important advantage of using the computer is the speed with which we can get
the work of accounting done. Computer can process a large number of
transactions in seconds.
2) Accuracy:
One can expect
accurate results with valid data and instructions. Computers do not commit
errors.
3) Versatility:
Computers are not
only capable of handling complex arithmetical problems, but can perform number
of jobs equally well. It can be used to carry out multiple jobs at a time.
4) Storage
capability: A
business needs to store different types of data for future reference. A
computer can store and recall any information regarding debtors, creditors,
assets, liabilities, expenses, incomes, working capital etc. as and when
required and can be retained as long as desired by the user.
5) Reduction
of lengthy cycle: In
manual accounting system, a transaction has to pass through four stages i.e.
journal, ledger, trial balance and final accounts. This process is very lengthy
which consumes lot of time also. In computerized accounting system, a
transaction has to be recorded once through data entry screen and the computer
does the rest of the processing of the transaction automatically.
6) Reliability: The computer system is well-adapted
to performing repetitive operations. They are immune to tiredness, boredom or
fatigue. As a result, computers are highly reliable compared to human beings.
Since computerised accounting system relies heavily on computers, they are
relatively more reliable than manual accounting systems.
7) Real Time User Interface: Most of the automated accounting
systems are inter-linked through a network of computers. This facilitates the
availability of information to various users at the same time on a real time
basis (that is spontaneously).
8) Legibility: The data displayed on computer
monitor is legible. This is because the characters (alphabets, numerals, etc.)
are type written using standard fonts. This helps in avoiding errors caused by
untidy written figures in a manual accounting system.
9) Efficiency: The computer based accounting systems
ensure better use of resources and time. This brings about efficiency in
generating decisions, useful information’s and reports.
10) Quality Reports: The inbuilt checks and untouchable
features of data handling facilitate hygienic and true accounting reports that
are highly objective and can be relied upon.
11) Quick
reporting. The
preparation and communication of reports based on the accounting records takes lot
of time in manual accounting. In computerized accounting, any kind of reports
can be easily prepared and presented. This does not delay the routine
accounting work.
Disadvantages of Computerized Accounting
Some of the major limitations of the
computerized accounting system are discussed below:
a) Costly:
The computerized
accounting is a costly system as it requires number of facilities and
attachments to set up the system. This includes the computer, printers, scanner
and other related accessories.
b) Chances
of Loss of data: When
a computer is used, it is possible that data can be lost because of hardware or
software damage.
c) Fraud
and embezzlement: Fraud
and embezzlement are usually achieved on a computer system by altering data or
programs. There are numerous techniques, varying from additions and deletions
to input data, through changing the standing information, files, modifying the
behavior of programs, to duplicating or suppressing output.
d) Obsolescence:
Obsolescence is a
major problem in computer industry. Information technology industry follows the
culture of ‘here today, gone tomorrow.’ Even the latest hardware and software
purchased today may become outdated very soon. The latest version of the
software provides more facilities as compared to the previous versions. This
creates a problem of software up gradation.
e) Dependence
on computer staff: In
the computerized accounting system, the organizations depend upon the computer
staff for maintaining the accounting. In the absence of computer literates for
some reason in the organization, it may pose a problem to run the accounting
software.
f) Inability to Check Unanticipated
Errors: Since the computers lack capability to judge, they cannot detect
unanticipated errors as human beings commit.
g) Ill-effects on Health: The extensive use of computers
systems may lead to development of various health problems: bad backs,
eyestrain, muscular pains, etc.
Manual V/s Computerized Accounting (Similarities and
Difference)
Accounts
can be maintained either manually or with the help of computers. Most
organizations now do their work with an electronic computer rather than the
manual methods. The similarity between
the both systems is that regardless of the degree of computerization in the
record keeping process, professional accounting judgment is required in
analyzing transactions and in creating source documents or machine methods to
capture the important information about routine transactions.
Difference between Manual Accounting
System and Computerized Accounting
a) Recording
of data:
The recording of financial transactions, in manual accounting system is through
books of original entries while the data content of such transactions is stored
in a well-designed accounting database in computerised accounting system.
b) Classification
and processing of data: In
a manual accounting system, transactions recorded in the books of original
entry are further classified by posting into ledger accounting. This results in
transactions data duplicity. In computerized account, no such data duplication
is made to cause classification of transactions.
c) Summarizing
and updating of data:
The transactions are summarized to produce trial balance in manual accounting
system by ascertaining the balances of various accounts. The generation of
ledger accounts is not a necessary condition for producing trial balance in a
computerized accounting system because it is done automatically.
d) Adjusting
entries.
In a manual accounting system, entries are made to the principle of cost
matching revenue. These entries are passed to match the expenses of the
accounting period with the revenues generated by them. However, in computerized
accounting, journal vouchers are prepared and stored to follow the principle of
cost matching revenue, but there is nothing like passing adjusting entries for
errors and rectification, except for rectifying an error of principle by having
passed a wrong voucher.
e) Cost
of reporting: Since
with a manual system, the cost of preparing reports other than the basic
financial statements is high. On the other hand, the cost of preparing
specialized management reports in computerized systems is usually quite law.
f) Financial Statements: In a manual system of accounting, the
preparation of financial statements pre-supposes the availability of trial
balance. However, in computerised accounting, there is no such requirement. The
generation of financial statements is independent of producing the trial
balance because such statements can be prepared by direct processing of
originally stored transaction data.
Accounting
Packages
Every
Computerised Accounting System is implemented to perform the accounting
activity (recording and storing of accounting data) and generate reports as per
the requirements of the user. From this perspective, The accounting packages are
classified into the following categories :
a)
Ready
to use
b)
Customised
c)
Tailored
Each
of these categories offers distinctive features. However, the choice of the
accounting software would depend upon the suitability to the organisation
especially in terms of accounting needs.
a) Ready-to-Use: Ready-to-Use accounting software is suited to
organisations running small/ conventional
business where the frequency or volume of accounting transactions is very low. This is because the cost of
installation is generally low
and number of users is limited. Ready-to-use software is relatively easier to learn and people (accountant)
adaptability is very high. This also implies that level of secrecy is relatively low and the software is
prone to data frauds. The
training needs are simple and sometimes the vendor (supplier of software) offers the training on the
software free. However, these software offer little scope of linking to other information systems.
b) Customised: Accounting software may be customised to meet
the special requirement of the
user. Standardised accounting software available in the market may not suit or fulfill the user
requirements. For example, standardised accounting software may contain the sales voucher and inventory status
as separate options.
However, when the user requires that inventory status to be updated immediately upon entry of sales
voucher and report be printed, the software needs to be customised. Customised software is suited for large and medium
businesses and can be linked
to the other information systems. The cost of installation and maintenance is relatively high because the
high cost is to be paid to the vendor for customisation. The customisation includes modification and
addition to the software
contents, provision for the specified number of users and their authentication, etc. Secrecy of
data and software can be better maintained in customised software. Since the need to train the software
users is important, the training
costs are therefore high.
c) Tailored: The accounting software is generally tailored
in large business organisations with
multi users and geographically scattered locations. These software requires specialised training to the
users. The tailored software is designed to meet the specific requirements of the users and form an important
part of the organisational MIS.
The secrecy and authenticity checks are robust in such softwares and they offer high flexibility in terms
of number of users.
Creating and Maintaining a Company
Creating a
company in Tally.ERP 9 is a simple, one-time activity. The company data created
can be modified, exported, and other company data can be imported into your
company at any given point of time. To create a company in Tally.ERP 9
1. Go
to Gateway of Tally > Alt+F3 > Create Company. Directory :
modify the data path, if required.
2. Enter
the following details pertaining to your company:
a)
Primary
Mailing and Contact Details
b)
Books
and Financial Year Details
c)
Security
Control
d)
Base
Currency Information
3. Press Enter to
create the company.
Altering a
Company: To alter details of an existing
company
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.
Deleting a
Company: To delete a company
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. A
confirmation message appears as shown below:
7. Press Enter to delete the
company.
Shutting a
Company: To shut a company
1. Go to Gateway of
Tally > F1: Shut Company .
2. Select company from the List
of Primary Companies .
3. Press Enter to shut the
company.
Creating Ledgers
Ledger
creation is defined by the F11:
Features and F12: Configure settings
that you have made for a company. To create single ledger in normal mode:
1. Go
to Gateway of Tally > Accounts
Info. > Ledgers > Create (Single Ledger) .
2. Enter
the Name of the ledger account. Duplicate names are not allowed.
3. Enter
the alias of the ledger account, if required. You can access the
ledgers using the original name or the alias name.
4. Select
a group category from the List of Groups. To create a new group from this
field, press Alt+C .
You
can alter a ledger account to change its group classification at any time.
See Importance of Grouping and Accounting Classifications for more
details.
5. 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. For an existing company, debit balances
for assets and credit balances for liabilities are applicable. You can enter
balances for accounts that have obverse balances such as revenue accounts. For
example, you may have transferred your books to Tally.ERP 9 in the middle of
the year and may not have closed them in your earlier system. Hence, you must
specify debit or credit for the balance.
Voucher, Voucher Entry and Voucher Types
Voucher: 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.
Voucher
Entry: The voucher entry menus options are available under Transactions in
the Gateway of Tally . The Accounting and Inventory Vouchers are
available as separate options which can be enabled based on the requirements.
Accounting
vouchers: Accounting vouchers are
used to record all accounts-related transactions in Tally.ERP 9. You can
selectively set the configuration for entry to allow only those features, which
you require while entering vouchers.
Types of
Accounting Vouchers:
a) Contra
entry
b) Payment
voucher
c) Receipts
voucher
d) Journal
e) Sales
voucher
f) Credit
note
g) Purchase
h) Debit
note
i)
Reversing journal
j)
Memos
Inventory
Vouchers perform
the function in the inventory system that accounting vouchers do in the
accounting system. Inventory Vouchers are also means of entering transactions.
Accounting vouchers will update only Accounts, but Inventory vouchers will update
both Accounts and Inventory. Inventory vouchers record the receipt and issue of
goods/stock (Movement of goods), the transfer of stock between locations and
physical stock adjustments.
Types of Inventory
Vouchers:
a) Receipts
note voucher
b) Rejection
in voucher (Sales returns)
c) Delivery
note voucher
d) Rejection
out voucher (Purchase voucher)
e) Material
out
f) Material
in
Meaning of Groups
Groups are
collection of ledgers of the same nature. Account groups are maintained to
determine the hierarchy of Ledger Accounts, which is helpful in determining and
presenting meaningful and compliant reports. Using this you can generate
reports, which are meaningful as well as compliant with laws. At the
highest level, accounts are classified into Capital or Revenue
and more specifically into Assets , Liabilities , Income and Expenditure .
Tally.ERP 9
provides you with 28 pre-defined Groups . Of
these 15 are Primary
Groups and 13 are Sub-Groups . You can also
create your own groups, either as Sub-groups or Primary groups .
Groups can be sub-classified to an unlimited level to give a virtual accounting
tree. The lowest level would be the Ledger Account. All Voucher
entries are passed using ledgers. You can create the required chart of
accounts. You can group the Ledger accounts under the required Groups at the
time of creating the chart of accounts or you can alter them at any time.
Creating
a Single Group
You can
create a single group in Tally.ERP 9 and configure its details as per your
requirement. You can also view, alter or delete single groups that you have
created.
To create a single group
1. Go
to Gateway of Tally > Accounts
Info. > Groups .
2. Click the
option Create under Single Group .
The Group Creation screen appears.
3. Enter
the Name of the group.
4. Enter
the Alias name, if
required.
5. In
the field Under , from
the List of Groups displayed,
select the parent group under which the group has to be classified. For
example, Indirect Expenses .
6. Click Yes to accept the screen.
Displaying a Group: To
display a group
1. Go to Gateway of Tally > Accounts Info. > Groups .
2. Click the option Display under Single Group .
3. Select the name of the group required
from the List of Groups displayed.
Altering a Group: The details entered in a group can
be modified when required. To alter a
group
1. Go to Gateway of Tally > Accounts Info. > Groups .
2. Click Alter under Single Group .
3. Select the name of the group required
from the List of Groups displayed.
4. Make the necessary changes in
the Group Alteration screen.
5. Click Yes to save the changes.
Deleting a Group:
Groups can be deleted from the alteration screen. Only one group can be deleted
at a time. To delete a group
1. Go to Gateway of Tally > Accounts Info. > Groups .
2. Click the option Alter under Single Group .
3. Select the name of the group required
from the List of Groups displayed.
4. Click D : Delete .
5. Click Yes to confirm deletion.
Creating
Multiple Groups
You can
create, edit or delete multiple groups in Tally.ERP 9. To
create multiple groups
1. Go
to Gateway of Tally > Accounts Info. >
Groups > Create (Multiple Groups).
2. Select the group category in the field Under .
3. Enter the Name of
the group.
4. Select All Items in the field Under to create multiple groups
of different categories.
Displaying
Multiple Groups: To display
multiple groups
1. G o to Gateway of Tally > Accounts Info. > Groups.
2. Click Display (Multiple Groups).
3. Select the groups to display from
the List of Groups or
select All Items to
display all groups.
Altering Multiple Groups: To alter groups
1. Go to Gateway of Tally > Accounts Info. > Groups > Alter (Multiple
Groups) .
2. Select the group from the List of Groups .
3. Change
the details as required and click Yes to
save changes.
Trial
Balance
A trial
balance is a summary of all ledger balances, and helps in checking whether the
transactions are correct and balanced. If journal entries are error-free and
posted correctly to the general ledger, the total of all debit balances should
be equal the total of all credit balances.
Trial
Balance in Tally: By default, the Trial
Balance report will be generated as on the date of the last voucher
entry. You can change the date to view the report for the required period. To view the Trial Balance:
1. Go
to Gateway of Tally > Display > Trial Balance .
2. Press F12 to configure the Trial Balance , as required. As
per accounting principles, the Trial
Balance does not display the closing stock.
3. Press Ctrl+A to accept.
While providing
the opening balance in ledgers, equivalent contrary balance will appear
as Difference in opening
balances in order to tally the assets and liabilities, or debit and
credit balances. The entry passed for the difference will affect the closing
balance, but the Trial Balance will
still display the difference in the amount. To balance the difference in the
opening balance, you need to adjust it with the opening balance of another
ledger.
Profit & Loss Account
The Profit
& Loss A/c is a periodic statement, which shows the net result of
business operations for a specified period. All the expenses incurred and
incomes earned during the reporting period are recorded here. The Profit and
Loss Account in Tally.ERP 9 displays information based on the default primary
groups. It is updated with every transaction/voucher that is entered and saved.
You can view the Profit & Loss account
details in Tally for a specified period. By default, the Profit &
Loss A/c report will be generated as on the date of the last voucher entry.
You can change the date to view the report for the required period. To view the
Profit & Loss Account
1. Go to Gateway of Tally > Display > Profit
& Loss A/c.
2. Click F1: Detailed to
view the Profit & Loss Account in detailed format.
The Profit & Loss Account appears as shown below:
Balance Sheet
A balance
sheet is a financial statement that reports a company's financial position.
This report shows the balance between the assets and liabilities of a firm. The
balance sheet follows the fundamental accounting equation: Assets = Liabilities
+ Owner's Equity.
By default,
the Balance Sheet report will be generated as on the date of
the last voucher entry. You can change the date to view the report for the
required period. To view the Balance Sheet:
1. Go to Gateway
of Tally > Display > Balance
Sheet .
Bank Reconciliation
Bank
reconciliation is a process that explains the difference between the bank
balance shown in an organization's bank statement, as supplied by the bank, and
the corresponding amount shown in the organization's own [accounting] records
at a particular point of time. Reconciliation can be done in two ways:
Auto Bank Reconciliation: The Auto Bank
Reconciliation option helps to view bank statements, import bank statements,
and reconcile transactions. To view, import and reconcile the banking
transactions
1. Go to Gateway of
Tally > Banking > Bank Reconciliation
2. Select the bank for which BRS is to be
prepared.
Manual Bank
Reconciliation: The Bank Reconciliation option
in the Banking menu enables you to reconcile
bank accounts. You can access bank reconciliation to print or configure the
reconciliation statements, according to your requirements.
Fund Flow in Tally
A Fund
Flow statement is a report, which explains the movement of funds during an
accounting period. This statement consists of two parts:
● Sources
of funds
● Application
of funds
The
difference between the two shows the net change in the working capital during
the period. Only those transactions that affect the net working capital of the
firm, find place in this statement.
The Fund
Flow statement is a supplement to the two principal financial statements. While
supplementing the position statement, it describes the sources from which
additional fund were derived and for which these funds were used. The
transactions, which increase working capital, are sources of funds and the
transactions, which decrease working capital, are application of funds. To view
Funds Flow:
1. Go
to Gateway of Tally > Display > Cash/Funds Flow
> Funds Flow
2. Press ALT+F2, change period - From: 1-04-2019
to 31-3-2020. The funds flow statement will
be displayed.
Cash Flow in Tally
Cash
Flow is
the inflow and outflow of cash during an accounting period. A cash flow
statement concentrates on the transactions that have a direct impact on cash.
It deals with the inflow and outflow of cash between two Balance Sheet dates.
That is, it explains the changes in cash position between the two periods. Here
the term cash stands for cash and bank
balances.
Cash flow statements
can also be used as receipts and payments statement. This is particularly
useful for businesses such as Non Profit Organizations where receipts and
payments statements need to be generated. To view Cash Flow:
1. Go
to Gateway of
Tally > Display > Cash/Funds Flow > Cash
Flow .
2. Press Alt+F2, change the period - From: 1-4-2019 to 31-3-2020.
The Cash flow statement will be displayed.
Post a Comment
Kindly give your valuable feedback to improve this website.