Create a new company in Tally
Introduction
- Open the Tally Prime software by searching for “Tally Prime” by clicking on the start button and opening the start menu
- Select Create company in the List of Companies gateway
Entering company basic information
- Selecting keyboard keys “Alt” and “R” (Alt+R), to change from regular company to group company in the company creation gateway. Therefore, we can create either a regular company or a group company by providing the requisite details.
- Enter the name of the company, in our example, the name of the Company is ABC India (P) Ltd.
- Give the financial year as per the rules of the country of incorporation. In our case, the financial period is January to December, and the first financial year is Jan 2020
- Represent the books beginning as the period from when the books have been prepared from
- Kindly give the Mailing Name and Address as per the Memorandum of association
- Under the State row, specify the emirate of the UAE where the business is being conducted or proposed to be conducted. In our example, the emirate where the business is conducted in Dubai
• In the Country row, give the country of incorporation. In our example, the country of incorporation is the United Arab Emirates
•Mention the Pincode, telephone, mobile, fax, email, and website of the company
• Input the base currency symbol as “AED”
• Write the formal name of the currency as the currency name is given by the United Arab Emirates, i.e UAE Dirham
After giving the company details, select the keyboard keys “Ctrl” and “A” (Ctrl+A), to accept the changes and create the company
Now, once the company has been created, it will ask for additional details to configure your company data entry
Select keyboard keys “Ctrl” and “I” (Ctrl+I). As a result, it will show more details in regards to configuring your company.
More details
The more details available for your company are
- Create Multiple Addresses for your company
- Ability to set Price levels for different products in your company
- The ability to create cost-center classes in your company
Create a bank account in Tally Prime
Importance of Bank in Accounting Software
Banks play a crucial role in accounting software, and the integration of banking features is important for several reasons:
1. Transaction Recording:
– Accounting software linked to bank accounts allows for the automatic recording of transactions, reducing manual data entry. Bank feeds enable real-time or periodic updates of transactions directly into the software.
2. Accuracy and Efficiency:
– Automatic bank feeds help minimize errors and ensure the accuracy of financial data by eliminating the need for manual input. This enhances efficiency and reduces the likelihood of data entry mistakes.
3. Reconciliation:
– Bank reconciliation is a fundamental accounting process. Accounting software facilitates the reconciliation of transactions recorded in the software with bank statements. This ensures that the company’s financial records align with actual bank balances.
4. Real-time Financial Information:
– Integrating with banks provides real-time access to financial information. Businesses can monitor cash flow, account balances, and transactions promptly, enabling timely decision-making.
5. Expense Tracking:
– Accounting software linked to bank accounts allows for the easy tracking of expenses. This includes categorizing and organizing transactions, which is essential for budgeting and financial analysis.
6. Invoicing and Payments:
– Businesses can streamline their invoicing and payment processes by connecting accounting software with bank accounts. This integration enables automated updates of payment statuses and better tracking of receivables and payables.
7. Cash Flow Management:
– Accurate and up-to-date bank information is critical for effective cash flow management. Accounting software helps businesses monitor inflows and outflows, project future cash positions, and make informed financial decisions.
8. Financial Reporting:
– Bank transactions are a key component of financial reports. Accounting software utilizes bank data to generate various financial reports, such as income statements, balance sheets, and cash flow statements.
9. Audit Trail:
– Bank integration creates a detailed audit trail of financial transactions. This audit trail is valuable for internal control purposes and external audits, providing transparency and accountability.
10. Tax Compliance:
– Bank integration assists in accurate tax reporting by ensuring that financial records align with bank statements. This simplifies the process of gathering the necessary information for tax filings.
11. Payment Reconciliation:
– For businesses that make multiple payments, accounting software helps reconcile payments with bank statements, ensuring that each payment is accounted for and reducing the risk of missing transactions.
In summary, the integration of banks into accounting software streamlines financial processes, enhances accuracy, and provides businesses with timely and reliable financial information for effective decision-making and compliance.
Creating a bank account in Tally
To create a bank account in Tally Prime, follow these steps:
- Open Tally Prime and go to the “Gateway of Tally” screen.
- Press the “Accounts Info” button, then select “Ledgers” from the menu.
- Press the “Create” button at the bottom of the screen.
- In the “Create Ledger” screen, enter the name of the bank in the “Name” field.
- Select “Bank Accounts” from the “Group” dropdown menu.
- In the “Under” field, select the appropriate parent group for the bank account, such as “Current Assets” or “Loans and Advances.”
- If necessary, enter the bank’s address and other contact information in the relevant fields.
- Press the “Create” button to save the new bank account.
After creating the bank account, you can use it to record transactions related to the bank, such as deposits, withdrawals, and interest payments. It’s important to regularly reconcile the bank account with your bank statements to ensure that your records are accurate and up-to-date.
Reconcile bank accounts in Tally Prime
Bank Reconciliation
Bank reconciliation is a crucial process in accounting that ensures the accuracy and consistency between a company’s financial records and its bank statements. It involves comparing the company’s internal records of transactions with the bank’s records to identify and resolve any discrepancies. Here’s a step-by-step guide on how to perform bank reconciliation:
Steps for Bank Reconciliation:
1. Obtain latest Bank Statement for relevant period
– Obtain the latest bank statement from the bank for the relevant period.
2. Update Cash Book (Internal Records):
– Record all transactions in the company’s cash book or accounting software. This includes deposits, withdrawals, checks issued, and checks received.
3. Compare Opening Balances:
– Verify that the opening balance in the cash book matches the opening balance in the bank statement.
4. Tick Off Matched Transactions:
– Go through each transaction on the bank statement and tick off those that match entries in the cash book.
5. Identify Outstanding Transactions:
– Identify any outstanding transactions that are recorded in the cash book but not yet reflected in the bank statement. These may include checks issued but not yet cleared by the bank or deposits in transit.
6. Add Bank Charges and Interest:
– Check for any bank charges or interest not recorded in the cash book and add them to the appropriate accounts.
7. Reconcile Deposits in Transit:
– If there are deposits recorded in the cash book but not yet on the bank statement, reconcile them as “deposits in transit.”
8. Reconcile Outstanding Checks:
– If there are checks recorded in the cash book but not yet on the bank statement, reconcile them as “outstanding checks.”
9. Adjust Cash Book:
– Make adjustments to the cash book for any outstanding transactions, bank charges, or interest.
10. Compare Closing Balances:
– Ensure that the closing balance in the cash book matches the closing balance in the bank statement.
11. Prepare Reconciliation Statement:
– Prepare a bank reconciliation statement that summarizes the reconciled items and explains any differences between the cash book and the bank statement.
12. Investigate Unexplained Differences:
– Investigate and resolve any unexplained differences. This may involve verifying the accuracy of recorded transactions or identifying errors.
13. Update Cash Book:
– Make any necessary adjustments to the cash book based on the reconciliation process.
14. Document Reconciliation:
– Keep a record of the bank reconciliation statement for auditing and documentation purposes.
By regularly performing bank reconciliation, businesses can ensure the accuracy of their financial records, detect errors or fraudulent activities, and maintain a clear understanding of their actual cash position.
Why is Bank Reconciliation important?
Bank reconciliation is a critical process in accounting for several reasons:
1. Accuracy Verification: Bank reconciliation ensures the accuracy of a company’s financial records by comparing its internal records with those of the bank. Discrepancies may arise due to errors, omissions, or fraudulent activities.
2. Fraud Detection: Bank reconciliation helps detect fraudulent transactions, including unauthorized withdrawals or altered check amounts, by identifying discrepancies between the company’s records and the bank statement.
3. Error Identification and Correction:
– It helps identify errors in recording transactions, such as data entry mistakes, double entries, or missing entries. Once identified, these errors can be corrected to maintain accurate financial records.
4. Maintaining Cash Control:
– By reconciling the bank statement with internal records, businesses can maintain control over their cash position. This is crucial for effective cash flow management and decision-making.
5. Preventing Overdrafts and Bounced Checks:
– Bank reconciliation helps prevent overdrafts and bounced checks by ensuring that there are sufficient funds in the account to cover outstanding checks and other withdrawals.
6. Timely Decision-Making:
– Accurate and up-to-date financial information, facilitated by bank reconciliation, enables timely decision-making. Business leaders can rely on accurate financial data to make informed choices about investments, expenses, and strategic planning.
7. Tracking Un-cleared Transactions:
– Outstanding checks and deposits in transit, which haven’t yet cleared the bank, can be tracked through bank reconciliation. This helps businesses anticipate future cash flows and account for these transactions.
8. Compliance and Reporting:
– Properly reconciled accounts contribute to accurate financial reporting, ensuring compliance with regulatory requirements. It enhances the credibility of financial statements during audits and other reviews.
9. Verification of Bank Charges and Interest:
– Bank reconciliation allows businesses to verify bank charges and interest, ensuring that these are correctly recorded in the company’s books.
10. Building Trust with Stakeholders:
– Accurate financial records build trust with stakeholders, including investors, creditors, and regulatory authorities. Demonstrating financial transparency through regular reconciliation helps instill confidence.
11. Safeguarding Assets:
– Reconciliation aids in safeguarding the company’s assets by identifying any discrepancies that could indicate errors, fraud, or unauthorized activities.
12. Internal Control Improvement:
– The reconciliation process is part of a robust internal control system. Regularly reconciling accounts contributes to the overall integrity and reliability of the company’s financial management practices.
In summary, bank reconciliation is a fundamental practice that contributes to the accuracy, transparency, and control of a company’s financial information. It plays a key role in maintaining the financial health of a business and supporting sound decision-making.
To reconcile a bank account in Tally Prime, you will need to follow these steps:
- Open Tally Prime and go to the “Accounting” menu.
- In the “Banking” option, select “Reconciliation of Bank Accounts”.
- Select the bank account that you want to reconcile from the list of accounts displayed.
- In the reconciliation screen, enter the ending balance and the ending date for the reconciliation period.
- Tally Prime will automatically fetch and display all the transactions for the selected account during the reconciliation period.
- Verify the transactions and make any necessary adjustments. For example, if there are any uncleared cheques or outstanding deposits, you can enter them in the appropriate fields.
- Once you have reconciled all the transactions, click on the “Accept” button to save the reconciliation.
After you have completed the reconciliation, Tally Prime