SOME TRICKS IN TALLY ERP

Bad Debt: Accounting entry in tally

Posted on March 8, 2010 by Mahendra • 5 Comments

One of tally nine reader Mr. Mohammad Saleem  requested me to write about bad debt and accounting of bad debt in tally.

In business bad debt is common in view of accounts and a business unit has always fear of bad debt when goods are being sold on credit period. High bad debt reflects poor sales management and lack of managerial control over the business and over the passage of time, units having high debt in accounts turns to bankruptcy.

bad debt is generally refers to the amount which is doubtful to receive from your debtors. It is also known as bad and doubtful debt.  Bad debt arise under following circumstances:

What is Bad Debt

• 1) When there is no possibility to recover an amount from you debtor.
  2) Your debtors become insolvent or run away.
  3) All your efforts becomes fruitless to recover the amount.
  4) There is a legal dispute between you and your debtors regarding the quantum or  genuineness   of the debt
• 5) Under any case, when the management is of the opinion that there is no possibility to recover certain amount
• How to do accounting entry manual and in tally

• In tally, bad debt entry is made through a  journal voucher
• In case of bad debt, the accounting entry are made as under :
  Dr. Bad Debt Account (Under Group Indirect Expenses)
  Cr. Debtors account
  Entry can also be made directly by
  Dr. Profit and loss account
  Cr. Debtors account
• Suppose, you have sold goods worth of Rs. 3,50,000.00 to one your debtors M/s. Shah Brothers  who is regularly paying your debt. He paid the Rs. 3.25 lac and then he inform you that he is not in a position to pay you balance Rs. 25000.00. You do not want to file  a legal case against your debtor on the matter  to recover your amount and decides to write off the amount as bad debt.
  you will require to pass the below entry:
• Dr. Bad debt account   Rs. 25000.00
  Cr. Shah & Bros. Rs. 25000.00
  (Being amount written off as per letter dated…… of suppliers… )
• Things seems to be easy however it is not easy. An Assesses has to prove the legitimate of the amount written off as bad debt. If the Income tax officer reject the amount of bad debt, then the assess will be require to pay tax on such amount written off.
• Let we go further in the above case. After you have written off the amount of Rs. 25k as bad debt, and then again you have sold fresh goods to  the same customer on credit base then the amount you have written as bad debt will be considered as a suspicious transaction. The tax authority will look this kind of transactions as a way of tax evasion.
• Bad debt also can be credited to provision for bad debt. that is leaving the debtors account balance unaffected, and creating a provision account for that part of the amount.
  When the unit is not sure of the exact amount that is not possible to write off, they can use provisional figure and in this case, the entry will be made as under :
  Dr. bad debt account (Under group indirect expenses)
  Cr. Provision for bad debt) (under group provision)
  When the figure of bad debt is finalised
  Dr. provision for bad debt
  Cr. Debtors account

Works Contract | How to deal in Tally : Works Contracts.

Posted on September 7, 2010 by Mahendra • 25 Comments

Works Contracts can be managed in Tally a more systematic way

We have already discussed a lot about vat and excise in tally and also read about concept of VAT. Today we will see the concept of works Contract and how to deal in Tally

Works Contracts, on Which VAT, Service Tax and TDS are applicable can be recorded in Tally.ERP 9. Works Contract transactions can be recorded in Purchase Voucher (AccountInvoice Mode)

WORKS CONTRACT EXAMPLE

Example: On 10-10-2009 ABC Company received Bill -0052 from  Shreya Builders & Developers for Rs. 58,384.80 for the given Work Contract.

In the above transaction – Purchase Cost of the Works Contract is Rs.54000, VAT is @ 4%, Service Tax @ 4.12%. On the Total Amount – TDS @ 1% to be Deducted.

Follow the given steps to record the above works contract

Step 1: Create Masters for Works Contract

1. Party Ledger (supplier)
2. Purchase & VAT Ledger
3. Service Tax & TDs Ledger

Step 2: Record a Purchase Voucher (Book the Works Contract Purchases)

WORKS CONTRACT ACCOUNTING IN TALLY

Step 1: Create Masters

1. Party Ledger

• Enter the Name of the Party Ledger e.g. Shreya Builders & Developers
• Select Sundry Creditors from the List of Groups in the Under field.
• Set Maintain balances bill-by-bill to Yes.
• Enter the Default Credit Period, if required.
• Set Is Service Tax Applicable to Yes. Select Not Applicable in Exemption Details screen
• Set Is TDS Deductable to Yes.
• In the Deductee Type field, select Company-Resident from the List of Deductee Type

2. Purchase Ledger

• Enter the Name of the Purchase Ledger e.g. Works Contract Purchase
• Select Purchase Accounts from the List of Groups in the Under field.
• Set Is Service Tax Applicable to Yes. Select Works Contract Service inCategory Name screen.
• Set Is Abatement Applicable to No
• Set Used in VAT Returns to Yes. Select Purchases @ 4% in VAT/Tax Classscreen
• Set Is TDS Deductable to Yes.
• Select Payment to Sub-Contractors in Default Nature of Payment field
• Set Use for Assessable Value Calculation to No
• Press Enter to save

3. VAT Ledger

• Enter the Name of the VAT Ledger e.g. Input VAT @ 4%
• Select Duties & Taxes from the List of Groups in the Under field.
• In Type of Duty/Tax field select tax type as VAT
• In VAT/Tax Class field select the VAT class as Input VAT @ 4%
• Set Is TDS Deductable to Yes.
• Select Payment to Sub-Contractors in Default Nature of Payment field
• Press Enter to save

4. Service Tax Ledger

• Enter the Name of the Service Tax Ledger e.g. Input Service Tax- Works Contract  @ 4%
• Select Duties & Taxes from the List of Groups in the Under field.
• In Type of Duty/Tax field select tax type as Service Tax
• In Category Name field select the Service Category – Works Contract Service
• Set Is TDS Deductable to Yes.
• Select Payment to Sub-Contractors in Default Nature of Payment field
• Press Enter to save

5. TDS Ledger

• Enter the Name of the TDS Ledger e.g. TDS- Works Contracts
• Select Duties & Taxes from the List of Groups in the Under field.
• In Type of Duty/Tax field select tax type as TDS
• Select Payment to Sub-Contractors in Nature of Payment field
• Press Enter to save

Step 2: Record a Purchase Voucher (Book the Work Contract Purchases)

To create Purchase Voucher

Go to Gateway of Tally > Accounting Vouchers > F9: Purchase

Set Up:

In F12: Configuration

• Set Use Common Ledger A/c for Item Allocation is set to No
• Set Use Defaults for Bill Allocations to No
• Set Allow Alteration of TDS Nature of Payment in Expenses to Yes

1. Press Alt + I for Account Invoice mode
2. Press F2 and change the date to 10-10-2009
3. In Party�s A/c Name field select Shreya Builders & Developers from the List of Ledger Accounts
4. Under Particulars select Works Contract Purchase
5. Enter Rs. 54,000 in the Amount field
6. In the TDS Nature of Payment Details screen, accept the default details.
7. Under Particulars select Input VAT @ 4%. VAT amount will be calculated and displayed automatically.
8. In the TDS Nature of Payment Details screen, accept the default details.
9. Under Particulars select Input Service Tax- Works Contract  @ 4% and press enter to view Service Tax Bill Details screen.
10. In Service Tax Bill Details screen – in Service Tax field enter the applicable rate of Service Tax (instead of Default rate of service tax).

In the present works contract Example we have taken 4.12% as the Rate of Service Tax. Service Tax Bill Details is displayed as shown

WORKS CONTRACT SCREEN SHOTS IN TALLY

1. Accept the Service Tax Bill Details screen
2. In the TDS Nature of Payment Details screen, accept the default details.
3. Under Particulars select TDS- Works Contracts and press enter to view TDS Details screen.
4. In TDS Details screen
5. select the Type of Ref as New Ref
6. In Name field select the default Bill Name – Purc-6/1
7. In Nature of Payment field select Payment to Sub-Contractors
8. Assessable Value and TDS Amount will be displayed automatically

Note: TDS will be calculated on the total amount of Rs. 58384.80 (Purchase cost of Works Contract + VAT + Service Tax)

1. Press enter to accept the TDS Details scree
2. In the Bill-wise Details enter the details as shown

Completed works contract Purchase Voucher screen is displayed as shown

1. Press enter to save.

Check the Reports for details on Tax Deducted

1. TDS Computation for TDS Dedcuted.
2. Input Serice Tax details after making the payment to the Party and then check Input Credit Form.
3. VAT Computation for VAT details.

Branch Accounting in Tally |how to do ?

Posted on February 22, 2010 by Mahendra • 32 Comments

When you have a branch in a different state, then how you will prepare accounts for branch ?

A head office and branch office accounts must be separated however at the year end and for assessment purpose, the branch Accounts are required to be incorporated into the Head Office Account.

A branch is required to issue Form F towards stock transfer from HO to Branch

First of all you must understand what is a branch. A branch is a distinct entity from its Head Office having separate TIN CST number. It may or may not have separate bank accounts.The head office and Branch accounting transactions are required to be recorded separately and you can’t club both the transactions.

Suppose a branch office incur an expenses of Rs. 5000 towards consultancy fees to an advocate and the same is being paid by the Head office bank account, then the entry will be made as per below :

In the books of branch Account

Dr. Consultancy Fees Expenses   Rs. 5000

Cr  M/s. ABC  & co.                         Rs. 5000

(Being consultancy fees credited to supplier’s Account)

Now on payment of this amount from the bank Account of HO

Dr. M/s. ABC & Co. Rs. 5000

Cr. Head Office Account   Rs. 5000

(Being amount paid to supplier from the HO Bank Account)

In the books of Head office only one entry as per below will be made

DR. Branch Account                Rs. 5000

Cr. Bank Account                    Rs. 5000

(Being Amount paid on behalf of Branch to M/s………)

In tally, you have to create a branch account under the group branch/Division Accounts  as shown below for creating a branch for Red Express Mumbai branch account

Similarly in the books of Branch Accounts you can group the head office under branch /divisions as mentioned above.

Branch stock transfers are subject to Form no F I will write in future about how to record inter branch transfer accounting