UNIT 5

FUNDAMENTALS OF COMPUTERISED ACCOUNTING

MEANING OF COMPUTERISED
ACCOUNTING
• A company’s accounting system is the core of its financial management,
as it processes all transactions within the organization. A computerized
accounting system is a software application that automates financial
records and reporting processes to make them faster, more accurate,
and easier to manage.
• It reduces the manual entry of data, eliminates redundant operations,
and reduces accounting error risk with built-in controls.
• An accounting system is a set of procedures and record-keeping
systems for managing the financial and operational activities of an
organization. Basically, it’s a method for tracking and managing the
business’s finances.
What Accounting software does:
• Accounting software automates and streamlines the accounting processes
by using computers to record and track a business’s financial transactions.
• It is software for financial record-keeping and analysis.
• It records the purchase of goods and services, sales value and other
financial transactions. 
• Accounting Software saves time, money and resources. 
• It is a business tool for bookkeeping and other financial operations.
Accountants use this software in recording and tracking financial
transactions.
• The software is designed to make accounting tasks easier and more
accurate.
Features of a Computerized Accounting System
• 1. Data Security: A computerized accounting system allows users to store their data in a central
location. In this way, if any piece of paper that contains valuable information is lost, no one is at
risk of having their information stolen. All the data is hence stored at a central location.
• 2. Improved Reporting: In Accounting software, various things are automated, and very less
things are recorded manually. This helps in improving reporting of transactions and
statements. 
• 3. Accuracy and Speed: The automation of accounting processes with the help of various
accounting software ensures that accounting work is done fast and accurately.
• 4. Scalability: Computerized Accounting system is so flexible as to accommodate the changing
business volume. 
• 5. Quick Decision Making: Since a computerized accounting system generates real-time
information, managers are quick to come up with instant decisions or solutions to a particular
problem.
• 6. Reliability: A computerized Accounting system produces standard and accurate accounting
information consistently.
Advantages of Computerized Accounting
System:
• 1. Accuracy: Accounting errors are one of the biggest problems that businesses
face in their accounting process. Accounting software is designed to anticipate
common errors and correct them before they are added to the company’s
records. It is more accurate than most manual systems.
• 2. Simplicity: Regardless of the size of a company, accounting software is
designed to be straightforward and easy to use. This means that even new
employees can quickly understand how to use the system and record their
financial activities.
• 3. Financial Report Accuracy: Accounting software is designed to be completely
accurate. Companies can be assured that their  financial reports have no errors.
This means that managers can quickly make decisions based on the accounting
data.
• 4. Standardized Financial Reporting: The use of accounting software
in a business ensures the production of standard financial statements
over the years. These reports are very vital when comparing a
company’s financial performance over the years, or when comparing
different businesses that are similar in operation.
• 5. Greater Control: A computerized Accounting system helps the
management of a company to have greater control over its
operations. This is more suitable for a company which is large in size
and has multiple departments. All vital information is easily
available with one click.
Disadvantages of Computerized
Accounting System:
• 1. Cost: Although accounting software is designed to simplify bookkeeping and reduce the cost of
accounting services, it can also be costly to set up and maintain. Many businesses decide to use
computerized accounting systems once they have reached a certain level of growth.
• 2. Lack of Expertise: Many business owners like to keep their accounting in-house. This means that
they may not want to rely on an outside service to handle their bookkeeping. In this case, they may
choose to use manual systems until they have the resources to implement computerized
accounting tools
• 3. Heavy Installation and Training Costs:  The cost of Accounting software depends on its
use. Some software goes at very high prices that are unaffordable to the business. Besides
acquisition costs, installation and training costs can also be so high and beyond the company’s
reach.
• 4. Disruption of Work: As newer versions of both the hardware and the software are introduced in
the market, there is a need for businesses to update them regularly. Employees must be retrained
for efficient use of such new tools. Re-installation and retraining result in a disruption of work. 
• 5. Loss of Employment Security: The adoption of computerized accounting software
means a lot of work is done by fewer employees. Such a move at times leads to lay-offs.
Where lay-offs have not been done, employees live in fear of anticipated job loss.
• 6. Compromised Accuracy: The accuracy of financial records is as good as the data fed to
the accounting software, thus the saying,’garbage-in, garbage-out.’ If the accuracy of the
data entered is compromised, the software is bound to produce faulty or misleading
accounting information.
• 7. Potential Fraud: Since most of the financial/accounting data is stored in the cloud,
professional hackers may gain access to a company’s records. Such actions may expose
the assets of a business to greater risks.
• 8. Technical Failures:The accounting software may be rendered useless, when the
premises where a business is housing are affected by technical issues, such as regular
power outages and computer virus attacks.
DIFFERENCES BETWEEN
COMPUTERISED AND MANUAL
ACCOUNTING
MANUAL ACCOUNTING COMPUTERISED ACCOUNTING
• Manual Accounting is a system of accounting • Computerized Accounting is an accounting
that uses physical registers and account system that uses an accounting software, for
books, for keeping financial records. recording financial transactions
• Recording is possible through book of electronically.
original entry. • Data content is recorded in customized
• All the calculation is performed manually. database.
• Slow • Only data input is required, the calculations
are performed by computer system.
• Back up is not possible
• Entries of transactions can be saved and
• Financial statement is prepared at the end of
backed up
the period or quarter
• It is provided at the click of button.
MANUAL ACCOUNTING COMPUTERISED ACCOUNTING
• Lengthy process. Entries are to • Brief process. A single entry in
be done in various ledgers. one account updates all other
• Error prone. Accuracy may not accounts automatically.
be 100%. • Accuracy 100%. If any error
• Little expertise is required to happens this is due to manual
handle ledgers. error.
• More technical expertise is
required.
 WHAT IS TALLY
• Tally Accounting is financial accounting software package designed and marketed by Tally
Solutions Pvt Ltd that helps in business financial purposes.
• It is used for recording the daily business data of a particular company. The name of the
business solution is derived from the word “tally”, which means to count and keep the record.
• Mr. Bharat Goenka is the developer of this software in 1984. it is an Indian software, It was
developed at Bangalore, India
• The latest version of the software is Tally Prime released in November 2020 & Tally ERP 9,
which was released in 2009.
• It is a package that offers maximum features for all kinds of business industries, from small to
large enterprises. It also has updates related to the new features of GST (Goods & Services Tax).
• The software is an all-in-one business management solution and GST software with combined
functions, control, and in-built customizability features. The computerised accounting software
follows the double-entry accounting system that helps in eliminating and rectifying possible
errors.
Features & Usage of Tally ERP 9
• Multi Lingual Software– It is a software that supports multi-languages
including 9 Indian language. In the software, accounts can be maintained in
one language and view transaction reports in different languages without
extra effort.
• Numerous Accounts: In tally, one can create up to 99,999 companies and
create multiple accounts. It can manage single or multiple groups as well.
• Popular Software: It is the best accounting software since it is easy to use
methods, no codes, is robust and powerful, executes in real-time, operates
at high speed, and has full-proof online help.
• Synchronization: Tally can maintain transactions created in multiple
locations offices and update them automatically.
• Financial statements: Tally can generate consolidated financial
statements in one click as per the company’s requirements.
• Payroll: This feature in ERP 9 allows a business to automate
employee records management.
• Accounting software is also used to handle financial and inventory
management, invoicing, sales and purchase management.
• The feature of software accounting customization makes the software
suitable for distinctive business functions.
• It has a low cost of ownership and can be quickly implemented and
customize according to business needs.
• The software supports multi-operating systems, for example,
Windows & Linux. It can also be installed on various systems at the
same time.
• It has a straightforward download method that utilizes common space
for installation.
• It is also used for Generating different report files for tax filing,
invoices, etc.
• While using the software the number of human errors can be
reduced. And the automated calculations of the software help and
play a significant role in maintaining the financial transparency audit.
• Tally ERP 9 is simple to learn and flexible to use
• Tally ERP 9 is integrated business solution for accounting, inventory,
sales, finance, purchasing, payroll etc.
• Maintain multiple companies with unlimited levels of classification,
generate reports with high accuracy and speed.
• Provide information in any Indian language besides few international
languages such as Arabic, Bahasa Inonesia, Bahasa malayu etc.
• Support for banking transaction.
• Provide you to record, view, print the information. Faster access to
business reports.
ADVANTAGES OF TALLY
• Data reliability and security: In Tally, the entered data is reliable and secure.
• Payroll management: Several calculations that need to be made while
disbursing salary to employees. Tally is used to maintain the financial record of
the company that includes net deduction, net payment, bonuses, and taxes.
• Management in the banking sector: Banks use Tally to manage various user
accounts, and also calculate interests on deposits. Tally support ensures ease
in the calculation and makes banking simpler. Tally Support can make the
calculation easy and banking simpler.
• Regulation of data across geographical locations: Tally software is used to
manage the data of an organization globally. Tally can bring together all
branches of the company and makes the common calculation for it at large.
So no matter which location a company's employee has access, it will be
uniform throughout.
• Simple tax returns filing: Tax GST is used to ensure that the company
complies with all GST norms. Tax GST takes care of service tax returns,
excise tax, VAT filing, TDS return, etc
• Audit tool for compliance: It acts as an audit tool. It is used to carry out
regular audits of companies. It does a thorough compliance check towards
the financial year beginning and ensures that all the monetary
transactions are smoothly being carried out.
• Remote Access of Data: In Tally, employees can access the financial data
using the unique User ID and password. The logging and access of data can
be done by sitting at the comfort of one's office or house.
• Quick Access to Documents: Tally can save all invoices, receipts, bills,
vouchers in its archive folder. Using the Tally, we can quickly access any of
the previously stored documents. We can immediately retrieve all the
billing related files.
How to Open Configuration in Tally
• Gateway of Tally → Click on F12: Configure or Press Function Key F12
The following settings are available on the
configuration screen:
• General
• Numeric symbols
• Accounts/inventory info
• Voucher entry
• Invoice/order entry
• Payroll configuration.
• Printing
• Data configuration
• TDL configuration
• Advanced configuration
• licensing
General confirguration- Go to gateway of tally- F12- GENERAL
• General configuration deals with the common and primary details of
the company which affects the accounting transaction and financial
reports. The general in configuration is further subdivided into
• Country details
• Style of Names
• Style of dates
• Configuration of numbers
• Other options
2. Numerical symbols
• Numerical Symbols: The following configurations are contained in
Numerical Symbols:
• Symbols to use for positive numbers
• Symbols to use for negative numbers
• Symbols to use for debit account
• Symbols to use for credit account
• This enables to set the number styles. The default styles and symbols are
specified. However, we have the option of changing them in the
respective fields according to our preferences. For example: change
negative sign from (-) to (+).
3. Accounts/Inventory Info configuration
• Inventory Info/ Accts: The following configurations are contained in
Accounts and Inventory information as follows:
• Master Configuration
• Accounts
• Inventory
• Accts/ Inventory info configuration Screen options are as follows:
• 1. Masters configuration
• a. Allow aliases along with names
• b. Allow language aliases along with names
• 2. Accounts masters
• a. Allow advanced entries in masters
• b. Use address for ledger accounts
• c. Use contact details for ledger accounts
• d. Add notes to ledger accounts
• 3. Inventory masters
• a. Allow advanced entries in masters
• b. Use part numbers for stock items
• c. Use description for stock items
• d. Use remarks for stock items
• e. Use alternate units for stock items
• f. Allow std. rates for stock items
• g. Specify default ledger allocation for invoicing
• h. Allow component list details
• i. Use addresses for godowns
4. Voucher entry configuration
• The option allows to configure the vouchers entries in Tally.ERP 9,
both Accounting and Inventory Vouchers can be configured from this
menu for additional information.
• Go to Gateway of Tally  F12: Configure  Voucher Entry
• The following configuration details are contained in Voucher entry as
follows:
• Accounts
• Inventory
• Statutory
5. Invoice, Delivery Note, or Order Configuration

• You can customise your invoice, delivery notes, and other order
vouchers using the options available in the Invoice
Configuration screen. This involves specifying or automatically
allocating the invoice value to a bill reference.
• Go to Gateway of Tally > F12: Configure > Invoice / Orders Entry .
The Invoice Configuration screen appears as shown below:
• 2. Enable the required options.
• 3. Press Ctrl+A to accept.
• Note: Depending on the options enabled in the Company
Features screen, options are added in Invoice Configuration screen.
6. PAYROLL CONFIGURATION
• The following details are contained in the Payroll configuration:
• Add notes for employees
• Show statutory details
• Provide passport and visa details
• Provide contract details
• Show resigned/retired employees
• Show employee display name
7. BANKING CONFIGURATION
8. PRINTING CONFIGURATION
9. EMAIL CONFIGURATION
• This configuration is used to setup the e-mail server of the company.
DATA CONFIGURATION
• The data configuration is used to define the following things:
• Data file's location
• Export file's location
• Load companies on start up
• Select companies to preload on startup
• Language file's location
• Configure file's location
WORKING IN TALLY
• After creation of company, the next step in Tally is to create groups and
ledgers Tally ERP 9 allows to create groups and ledgers as per one's
requirements.
• Groups
• A group is a collection of similar ledgers. For example, all ledger
accounts relating to fixed assets such as Building Account, Furniture
Account, Machinery Account, Computers Account etc., of the company
are grouped under Primary Group "Fixed Assets". Similarly, all ledger
accounts relating to Indirect Expenses such as Salaries Account, Rent
Account, Insurance Account, Printing and Stationery Account etc., are
grouped under the Primary Group "Indirect Expenses".
Predefined Groups
• Tally offers 28 predefined widely used Groups. Of these 28
predefined groups 15 groups are Primary groups and the remaining
13 are sub groups.
• Among the 15 predefined groups 9 Groups are Balance Sheet items
and the remaining 6 groups are Profit and Loss items.
• The Accounting groups are related with: 1. Income 2. Expenditure 3.
Assets 4.Liabilities
• Accounts Info > Groups > Alter > Name of Group (All Items)- 28
GROUP To view predefined groups, press Ctrl + G on the Tally ERP 9
Screen. In Tally ERP 9, one can create new groups as follows: Go to
Gateway of Tally > Accounts Info > Groups.
• There are two options for creating groups in Tally ERP 9.
1. Single Group
2. Multiple groups
• Creating single group
• To create a single group Go to
• Gateway of tally> Accounts info> groups> Single> Create
• Creating Multiple groups
• To create multiple groups
• Go to Gateway of tally> Accounts info>Groups> Multiple> Create
LEDGER ACCOUNTS IN TALLY
• Ledger account heads are the actual account heads to which we
identify the transactions, that is passing of all vouchers using ledger.
• Hence, a thorough understanding of account classification is
important for working with ledgers. Tally creates the following two
ledgers on its own and the other ledgers should be created by user.
• (i) Cash under Cash-in-hand group, (ii) Profit and Loss Account under
Primary Ledger
Predefined Ledgers
• There are two predefined ledgers in Tally ERP 9 namely, Cash Account
and Profit and Loss Account.
• To view predefined ledgers, press Ctrl + L on the Tally ERP 9 Screen.
One may however create all the necessary ledger accounts for the
company as per the requirements.
• In Tally ERP 9, one can create new ledgers as follows:Go to Gateway
of Tally > Accounts Info > Ledgers
LEDGER CREATION
• One may create ledgers using the following ways:
• 1. Single ledger
• 2. Multiple ledgers
• CREATING LEDGERS
• It should be noted that Tally automatically creates two ledger
accounts, viz., Cash (under Cash-in-hand) and Profit & Loss Account
(direct Primary account). It does not make any other presumptions.
User must create all other account heads. There are no restrictions in
ledger creation except that user cannot create another Profit and Loss
A/C.
• Creating Single Ledger
• Go to Gateway of Tally > Accounts Info. > Ledger > Single > Create
• (i) Enter the name of the ledger(ii) Alias leave the field blank
• Iii) under group select the group details in the field
• Iv) Press enter to accept
• CREATING MULTIPLE LEDGER>
• To create multiple ledgers
• GO TO GATEWAY OF TALLY> ACCOUNTS INFO> LEDGERS> MULTIPLE>
CREATE
VOUCHER ENTRY IN TALLY
• A voucher is a written document in support of a transaction. It is a
proof that a particular transaction has taken place for the value
stated in the voucher.
• Voucher is necessary to audit the accounts. A Voucher is the basic
recording document.
• To input data into tally user must use a voucher to record all financial
and accounting transaction. Input the data into tally through the
voucher. The voucher entry mode may be called creating a voucher or
voucher entry
• In manual accounting, the transactions are recorded through journal
entries whereas in Tally they are done through voucher entry.
• Tally provides 21 predefined vouchers that can be used for recording
various transactions.
• The vouchers are relating to both accounting and inventory.
• They are two types of vouchers namely:
• (i) Accounting voucher (ii) Inventory voucher
ACCOUNTING VOUCHERS
• Tally ERP 9 is preprogrammed with a variety of accounting vouchers, each
designed to record a particular transaction. The standard accounting vouchers
are:
• 1. Contra voucher (F4)
• 2. Payment voucher (F5)
• 3.Receipt voucher (F6)
• 4. Journal voucher (F7)
• 5. Sales voucher (F8)
• 6. Credit Note voucher (Ctrl + F8)
• 7. Purchase voucher (F9)
• 8. Debit Note voucher (Ctrl + F9
• 1. Contra Voucher (F4):
• Any transaction indicating transfer of funds from Cash account to Bank
Account, Bank Account to Cash Account and Bank Account to Account is
recorded by using Contra Voucher. Fundamentals ofThe contra voucher is for
Fund transfers between cash and Bank accounts only. Press <F4> at the
Voucher Entry screen to enter Contra Voucher. For example: (i) Cash
deposited in to Bank. (ii) Cash withdrawn from Bank for office use.
• 2. Payment Voucher (F5): Any transaction which involves outflow of cash is
recorded by using payment voucher.The payment voucher is for all payments
made through cash or Bank. These payments can be towards expenses,
purchases, to trade creditors etc.
• Press <F5> at the voucher entry screen to make a Payment Voucher.For
example: (i) Payment of Rent by cash. (ii) Payment of Salary by cheque. (iii)
Payment made to Sundry creditors.
• 3. Receipt Voucher (F6): Any transaction which involves inflow of
cash is recorded by using Receipt voucher. The receipt voucher in Tally
is for all receipts into the Cash/Bank account.
• Press <F6> at the voucher entry screen to make a Receipt
Voucher.For example: (i) Commenced business with cash (ii)
Commission received (iii) Amount received from Sundry debtors.
• 4. Journal Voucher (F7): Any transaction which does not involve
actual cash outflow or cash inflow is recorded by using Journal
Voucher. Journal Voucher is an Adjustment Voucher, used for non-
cash transactions like adjustment between ledger accounts,
Provision for Liabilities, Income Receivables, Depreciation and all
other provisions are common examples of Journal Voucher.
• 5. Sales Voucher (F8):
• Any sales made on credit are recorded by using Sales. All Sale
transactions (goods or services) are entered in Sales Voucher.
• 6. Credit Note Voucher (Ctrl+F8): Any goods sold on credit is
returned by customer (Sundry debtor) is recorded by using credit
note voucher. For example:(1) Goods returned by Suman - Sundry
debtor(2) Goods returned by Ripon - Sundry debtor.
• 7. Purchase Voucher (F9): Any purchase made on credit are recorded
by using Purchase voucher
• Press <F9> at Voucher Entry screen to enter a Purchase Voucher. For
example: (i) Goods purchased from Mithun on account (ii) Bought
goods from Palash on credit.
• 8. Debit Note Voucher (Ctrl+F9): Any goods purchased on credit
which is returned to supplier (Sundry Creditor) is recorded by using
Debit Note Voucher.
• For example: (i) Goods returned to Mithun - Sundry Creditor (ii)
Goods returned to Palash Sundry Creditor.