FINANCIAL ACCOUNTING I

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Elaine Gregory
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1 Syllabus: Computerized accounting meaning, features, introduction to tally, creation and alteration of company, groups and ledger accounts, generation of trial balance and financial statements. Meaning of Computerized accounting Computerized accounting systems are software programs that are stored on a company's computer, network server, or remotely accessed via the Internet. Computerized accounting systems allow you to set up income and expense accounts, such as rental or sales income, salaries, advertising expenses, and material costs. They also can be used to manage bank accounts, pay bills, and prepare budgets. Depending upon the program, some accounting systems also allow you to prepare tax documents, handle payroll, and manage project costing. Features of Computerized accounting 1. It leads to quick preparation of accounts and makes available the accounting statements and records on time. 2. It ensures control over accounting work and records. 3. Errors and mistakes would be at minimum in computerized accounting. 4. Maintenance of uniform accounting statements and records is possible. Advantages of Computerized accounting 1. Automation of tedious clerical jobs 2. Speed and accuracy 3. Low cost of packages 4. Automatic generation of standard reports 5. Redundant data storage permits efficient generations of some reports 6. Increase revenue while lowering operating costs and enhancing competitive advantage of the company. Disadvantages of Computerized accounting 1. Transactions orientation only 2. Periodic not real time reporting 3. Limited flexibility for ad hoc reports B.Com I SEM UOM Page 1

2 Difference between manual accounting and computerized accounting Manual Accounting 1. The identification of transactions is done manually. 2. Transactions are recorded and retrieved through books of original entries. 3. Transactions are recorded first in the books of original entry, then they are to be posted into ledger accounts. Thus, they are recorded twice. 4. After the preparation of ledger accounts, balances of various accounts are known and hence a trial balance is prepared in order to summaries the data. 5. Financial statements are prepared on the basis of trial balance. Computerized Accounting 1. The transactions are identified on the bases of well-designed programs. 2. Transactions are recorded and stored in well-designed databases. 3. The stored data is processed automatically in classified ledger accounts. 4. Need not generate ledger accounts to produce trial balance. The data in each transaction is processed to show the balance report automatically. 5. The generation of financial statements is independent of trial balance because such statements are directly processed using the originally stored data. Meaning of Tally Tally Accounting is a software used for accounting purposes. It is provided by Tally Solutions and is a standard business accounting software. Advantages of Tally 1. Any business owner understands the importance of maintaining proper books of account. This practice ensures that finance for the company is always in order and are correct at all given points of time. Company should always be aware of its financial positions. 2. Earlier, most of the businesses were employing manual practice in maintaining books of account. However, with the advent of modern information technology, this task can be performed by accounting software. Tally is one such all-powerful accounting software. 3. Tally accounting software provides a solution to all the problems real businesses have to encounter. Single software takes care of all tasks required for enterprise management. Accounting task such as records keeping, accounts receivable and payable management and bank reconciliation are made simple through tally. B.Com I SEM UOM Page 2

3 4. Financial management is also made simpler under Tally software. The software allows management of finances across multiple locations can handle multiple currency transactions, manage cash flow and interest payment. 5. Tally enables to identify bad debts and defaulters in payment. Limitations of Tally 1. Not user friendly at all, one has known accounting knowledge in order to use Tally accounting software in Pakistan. 2. There is no major graphical improvement in old version of Tally. The Indian head office of Tally is continuously launching new version from Tally 4.5 to Tally 9 ERP but the GUI interface is still like old DOS based accounting software. 3. Journal Voucher cannot be amended once created. 4. Batch wise invoicing not possible in Tally accounting software. 5. Re-order level of inventory stock cannot be maintained in Tally ERP software. Creation of a Company Go to Gateway of Tally > Company Info. > Create Company (Company Info by Alt+F1 Key) Various fields in the creation of company are as follows: Directory : This shows you the directory of Data Path where the transaction are saved which you entered in tally you can change this path or choose the default (We recommended default until you know what you doing ). Name: Here you have to give a name to your company for which you want to enter the Transactions. Mailing Name: By default it is same as your company name but you can change it as per your convenience. Address: Address of the company. Statutory Compliance: Select the Country India State, PIN, Telephone, B.Com I SEM UOM Page 3

4 Currency Symbol: By Default it is Rs. FINANCIAL ACCOUNTING I Maintain: Accounts with Inventory or without (For Basic Learning you should choose Without Inventory) Financial Year from: From 01-April-XXXX to xxxx Books Beginning from: By Default it is when you financial year started. Tally Vault Password: This field allows you to make password control on access and more you can select password to access and view control. Creation of ledger in Tally Tally ledgers creation under group of accounts is main part of Tally ERP 9 implementation. In every implementation of Group wise Tally ledger list prepared first which affects Trading a/c, Profit and loss a/c and Balance sheet. Here is the list of ledger head and respected group of ledgers. Following are the examples of ledger name and the group head which comes under tally Ledger name Sale Return Sale Purchase Return Purchase Carriage Freight & Cartage Import duty Rent (Dr) Royalty Wages Advertisement Bank charges Bill drawn Carriage Commission allowed Discount allowed Donation & charity Free sample Insurance premium Printing & stationery Tally head Sales Sales Purchase Purchase B.Com I SEM UOM Page 4

5 Rent (cr) Repair charge Salary Sale tax Taxi fire Telephone charge Trade account Travelling expenses Suspense Miscellaneous exp. Depreciation Commission Received Bed Debts Recovered Interest on Drawing Discount Received Interest on Investment Drawing Income Tax Life insurance Reserves & Surplus Advance Bank Overdraft Bill Payable Outstanding expenses Salary payable Creditor name Loan Branch in division Accrued expenses Furniture Goods Land & Building Long term investment Machinery & plant Bank Cash Stock Debtor name Bad debt Suspense Miscellaneous exp. Reserves & Surplus Sundry Creditors Loan Liabilities Branch in division Cash at bank Cash in hand Stock in Hand Sundry Debtors Sundry Debtors B.Com I SEM UOM Page 5

6 Bill receivable Good will Prepaid expenses Short Term Investment Accrued income Prepaid rent Loss on theft Misc. Exp.- asset Stock in Hand Balance Sheet and Profit & Loss Report A Balance Sheet is a financial statement that summarizes the assets, liabilities and shareholders equity of a company at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders. The balance sheet complies with the formula below: Assets = Liabilities + Shareholders Equity. A balance sheet is often described as a snapshot of a company s financial condition. The accounts displayed in the Balance Sheet are linked to an account type for which the P&L / Balance Sheet parameter is set to Balance Sheet (either Assets or Liabilities account). ****All the Best***** B.Com I SEM UOM Page 6

Shri Shahu Mandir Mahavidyalaya, Pune - 9

Shri Shahu Mandir Mahavidyalaya, Pune - 9 The main Advantages of a Computerized Accounting system are listed below: 1. Speed: Data entry onto the computer with its formatted screens and built-in databases of customers and supplier details and