1 1 . basic accounting

Accounting Packages

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Accounting Software

• It is a system that carries out mechanical operations in accounting process.

• It does not have any accounting knowledge.

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Accounting for Software

• Income • Expenditure

Liability Asset

Debit Credit

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Types of Accounts

• Personal

• Real

• Nominal

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Personal Accounts

Accounts representing persons or group of persons.

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Real Accounts

Accounts related with real things in this world.

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Nominal AccountsAccounts related with unreal things in the world.

All Expenses and Incomes

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Accounting Theme

Credit Debit

Income (Nominal)

Expenses(Nominal)

Liability(Personal)

Asset(Personal or Real)

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Rules of Accounting

Type of Account

Debit Credit

Personal The Receiver The Giver

Real What Comes In What goes out

Nominal All Expenses & Losses

All Incomes & Gains

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Basic Question

• What do you mean by Debit ?

Any Guess ?

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Basic Question

• What do you mean by Debit ?

Left Hand Side of a Ledger Account

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Flow of Accounting Understanding the Transaction

Voucher Entry

Posting

Balancing

Trial Balance

P & L Account Balance Sheet12

Structure of Accounting Ledger Accounts

Income

Credit Debit

Liability AssetExpenditure

Balance Sheet

P & L Account

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Ledger Grouping

• Income Groups

• Liability Group

• Expenditure Groups

• Asset Group

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Profit & Loss Account Group

• Income :– Direct Income – Indirect Income – Sales Accounts

• Expenditure :– Direct Expenses– Indirect Expenses– Purchase Accounts

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Balance Sheet Group • Liabilities :

– Capital – Bank OCC/Bank OD– Current Liabilities– Duties & Taxes– Loans (Liability)– Provisions– Reserves & Surplus – Retained Earnings – Secured Loans– Sundry Creditors – Suspense– Unsecured Loans

• Assets :– Bank Accounts – Cash in Hand – Current Assets – Deposit (Assets)– Fixed Assets – Investments – Loans & Advances

(Asset)– Misc. Expenses (Asset)– Sundry Debtors

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Accounting Software

• It is a system that carries out mechanical operations in accounting process.

• It does not have any accounting knowledge.

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What is buying a software ?

• We actually never buy a software• Demo copy of all software is available free• We buy license to use the software

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Legal/Demo/Pirated Software

• Legal software - Full functional software without any restrictions.

• Demo Software - Used for demo purpose with all major features but with a very few restrictions.

• Pirated software - Cracked software, nearly full functional, but illegal.

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Demo / Educational Version

• This is a full functional software except a very few restrictions.

• This can be very well used for learning purpose.

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Software License

• License to use is to bought at the time of buying a software.

• This includes a unique Serial No. and a key for that particular serial number.

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Software Versions

• Version are used to differentiate same software according to stages of development.

• This is a totally new software with some major changes.

• E.g. Tally 4.5, 5.4, 6.3, 7.2, 8.1, 9, ERP9

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Software Release

• Releases are like editions of a book.• Software of same version with a new

release will be having minor changes.• Changes / updations are made in every

software on continuous basis. • Updations may be related to rectification of

mistakes, addition of new features, statutory changes, etc.

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Types of Licenses• Single User • Multi User • In case of Tally, there is no limit on

number of users. • In some cases, licensing may be

according to the number of user, i.e. for every five users, or per user, etc.

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Comparison of softwares pricesSoftware Single User

Rs. Multiuser

Rs.

Busy 11,880 29,770(Unlimited Users)

Miracle 13,500 27,000(Unlimited Users)

Focus 33,000 2,500 per user

Tally 13,500 40,500(Unlimited Users)

Wings 15,000 25,000 (five user)Rs. 10,000/five

users 25

Why to learn Tally only ?

Tally is king of accounting packages in India.

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Tally Versions• Tally 4• Tally 4.5• Tally 5• Tally 5.4• Tally 6.3• Tally 7.2• Tally 8.1• Tally 9• Tally.ERP 9

Basic Accounting Basic Accounting Window Based Inventory Hardware Lock VAT, Service Tax, TDS Multilanguage, FBT, Excise International Taxation, Payroll Excise for Manufacturers,

Remote Login 27

Operating Systems

• Upto Tally 4.5, it was using DOS. • From Tally 5 onwards, all versions are

windows based.

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DOS & WindowsFeature DOS Windows

Speed More Less

Printing Cost Less More

Reliability More Less

User Friendliness Less More

Presentation Poor Excellent

Facilities Less More

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Leaders in Generalised Accounting Softwares

• Tally (Tally India Pvt. Ltd., Bangalore)• Busy (Busy Infotech Pvt. Ltd., New Delhi)• Wings (Wings Infonet Ltd., Hyderabad)• Focus (Softline Software Services Pvt. Ltd.,

Hyderabad)

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Company

• “Company” in Tally means any accounting unit.

• It includes Limited Company, Partnership Firm, Trust, Society, College, School, Proprietorship, etc.

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What is Accounting Data ?

• Masters • Vouchers

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Masters

• Heads that are to be set only once. • This is the standing data. • Not expected to change frequently• Forms integral part of accounting data.

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Vouchers • This is a place where transactions

are recorded. • This will contain links to masters.• This may include other information

like date, narration, quantitative details, reference, etc.

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How data is stored ?

• In masters, independently • In vouchers along with link to

masters

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Types of Masters • Accounting Masters • Inventory Masters • Payroll Masters • Statutory Masters

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Basic Menu Style

• Masters • Transactions • Reports • Configurations/Settings

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Masters

• Creation• Alteration – Group, Name, Contact

Details, • Deletion

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Vouchers

• Used only for entering transactions in software.

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Reports • For viewing information• For alteration of transactions • For printing

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Voucher Types in Tally

• F4 : Contra• F5 : Payment • F6 : Receipt • F7 : Journal • F8 : Sales • F9 : Purchases

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F4 : Contra

• Cash deposited in bank • Cash withdrawn from bank• Cash to cash transfer• Bank to bank transfer

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F5 : Payment

• All types of payments are entered through this voucher type. (Cash and Bank)

• Credit item of a payment voucher shall be either Cash or Bank Account only.

• There can be two modes, Single Entry Mode or Double Entry Mode.

• Voucher can be with Dr. and Cr. or with To and By as prefixes.

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F6 : Receipt • There can be only two types of receipts. • Cash Receipt and Bank Receipt.• Both these receipts has to be entered here.• Debit item of Receipt Voucher will always

be either Bank or Cash• There can be two modes, Single Entry

Mode or Double Entry Mode.• Voucher can be with Dr. and Cr. or with To

and By as prefixes 44

F7 : Journal

• This voucher is used for non cash transactions.

• E.g. Depreciation, provisions, trasnfer entries, purchase of fixed assets on credit.

• Journal voucher should not be used for credit sales or credit purchases.

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F8 : Sales

• This is used for cash sales as well as credit sales.

• There can be two modes, “As Invoice” or “As Voucher”.

• Party’s A/c Name means ledger to be Debited, write Cash in case of Cash Sales

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F9 : Purchases

• This voucher type is used for both types of purchases, Credit as well as Cash

• There can be two modes, “As Invoice” or “As Voucher”.

• Party’s A/c Name means ledger to be credited, Write Cash in case of Cash Purchases.

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Reports in Tally

• Balance Sheet • Profit & Loss Account • Ratio Analysis • Display

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Display • Trial Balance • Day Book • Accounts Books• Statements of Accounts • Inventory Books • Statement of Inventory • Cash Flow • List of Accounts • Exception Reports

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