Tally Prime Accounting: Features, Setup & Transactions

Posted on Sep 20, 2025 in Accounting and Finance

Tally Prime Software: Key Features

Tally is one of the most popular accounting software used by businesses for financial management and bookkeeping. Its latest versions offer many advanced features.

1. Accounting Management

• Handles all types of accounts: general ledger, payables, receivables, etc.
• Supports multi-currency and multi-accounting systems.

2. Inventory Management

• Tracks inventory levels, orders, sales, and deliveries.
• Helps with stock categorization, batch-wise tracking, and warehouse management.

3. Payroll Management

• Manages employee records, salaries, bonuses, attendance, and payslips.

4. Taxation (GST, TDS, TCS)

• Automatic calculation and filing of GST, TDS, and TCS.
• Generates returns and reconciliation reports.

5. Banking Features

• Supports cheque printing, bank reconciliation, and e-payments.
• Provides auto bank statement import and matching.

Computerized Accounting: Core Benefits

Computerized accounting refers to using software (like Tally, QuickBooks, SAP) for managing financial records and processes.

1. Accuracy

• Minimizes human errors through automation in calculations.

2. Speed

• Speeds up data processing and report generation.

3. Efficiency

• Handles large volumes of transactions quickly and efficiently.

4. Automation

• Automates posting of entries, updating ledgers, and generating financial reports.

5. Data Storage and Retrieval

• Stores vast amounts of financial data and allows quick retrieval.

Tally Prime Setup: Essential Steps

1. Company Creation

Before any data entry, you must create a company in Tally Prime:

• Go to: Gateway of Tally > Create Company
• Fill in company name, address, financial year, and other relevant details.
• Save the details (Shortcut: Ctrl + A).

2. Ledger Creation (Masters)

Ledgers are used to record all accounts like cash, bank, customer, supplier, income, expense, etc.

Steps to Create a Ledger:

• Go to: Gateway of Tally > Masters > Create > Ledger
• Enter the following details:
  • Name (e.g., Ram Traders)
  • Under Group (e.g., Sundry Debtors, Purchase Accounts, Sales Accounts, etc.)
  • Enter GST details (if applicable)
  • Enter Opening Balance (if any)
• Save (Shortcut: Ctrl + A).

3. Stock Item Creation

Stock items are used for inventory management and tracking sales/purchase transactions.

Steps to Create a Stock Item:

• Go to: Gateway of Tally > Masters > Create > Stock Item
• Enter the following details:
  • Name of Item (e.g., Makhana 500g)
  • Unit of Measure (e.g., Nos, Kg, etc.)
  • Under Group (e.g., Primary)
  • Rate, GST rate (if needed)
• Save (Shortcut: Ctrl + A).

4. Voucher Entry (Transactions)

Vouchers are used to record all financial transactions in Tally Prime.

Common Voucher Types:

Bill-Wise Details in Tally Prime

Bill-wise details in Tally Prime help track outstanding receivables and payables bill-by-bill, rather than as a lump sum. This is useful for managing credit sales/purchases, due dates, payments received, and balances.

1. New Reference (New Ref)

• Used to create a new bill/invoice that is due for payment later.
• The system treats it as an outstanding bill.
• Example: You sell goods worth ₹10,000 on credit to Ram. You enter it as “New Ref – INV001”.

2. Against Reference (Against Ref)

• Used to adjust a payment against an existing bill (reference).
• Helps clear outstanding amounts.
• Example: Ram pays ₹10,000 for INV001. You select “Against Ref – INV001” during receipt entry.

3. Advance Payments

• Used when a customer pays you in advance, before you issue a bill.
• Example: Ram gives ₹5,000 as advance before placing an order. Select “Advance” when recording the receipt. Later, you can adjust the advance against a new bill using “Against Ref”.

4. On Account Payments

• Payment is made/received, but not adjusted against any specific bill.
• Useful when exact invoice details are unknown.
• Example: A vendor pays ₹2,000 but doesn’t mention the invoice number. You record it as “On Account” and adjust later.

5. Ledger Advance (Auto Reference)

• Automatically generated by Tally for ledgers created before enabling bill-wise details.
• This is usually for compatibility or older entries.

Understanding Accounts Payable

Accounts Payable (AP) refers to the amount a business owes to its suppliers or vendors for goods or services received on credit. It is a liability for the business.

Example: Accounts Payable

You buy raw materials worth ₹50,000 from a vendor on 30 days credit. Until you pay, this amount is recorded as Accounts Payable.

Key Features of Accounts Payable

• Current Liability: Appears on the liabilities side of the balance sheet.
• Short-Term Obligation: Usually paid within 30–90 days.
• Trade Credit: It reflects credit facility given by suppliers.
• Recorded through Purchase Vouchers in accounting software like Tally.
• Delayed Payment may incur interest or penalty.

Benefits of Managing Accounts Payable

• Helps maintain strong supplier relationships.
• Enables efficient cash flow management.
• Avails credit without interest for short terms.

Risks of Poor Accounts Payable Management

• Late payments can damage your credit score.
• Excess payables may indicate poor liquidity.

Accounts Receivable (AR) Explained

Meaning of Accounts Receivable

Accounts Receivable (AR) refers to the amount of money customers owe to a business for goods or services sold on credit. It is an asset for the business.

Example: Accounts Receivable

You sell ₹80,000 worth of goods to a customer on 45 days credit. Until they pay, it is recorded as Accounts Receivable.

Key Features of Accounts Receivable

• Current Asset: Appears on the asset side of the balance sheet.
• Short-Term Claim: Expected to be collected within a specific credit period.
• Credit Sales Tracking: Helps in monitoring pending collections.
• Recorded through Sales Vouchers in Tally.
• Receivables Aging Report tracks overdue payments.

Essential Ledgers & Groups in Tally Prime

Here’s a list of common ledgers and their relevant groups for creation in Tally Prime:

Key Financial Reports in Tally Prime

Tally Prime allows you to display and print various essential financial reports:

1. Day Book

   Go to: Gateway of Tally > Display More Reports > Day Book

2. Profit & Loss Account

   Go to: Gateway of Tally > Display More Reports > Profit & Loss A/c

3. Balance Sheet

   Go to: Gateway of Tally > Display More Reports > Balance Sheet

Sample Voucher Entries (April 2024)

Here are some example voucher entries for April 2024: