What is Ledger?
A Ledger is the actual account head to which you identify a transaction and must be used in all Accounting Vouchers. Without a ledger we cannot record any transactions.
Ex: Purchase, payments, sales, Receipts, etc, all these accounts heads are ledger Accounts.
All Ledgers have to be classified into Groups. Classification of Ledgers to the appropriate groups is very important. These Groups and Ledgers are classified to Profit & Loss or Balance Sheet. The creation and usage of Groups in Tally.ERP 9 has been explained earlier. Now you will learn how Tally.ERP 9 works with Ledgers.
Pre-defined Ledgers in TallyERP.9
There are two pre-define ledgers in TallyERP.9
1. Cash: This Ledger is created under the Group Cash-in-hand. You can enter the opening balance as on the date of books beginning from. You can also alter the name and even delete the Ledger. It helps you to maintain Daily Cash Expenses.
2. Profit & Loss Account: This Ledger is created under the Group Primary. Previous year’s Profit or Loss is entered as the opening balance for this ledger. The balance entered here is treated as the opening profit/loss and shown in the Balance Sheet as opening balance of Profit and Loss account in the Liabilities side. You cannot delete this ledger, but you can modify the same.
Creating a Ledger
Go to Gateway of Tally > Accounts Info. > Ledgers
You can create either Single or Multiple Ledgers.
Importance of Grouping and Accounting Classifications
Debtor/Creditor Classification
1. Placing individual party accounts under Sales or Purchase Accounts groups:
Accounts of parties with whom your company has trade relationship must be opened under one of the following groups (or sub-groups under them) only:
· Sundry Debtors
· Sundry Creditors
· Branch/Divisions
Sales and Purchase account groups are meant for revenue accounts and would be reflected in the Profit & Loss Account. If you open party accounts under these groups, you will find it difficult to pass sales or purchase voucher transactions. For example, in a sales voucher transaction entry, you must debit an account which is a sundry debtor, branch/division or even a sundry creditor (why a creditor? - it will be explained soon). Moreover, other facilities like bill-wise allocation and tracking will not be available unless the accounts belong to one of these groups.
2. Opening two accounts of the same party
For convenience Tally.ERP 9 has separately classified debtors, creditors and branch/divisions. There is no operational distinction except for the purpose of keeping the accounts of a particular group together during displays and analysis. You can pass both sales and purchase entries for a party account placed under Sundry Debtors.
We recommend that you use the classification depending on the most natural group for the party. For example, parties from whom you buy more frequently then you sell to can be placed under Sundry Creditors, as that would be the natural place for you to look for his account.
Tally.ERP 9 does not restrict the accounts from having obverse balances. Thus, a Sundry Debtor can have a credit balance depending on the state of his account.
Note: You need not open two accounts of the same party - one under Sundry Debtors and another under Sundry Creditors.
Remember, Tally.ERP 9 restricts you from opening two identical ledger accounts. Of course, you may decide to circumvent by marking one account as A & Co - S/Dr and another A & Co - S/Cr. Doing this would allow you to have two accounts of the same party under two groups, but you would lose the advantage of analyzing his net position at one instance. We recommend that you maintain a single account to obtain best results.
3. Placing expenditure items under a Liabilities group, e.g., the expenditure item 'Rates & Taxes' under the group 'Duties and Taxes'.
The group Duties and Taxes is specifically meant to handle taxation liabilities of your company. Rates & Taxes and other statutory expenses should be placed under Indirect Expenses.
Creating a Single Ledger
By default, Tally.ERP 9 contains two Ledger accounts namely, Cash (Under Cash-in- Hand) and Profit and Loss Account (direct Primary Account). You need to create all other accounts heads. There are no restrictions in Ledger creation except that you cannot create another Profit & Loss A/c. Any number of Cash Accounts may be created in any other name for ex: Petty Cash.
Go to Gateway of Tally > Accounts Info > Ledgers > Create
Ledgers can be created in Normal mode or in Advance mode.
Creating Ledger in Normal Mode
The creation of a Ledger depends on the features you have selected under F11: Features of your company and F12: Configure. You can create a single ledger account with the default options enabled.
Go to Gateway of Tally > Accounts Info > Ledgers > Single Ledger > Create
Name
Enter the Name of the account. You can provide the full name of the account. Tally.ERP 9 fits it all in. Press Enter to move to the next field. Tally.ERP 9 does not allow the entry of duplicate names. The uniqueness check is made here itself.
Note that the punctuation and other non-relevant information are ignored by Tally.ERP 9 in its recognition of a name. Thus, CST, C.S.T. and C. S. T. are all considered as same.
Tally.ERP 9 converts the first letter of all relevant words to upper case, which helps you; speed up data entry.
Alias
Enter an alias name if required. You can access the Ledgers using the original name or the alias name.
Under
All accounts must be classified under their appropriate Groups. Select the Group under which the Ledger is created from the List of Groups. (To create a new Group from this field press [ALT + C]). A wrong classification would affect the treatment of the Ledger account in final statements and during voucher entry.
You can, alter a Ledger account to change its group classification at any time. Refer Importance of Grouping and Accounting Classifications: for more details in Grouping.
Opening Balance
If yours is an existing company whose books you are entering into Tally.ERP 9, Opening Balance would be applicable in circumstances where the Ledger is an asset or a liability and if it has a balance in the account as on the date of beginning of books in Tally.ERP 9.
Tally.ERP 9 recognizes normal accounting principles of debit balances for Assets and credit balances for Liabilities. It accepts the reverse for obverse balances. Revenue accounts normally do not have balances. Tally.ERP 9, however, permits you to give balances even for such accounts - You may be transferring your books on to Tally.ERP 9 in the middle of the year and may not have closed them in your earlier system. Hence, you may specify whether the balance is Debit or Credit. Simply D or C would suffice.
Creating a Sales / Purchase Ledger
Purchase / Sales ledgers are required for trading, repacking or for usage in manufacturing products. Sales and Purchase account groups are meant for revenue accounts and are reflected in the Profit & Loss Account.
To create a Purchase / Sales Ledger,
Go to Gateway of Tally > Accounts Info > Ledgers > Create
Inventory values affected: This is applicable for Companies maintaining Accounts with Inventory. Inventory allocation is required for Accounts like Sales, Purchase, Receipt note, Delivery note, etc. However, Tally.ERP 9 does not restrict to particular accounts as you may have the need to affect inventory with accounts like Customs Duty, and perhaps, direct expenses related to purchases such as Freight Inwards.
Cost Centers are applicable: Tally's concept of Cost Centers allows an additional dimension to a transaction. .
You have set Maintain Cost Centers to Yes in F11: Features:F1:Accounting Features, to get this option in the Ledger creation screen. If any of the transactions need to be allocated to any particular Cost Center(Which involves this ledger) set this option to Yes.
Activate Interest calculation: Set this option to Yes to enable Tally.ERP 9 to calculate interest automatically based on the interest rate and style of calculation specified for this ledger account.
Use advanced parameters: The advanced parameters are particularly useful where interest rates change from time to time. Set this option to Yes to enable this.
Creating a Income/ Expenses Ledger
Expense ledgers must be created for each of the expense account separately.
To create a Expenses / Income ledger,
Go to Gateway of Tally > Accounts Info > Ledgers > Create
Inventory values affected: This is applicable for Companies maintaining Accounts with Inventory. Inventory allocation is required for Accounts like Sales, Purchase, Receipt note, Delivery note, etc. However, Tally.ERP 9 does not restrict you to particular accounts as you may have the need to affect inventory with accounts like Customs Duty, and perhaps, direct expenses related to purchases such as Freight Inwards.
Cost Centers are applicable: Tally's concept of Cost Centers allows an additional dimension to a transaction. .
You have set Maintain Cost Centers to Yes in F11: Features: F1: Accounting Features, to get this option in the Ledger creation screen. If any of the transactions need to be allocated to any particular Cost Center(Which involves this ledger) set this option to Yes.
Activate Interest calculation: Set this option to Yes to enable Tally.ERP 9 to calculate interest automatically based on the interest rate and style of calculation specified for this ledger account.
Use advanced parameters: The advanced parameters are particularly useful where interest rates change from time to time. Set this option to Yes to enable this.
Creating a Party Ledger
Party Accounts should be opened under Sundry Debtors or Sundry Creditors group with whom your company is trading.
Customers (Sundry Debtors) who buy goods or services for cash or on credit. Suppliers (Sundry Creditors) who supply goods and services for cash or on credit.
To create a Party Ledger, Go to Gateway of Tally > Accounts Info > Ledgers > Create
The Party Ledger account screen is displayed as shown
Currency of Ledger: Tally.ERP 9 allows you to maintain Ledgers in any currency and the amount is reflected in the selected currency. But it is strongly advised that you maintain the currency of the Ledger as the Base currency.
Only foreign currency bank accounts are maintained in foreign currency and other ledgers are maintained in Base Currency. Nevertheless you can enter transactions in any other currency.
To create/maintain ledgers in multiple currency, set Allow Multi Currencies to Yes under F11: Features.
You can always create a new currency from this field by pressing Alt+C.
For more information on Currencies, refer Mult-Currency.
Maintain Balances Bill-by-Bill: This option is applicable when you want the balances to be maintained Bill by Bill or Bill wise. Normally, this option is useful for Ledgers falling under Sundry Debtors & Sundry Creditors. If you set this option to Yes, while entering the opening balance in the Opening Balance field at the end of Ledger Creation screen and press Enter, the Bill-wise Breakup screen of the Ledger created is displayed as shown.
Date: Since you are giving the break-up of the Opening Balance, the date of the bill would naturally be prior to the accounting period. By default Tally.ERP 9 takes last date of your previous accounting period, e.g., 31 March 2008. Change it, if necessary.
Name: Enter a Name to which you can later refer when adjusting the bill. You can enter the Bill number or Document number.
Due date (or credit days): For the Ledgers under Sundry Debtors and Creditors, give the credit period or the date when the bill is due.
Note: During transaction entry, there would be another concept-that of effective date. If you opt for using effective dates instead of bill dates the due date would be calculated accordingly.
Amount: For the amount of the bill due, you can give particulars of all the pending bills one by one.
If the total amount of all your bills covers the Opening Balance, the On Account becomes NIL. You could have Bills totaling beyond the Opening Balance. In the screen shown below, there are two bills 50,000, 25,000. Now, if the balance brought forward is 1,00,000/- , the On Account amount will reflect 25,000/-. If you obtain the bill particulars at a later date, you can alter the ledger to enter these details, which will nullify On Account.
Default Credit Period:
The Credit period may be given for Sundry Debtors and Sundry Creditors. The number of Credit days or period can be defined in various ways:
· Days: If there is no suffix given to the number of credit days, then it is taken as Days. For Ex: If you enter just the number 5, then it is considered as 5 Days.
· Weeks: If W is given as suffix to the number of credit period, then it is taken as Weeks. For Ex: If you enter 5 W, then it is taken as 5 Weeks.
· Months: If M is given as suffix to the number of credit period, then it is taken as Months. For Ex: If you enter 5 M, then it is taken as 5 Months.
· Year: If Y is given as suffix to the number of credit period, then it is taken as Year. For Ex: If you enter 5 Y, then it is taken as 5 Years.
Inventory values affected: This is applicable for Companies maintaining Accounts with Inventory. Inventory allocation is required for Accounts like Sales, Purchase, Receipt note, Delivery note, etc.. However, Tally.ERP 9 does not restrict you to particular accounts as you may have the need to affect inventory with accounts like Customs Duty, and perhaps, direct expenses related to purchases such as Freight Inwards.
Cost Centres are applicable: Tally's concept of Cost Centres allows an additional dimension to a transaction. .
You have set Maintain Cost Centres to Yes in F11: Features:F1:Accounting Features, to get this option in the Ledger creation screen. If any of the transactions need to be allocated to any particular Cost Center(Which involves this ledger) set this option to Yes.
Activate Interest calculation: Set this option to Yes to enable Tally.ERP 9 to calculate interest automatically based on the interest rate and style of calculation specified for this ledger account.
Use advanced parameters: The advanced parameters are particularly useful where interest rates change from time to time. Set this option to Yes to enable this.
Statutory Information: This functionality is available only, if you have enabled at least one of the options under F11: Features> F3: Statutory & Taxation. Based on the options enabled under F3: Statutory & Taxation, the respective fields will be displayed in the Statutory Information section.
Mailing Details: is applicable only for party accounts like Sundry Debtors, Creditors and Branch Divisions, Branch/Divisions, Bank & Bank OCC A/c, Loans & Advances Assets, Loans & Advances Liabilities, Secured & Unsecured Loans, etc. These are used in mailing outputs like statement of accounts.
Tax Information: The Tax Information consists of the default fields PAN/IT No. and the TIN/SALES Tax No. Based on the features you enable in F11: Features> F3: Statutory & Taxation, additional fields will appear under Taxation.
Other Information: In this section information of the relationship and enterprise type of the party with whom the transaction carried out is entered
· Is Related Party: If the party under creation is related to the business organisations set the option to Yes. Other wise it will be retained as No
· Relationship: This option is a suboption of Is Related Party. This field will be displayed only when the option Is Related Party is set to Yes. In this field mention the relationship with the party.
· Enterprise Type: In this field select the enterprise type from the Type of Enterprise as information collected from the party.
Note: Other Information section will be displayed in Ledger Master Creationscreen only when the option Use Other Information for Ledger Accounts is set to Yes in F12: Ledger Configuration
Percentage of Calculation: This field is applicable only for Ledgers created under the Group Duties and Taxes, or for Ledgers created under any Group for which Used for Calculation is enabled in the Group Creation screen.
Effective date for Reconciliation option will appear when a ledger is created under Bank Account group. Give the date of reconciliation on which you would like to reconcile the voucher.
Creating Duties & Taxes Ledger
Type of Duty/Tax: This option is based on statutory compliance of company. For Indian statutory, by default, it will show the Excise and Others. Depends on features in F11: Statutory, more options will be included in the Type of Duty/Tax.
Inventory values affected: This is applicable for Companies maintaining Accounts with Inventory. Inventory allocation is required for Accounts like Sales, Purchase, Receipt note, Delivery note, etc. However, Tally.ERP 9 does not restrict you to particular accounts as you may have the need to affect inventory with accounts like Customs Duty and perhaps, direct expenses related to purchases such as Freight Inwards.
Cost Centres are applicable: Tally's concept of Cost Centres allows an additional dimension to a transaction.
You have to set Maintain Cost Centres to Yes in F11: Accounting Features, to get this option in the Ledger creation screen. If any of the transactions need to be allocated to any particular Cost Center, set this option to Yes.
Activate Interest calculation: Set this option to Yes to enable Tally.ERP 9 to calculate interest automatically based on the interest rate and style of calculation specified for this ledger account.
Use advanced parameters: The advanced parameters are particularly useful where interest rates change from time to time. Set this option to Yes to enable this.
Percentage of Calculation
The Group Duties and Taxes is used for automatic tax calculation. You need to specify the rate of tax e.g.5%, 10%, 12.5% etc. You can use an automatic Discount calculation facility by specifying a negative percentage in this field. On entering a percentage, a new field Method of Calculation is displayed. From the Method of Calculation, you can select appropriate options to calculate the Tax/Duty.
Rounding Method
This is used to round off the duty value. By default rounding method will be Blank. Once you select rounding Method, rounding Limit sub option will be displayed. Here you can specify the round off limit.
For Example:
For Duty value 123.33 and rounding Limit is 1,
- Downward rounding will show as 123
- Normal rounding will show as 123
- Upward rounding will show as 124
For Duty value 125.55 and rounding Limit is 1,
- Downward rounding will show as 125
- Normal rounding will show as 126
- Upward rounding will show as 126
This is the method to Creating Ledgers. You can also create Assets, Current Liabilities, Cash & other Type of Ledgers.
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