Chaitanya Daegree College(Autonomous), Hanmakonda

Maintaining Accounts with Inventory

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Previously we created and maintained accounts without stock of Goods. They do not maintain the details of Goods purchased, sold and stock. But there are no transactions without stock. When we maintain the accounts based on stock that is called accounts with inventory. To maintain Accounts with Inventory select “Accounts with Inventory” option at maintain property of Company creation screen. Then tally provides the various Inventory features in the company. To view various options related to Inventory, move to Gateway of Tally Inventory Info. Stock Groups: A stock group is same as “Groups” in Accounts information of tally. Accounting Groups are pre defined in Tally, but there are no pre defined Stock groups in Inventory. In case of Accounts there are some common groups in any company like fixed assets, Capital, Current Assets etc., but Stock Groups are different for different companies, so Tally does not provide pre defined Stock groups. All the goods or stock similar in nature are classified into a single Stock Group. Stock Groups enable to get reports on various similar goods. To create Stock Groups move to Gateway of tally Inventory Info. Stock Groups We can create Stock Groups in two methods Single Stock Group and Multiple Stock Groups. Create: Used to create a new stock group Display: Used to display existing stock groups Alter: Used to modify the existing stock groups. While creating a stock group enter the name of the stock group, select primary at under column to create a new primary group, select any other existing group to create a sub-stock group. Let us take a Gas agency we may create the stock groups as

B.Com. III Yr CAA (Tally) Notes Unit – 3

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Chaitanya Daegree College(Autonomous), Hanmakonda

below.

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Units of Measure: Stock Items are purchased or sold on the basis of quantity. The quantity is measured by Units. Hence, it is necessary to create Units of Measure. You can have simple units such as numbers, meters, kilograms, Liters and pieces or compound units like box of 10 pieces [1box =10 pieces], dozen(12 pieces). Inventory Info Units of Measure > To create Units of Measure Go to Gateway of Tally Create The Unit Creation screen is displayed as shown. Type This field will show the Type of Units. Simple Compound. Simple units are nos, pcs, etc. Compound unit is a combination of two simple units. By default Tally will show the Simple unit for creating the unit of measure. Symbol Define the symbol of the unit, e.g., Nos. This symbol is used in all displays and printouts. Formal Name Specify the formal name of the symbol, e.g. Numbers. Dozens, Kilograms, etc., Number of decimal places: In this field you can specify the decimal places for the Units from 0 to 4. A Compound Unit is a relation between two Simple Units. Hence, before you create a Compound Unit, ensure that you have already created two Simple Units. Example: To Create Compound unit – Doz (Dozen) of 12 Nos (Numbers), you have to create two simple units, Doz (Dozen) and Nos (Numbers) and set the conversion factor as 12. Go to Gateway of Tally > Inventory Info > Units of Measure > Create Select Compound from the Types of Units and press Enter. The Conversion field will be displayed for creating Compound unit. Field Information: B.Com. III Yr CAA (Tally) Notes Unit – 3

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Chaitanya Daegree College(Autonomous), Hanmakonda

Tall First unit: Select the First unit from the Units List. In the above example, dozen will be the First y Unit. Conversion: Specify the conversion Factor. In the above example, Conversion factor will be 12. Second Unit: Specify the Second Unit from the Units List. In the above example, Number will be the Second Unit. This unit is also called Tail Unit. Stock Items: Stock Items are the actual items in Stock, they represent individual items in the stock. We can maintain account for issue or receipt of each item. Generally Stock Items are created after creating stock groups and units of Measure. To create Stock Items move to Gateway of Tally Inventory Info. Stock Items. Tally displays the Stock Items creation menu; we may create single Stock Item or Multiple Stock Items at a time. The various options while creating Multi stock items are: S.No: It is automatically allotted by Tally. Name of the Item: it is the Name of the Stock Item which we are creating Under: here we have to mention the Stock Group under which that item comes. Units: Select the Units from the List of Units of Measure to measure that stock item. Opening Qty: Enter the total No. Of items or Units of Items available. Rate: Enter the Rate of individual Stock Item. Per: Select the Unit of Measure for the rate given. Amount: It is automatically calculated by Tally. After entering data the multi stock item screen displays as below:

Inventory Books: Inventory Books option displays all the Books related to Inventory transactions. To display Inventory Books move to Gateway of Tally Display Inventory Books. Stock Item: it displays the Monthly summary of selected Stock Item, with Inwards, Outwards and Closing Balance. Group Summary: It displays the Closing Balance of Selected Stock group. Stock Transfers: It displays all the transactions of Stock entered in the Stock Journal Register.

B.Com. III Yr CAA (Tally) Notes Unit – 3

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Chaitanya Daegree College(Autonomous), Hanmakonda

Physical Stock Register: It displays all the entries in the Physical Stock Register.

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Movement Analysis: It displays various analysis of stock. They are 1. Stock Group Analysis 2. Stock Item Analysis 3. Group Analysis 4. Ledger analysis 5. Transfer Analysis Inventory Features available in Tally: Tally provides various Features related to Accounts and Inventory to view these features Click on Features of Button Panel or F11. Select Inventory Features then it displays inventory features. They are:

Godowns: Godown is a place where the goods are kept are preserved, that may be a shed, cottage, etc., Tally provides a facility to create and maintain the stock details in Godowns. To work with Godowns Create the company as Accounts with Inventory at maintain option of company creating screen. To create and Maintain Godowns move to Gateway of Tally Inventory Info. Godowns. (If this option is not available in the list click on Features of Button panel or F11, to display features, select Inventory Features, change the “Maintain Multiple Godowns ?” option as Yes.)

B.Com. III Yr CAA (Tally) Notes Unit – 3

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Chaitanya Daegree College(Autonomous), Hanmakonda

Tall Tally by y

We may create. Display, Alter Single Godown or Multiple Godowns at time. default creates a Godown with name “Main Location” Under primary. We have to create other Godowns. As below:

Economic Order Quantity (EOQ): Economic order quantity (EOQ) is the order quantity of inventory that minimizes the total cost of inventory management. Two most important categories of inventory costs are ordering costs and carrying costs. Ordering costs are costs that are incurred on obtaining additional inventories. They include costs incurred on communicating the order, transportation cost, etc. Carrying costs represent the costs incurred on holding inventory in hand. They include the opportunity cost of money held up in inventories, storage costs, spoilage costs, etc. Ordering costs and carrying costs are quite opposite to each other. If we need to minimize carrying costs we have to place small order which increases the ordering costs. If we want minimize our ordering costs we have to place few orders in a year and this requires placing large orders which in turn increases the total carrying costs for the period. We need to minimize the total inventory costs and EOQ model helps us just do that. Total inventory costs = Ordering costs + Holding costs By taking the first derivative of the function we find the following equation for minimum cost EOQ = SQRT(2 × Quantity × Cost Per Order / Carrying Cost Per Order) BRS: BRS Stands for Bank reconciliation Statement. Generally every business deals with Bank Transactions, through Issuing Cheques, transferring a Check to Bank A/c. Due to these transactions there is a difference between the Cash Book balance and Bank Balance. To consolidate these two statement we use “Bank Reconciliation Statement”. To create BRS in tally: 1. Create a New company in tally. 2. Create some ledgers under “Bank Accounts” Group. 3. Enter some transactions into Bank Accounts. 4. Move to Gateway of Tally Display Account Books Cash/Bank Book(s). 5. Select any Bank Account, Click of Period of Button Panel or F2. 6. Enter From and To dates in the Change Period Box. 7. Now it shows the bank balance on the screen, Click on “Reconcile” button of Button Panel or F5. 8. Now enter the date on which the party dropped the cheque in the bank and press enter 9. Tally displays the BRS statement with difference in Company Account Books and Bank accounts. LIFO AND FIFO: Inventory can be broken down into three categories: 1. raw materials, 2. work-inprocess, 3. finished goods. Raw materials are inventory used to produce assets for sale. Work-inprocess is assets in production for sale. Finished goods are assets intended for sale. The inventory equation is the following: Beginning Inventory + Net Purchases - Cost of Goods Sold = Ending Inventory. There are two common methods for accounting for this inventory. They B.Com. III Yr CAA (Tally) Notes Unit – 3

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Chaitanya Daegree College(Autonomous), Hanmakonda

Tall inventory y

are LIFO, last-in-first-out and FIFO, first-in-first-out. The choice of the method of accounting by a small business can directly impact its balance sheet, income statement and statement of cash flows. Not only do companies have to track the number of items sold, but they have to track the cost of items each item. These two methods are ways in which they can do that. Each will have a different effect on their financial statements. LIFO - Last-In, First-Out LIFO assumes that the last items put on the shelf are the first items sold. LIFO is a good system to use when your products are not perishable or become obsolete. Under LIFO, when prices rise, the higher priced items are sold first and the lower priced products are left in inventory. This increases a company's cost of goods sold and lowers their tax liability and, as a result, their net income. FIFO - First-In, First-Out FIFO assumes that the first items put on the shelf are the first items sold, so your oldest goods are sold first. This system is generally used by companies whose inventory is perishable or subject to quick obsolescence. If prices go up, FIFO will give you a lower cost of goods sold because you are using your older, cheaper goods first. Your bottom line will look better to your investors, if you have any, but your tax liability will be higher because you have higher profit.

B.Com. III Yr CAA (Tally) Notes Unit – 3

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tally chapter 3 notes.pdf

Per: Select the Unit of Measure for the rate given. Amount: It is automatically calculated by Tally. After entering data the multi stock item screen displays as below:.

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