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Journal entry in tally – What is journal entry? Why is it used?

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Journal Entry in Tally.ERP9 is a different concept than what we have learned theoretically from our class room. Journal entries in tally is NOT used for recording ALL KINDS transactions.Generally transactions recorded through journal voucher in tally erp9 does not include cash or Bank account. However tally allow user to enter cash/ bank transactions through journal vouchers by activating this option through F12 Configuration.

In general or in the  manual accounting journal is a book where transactions are recorded initially. Transactions are recorded  in the journal book  then posted in to ledger.

But in tally we use this term differently. It is a voucher type like  (Payment – F5), Receipt (F6), Sales (F8) is the examples) which is used to record  special transaction which cannot be recorded using  Payment ,receipt, contra, sales, purchase  vouchers. Some of the examples of such transactions are

  • Expense Journal Entry : We can use Journal entry to book credit purchase of expense.When purchasing of consumable items like stationery. Staff welfare expense like drinking water, food bills on credit from a shop/party  we use journal entry to book such expenses.
  •  Adjusting journal entries: – The use of adjusting entry is to get accurate financial result of a company. For example
    • Outstanding Expense: – Outstanding expenses are expenses which are due but not paid.Usually telephone bill of January 2014 will be paid on February 2014. but the expense should be recorded in January so as to get an accurate financial report or profit. To do this we use a journal entry at the end of the January by debiting “telephone expense” and crediting “expense payable ledger”. Some other examples of outstanding expenses are Interest payable,
    • Pre-paid Expense:- Pre- paid expenses are expenses paid in advance. For example Insurance premium paid 5000 on May 1st 2016 for 1 year. The expense is spread over more than one Financial year.That is The expense is shared in FY 2016-17 ( May 2016 to March 2017 is 11 months)  hence current FY premium is calculated as 5000/12*11 = 4583.00 and for FY 2017-18 1 Month = 5000/12*10 = 417. So Rs 417 is a pre-paid expense or Insurance premium pre-paid.
    • Accrued Income:-Accrued income is an income earned but not received,It is a current asset for the company. for example on 1 st March 2016, ABC Ltd deposited Rs 500000 in bank as Fixed deposit @ 8.5% /year.  On 31 st march 2016 company will have earned one month interest  500000 x 8.5%/12 x 1month  =3542. This has to be recorded as income in march 31st 2016 as current year income by passing a journal entry.
    • Unearned Income:- Unearned  income is an income received but not earned, which means cash or consideration received in advance but not actually earned. for example a designing company receive money 5000 as advance for a particular costume design. But not delivered the service till the date of receipt. in such case initially we debit cash account and credit liability account like unearned revenue account ,up on completing and delivery the liability account debited and revenue account credit using a journal entry.
  • Transfer journal entries:- Transfer entries are used to transfer funds from one account to another or one department to another. Simple example to understand this  is , on 01-05-2016 XYZ  Ltd has two accounts in your books of accounts as “XYZ Ltd ( Debtor)” hold a debit balance of Rs 1000 and “XYZ Ltd ( Creditor)”  hold a credit balance of Rs 1000. To transfer funds  from “ABC Ltd ( Creditor)”   to XYZ Ltd ( Debtor) and to close both accounts pass a journal entry by debiting ABC Ltd ( Creditor ) and crediting ABC Ltd ( Debtor)
  • Correcting entries:  There may be situations where accounts are wrongly credited or debited by accountants, In such case to correct those entries we use two methods one is to reverse the first entry and correct entries, or to making a single entry and to transfer from wrong account to the correct account.
  • Purchase and sale of fixed Asset on account: In tally we use journal vouchers are used to record the purchase or sale of fixed asset on account (credit basis), I have seen many are confused about the voucher type used to record fixed asset purchase. Use journal voucher instead purchase a voucher to record fixed asset purchase or sale on credit basis for example purchase of computer from Computer solutions on credit basis use this journal entry.
  • Depreciation on Asset: Depreciation is the written down value of asset, the value of asset decreases due to the wear and tear, passage of time,obsolescence etc. Every year asset must be revalued after deducting the cost of depreciation. The value which is reduced on each asset is treated as an expense of the company and depreciation affect in the net profit or loss of the company.

These are uses of journal voucher in tally.

How to enter journal in tally

Now let’s learn to enter  or pass journals in tally, journals are entered through journal vouchers the shortcut key for journal voucher is F7.

Read:How to Enter Voucher in Tally ERP 9

To access journal voucher

Gateway of Tally>>Accounting Vouchers

Then press F7 or click on the Journal button provided on the right hand side

jv-button

You will have a screen like below image, To change the date of of voucher press F2 or click on date button provided on the right top.

journal-voucher

Now let’s consider one example for each item described above.

Journal entry for booking expense

For booking of expenses paid through cash, we use Payment voucher. But what about an expense purchased on credit. For example  Purchase of Drinking water from Himalaya Springs on credit for Rs 1000.00. In such case we will make a journal entry for making provision. By debiting  Concerned expense and crediting party as follows.

DateParticulars DebitCredit
01-06-2016Staff Welfare Expense........Dr1000
To, Himalaya Spring1000
Being Drinking water purchased from himalaya springs on credit bill no 12

Make sure that you have created Staff welfare expense under Indirect expense and Himalaya springs Under sundry creditors ledger. Lets enter this expense in Tally journal Voucher.

Go to Gateway of Tally> Accounting Voucher> F7 Journal

Journal entry for expense booking

Adjusting Journal entry in tally ERP9

Adjusting journal entries are passed at the end of the Financial year in most cases while preparing final accounts. some companies following monthly adjustment of transactions for getting accurate monthly financial report.

Learn : Types of Journal

Outstanding expense Journal Entry in Tally ERP9

For booking outstanding expense in tally erp9, consider the following example.

Telephone bill from BSNL for the month of May 2016 is 2500.00,Bill received on 10th of June 2016.

To get exact profit of May you must enter this expense of May 31st itself. for easy understanding here is the journal entry for the telephone expense to be booked on may 31 st.

DateParticularsDebitCredit
31-05-2016Telephone Expense.........Dr2500
Telephone Expense Payable A/c2500
Being telephone Expense for the period of 01-05-2016 to 31-05-2016 payable to BSNL

Now enter the Debit just after By provided in the screen and credit just after To as shown in the image below.

Outstanding expense journal entry in tally example

Press Enter and accept the screen.

Prepaid Expense Journal entry voucher in tally

As earlier explained lets consider the following example for the pre-paid expense.

Insurance premium paid 5000 to New India Assurance Co Ltd, on May 1st 2016 for 1 year. The expense is spread over more than one Financial year.That is The expense is shared in FY 2016-17 ( May 2016 to March 2017 is 11 months)  hence current FY premium is calculated as 5000/12*11 = 4583.00 and for FY 2017-18 1 Month = 5000/12*10 = 417. So Rs 417 is a pre-paid expense or Insurance premium pre-paid.

In this case first you have to pass a compound journal entry as mentioned below

DateParticularsDebitCredit
01-05-2016Insurance Premium......................Dr4583.00
Pre-paid Insurance premium ....Dr417.00
To; New India Assurance Co Ltd5000
Being insurance premium paid for one year split for current year premium and coming year pre -paid premium and accounted

Now enter prepaid insurance expense in tally as shown below.

Journal entry for prepaid expense in tally erp9

After passing this journal entry you can make payment entry using F5 Payment voucher in tally erp9.

Accrued Income Journal Entry in Tally ERP9.

Let’s take an example of accrued income

ABC Ltd deposited Rs 500000 in bank as Fixed deposit @ 8.5% /year.  On 31 st march 2016 company will have earned one month interest  500000 x 8.5%/12 x 1month  =3542. This has to be recorded as income in march 31st 2016 even if the total interest will be received only after completion of tenure one year.

The entry for accrued interest is as follows.

DateParticularsDebitCredit
31-05-2016Accrued Interest..............Dr3542.00
To; Interest on deposit3542.00
Interest earned from Fixed deposit in SBI from 1st May to 31 st may 2016 accounted

Now entry of accrued income or interest in tally.

Accrued interest in tally erp9

Examples of Unearned Income Journal entry

Leo International is renting a portion of their building for a monthly rent of 20000, On 1st April 2016 They received a cheque of 80000 as rent advance till july 31st. Make the receipt entry and adjust the income in monthly p& l account 

Create a ledger of ‘Unearned Rent‘ ledger under Group current Liabilities.

When amount received pass a receipt entry by debiting Bank a/c and crediting Unearned income.

Journal Book
Date Particulars LF Debit Credit
1/4/2016
State Bank Of India————Dr 80000
To; Unearned Rent 80000
(being 4 months rent advance received)

Unearned Income entry in receipt voucher

Now we have recorded the receipt as liability to the business. At the end of the April 30 2016 the business will earn one month rent. For booking april month rent as income we have to transfer 20000 from unearned rent to rent received account in order to extract the accurate profit from P&L Account.

The journal entry for the same is

Journal Book
Date Particulars……………………….……..Dr LF Debit Credit
30/4/2016
Un earned Rent————–Dr 20000
To; Rent received a/c 20000
(being unearned rent transferred to april moth rent received account)

This entry can be recorded only through journal voucher of tally erp 9. Let’s do this.

unearned income transferred to rent account

This transfer 20000 from unearned rent account to rent received account. The balance of unearned income become 60000. In the same manner every month end till july 31st pass the same entry.the whole amount got transferred to rent received account and unearned income account will become zero.

Depreciation Journal entry in tally

Lets enter a depreciation journal entry at first. For example

Furniture worth rs 15000 depreciated and accounted @ 10% &  Plant and Machinery valued Rs 250000 depreciated @ 15% at the end of the FY 31-03-2016

The journal entry for  the above is as follows.

DateParticularsDebitCredit
31-03-2016Depreciation.......Dr39000.00
To Furniture1500.00
To; Plant & Machinery37500.00
Being amount of depreciation charged on particular assets

Here is the depreciation journal entry screen in tally erp 9

journal entry for depreciation of fixed assset

Journal entry for Purchase and sale of fixed Asset on account in tally.

Computer purchased from Computer solutions for Rs 25000.00

The journal entry for the above transaction is

DateParticularsDebitCredit
01-04-2013Computer & Peripherals ----- Dr25000.00
To; Computer Solutions25000.00
being computer purchased from computer solutions as per bill cs 15225

Create both the ledger if not existing in your company and enter as follows

journal-entry

Press enter key and save the screen .that is it.

Correction journal entries (Further understanding on journal voucher)

Let’s do another example of correcting an entry

A computer purchased from computer solutions wrongly entered in “system solutions” account as per bill no 1523 for Rs 25000.00

The entry you wrongly made was

DateParticularsDebitCredit
01-04-2013Computer & Peripherals ——— Dr25000.00
To System Solutions———25000.00
(Being computer purchased as per bill no 1523)

wrong

The credit should be computer solutions instead system solutions, to correct this we can follow two methods

Method 1

Reverse the wrong entry and make correct entries

The reverse journal entry is

DateParticularsDebitCredit
01-04-2013System Solutions ————— Dr 25000.00
To; Computer & Peripherals25000
(to cancel the jv no 1 as the it was a wrong entry)

cancel-journalThe effect of the above journal is the cancellation of first entry, now what we do is make a fresh correct entry.

DateParticularsDebitCredit
01-04-2013Computer & Peripherals ----- Dr25000.00
To; Computer Solutions25000.00
being computer purchased from computer solutions as per bill cs 15225

journal-entry

Method 2

Just make a single journal entry to transfer balance from system solutions to computer solutions

DateParticularsDebitCredit
01-04-2013System solutions————-Dr 25000.00
To; Computer Solutions25000.00
(Being computer purchased from computer solutions wrongly entered in system solution account transferred to computer solutions account as per bill no 1523)

SINGLE-ENTRY-CORRECTION

How to enter transfer journal entries in tally

Example: 

on 01-05-2016 XYZ  Ltd has two accounts in your books of accounts as “XYZ Ltd ( Debtor)” hold a debit balance of Rs 1000 and “XYZ Ltd ( Creditor)”  hold a credit balance of Rs 1000. You need to transfer of rs 1000 in debtor account to creditor account and close both the account.
DateParticularsDebitCredit
01-05-2016XYZ Ltd ( Creditor) ........Dr1000.00
To; XYZ Ltd ( Debtor)1000.00
Being amount transferred from XYZ Debtor accounts which was receivable to XYZ Creditor account which was payable and closed both the account.

Transfer journal entry in tally erp9

That all for now about journal , feel free to discuss on the comment form below and share it with your friends.

Comments (17)

  • sir, is any illustrations about vat journal?

    Reply
  • Easy and Understandable terms…,

    Reply
  • Tally Me anaj marchant accounting

    Reply
  • Wheat katta & quantal two comodity detail

    Reply
  • One Katta & 30 Kg wheat invice amount per qtal 1800
    eta– 320 katta & weight 96 qtal = 172800
    Yearly katta ke detail with total

    Reply
  • i am new in tally and my senior told me to make a invoice which i made and than he told me make a Je pass entry in journal entry…
    i was making a invoice for e commerce website.
    answer the question

    Reply
    • Please give me clear idea about your question.
      What is your company doing? is it an e-commerce business, or you want to generate a purchase invoice? what is the product you are dealing? give me all details.Please elaborate your question.

      Reply
  • very very helpful

    Reply
  • i am new in tally how to pass expense entry on journal voucher in tally
    please reply

    Reply
    • For Booking Expense There is voucher called payment.You have to go Gateway of Tally> Accounting Voucher > F5 Payment. There you can enter payment voucher.
      Here is how payment vouchers are made in tally
      If you want to book any expense bill purchased as credit. For example stationery purchased from dreams stationery 500.00 on credit. In such case you have to debt Stationery Account —Dr and credit the party Dreams stationery a/c using journal.

      Stationary a/c ………dr 500
      To ;Dreams stationery a/c 500
      Hope this is clear.You can contact me for any further help.

      Reply
  • Sir, I just want to ask how to pass a provision entry for the slow/non-moving stocks or products. Example I have 1000 worth value of products in the beginning of 2013 and at the end of 2016 the remaining stocks becomes 900 worth. These remaining stocks are not selling even in bargain price so the company decided to dispose the stocks but before disposing it the company decided to keep it for another year while looking for a possible buyer. Now if I need to make an provision entry for 1 year before disposing the stock, how the entry will be? and how to remove the stocks from the system once it is dispose (i.e. given to charity or thrown at the garbage).

    Reply
  • In tally single entry system .one ledger pick tally automatic what shows debit or credit.

    Reply
  • sir i want to know my company making shft piston if we done job work in other company than what will be entry for job work with service tax

    Reply
  • Dear sir:

    In some Text books I Studied Prepaied expenses are journalised like this…

    At the time of pay…

    Insurance premium A/c Dr
    To Cash or Bank A/c

    When reversing unused premium at the end of the year…

    Prepaied insurance premium A/c Dr
    To Insurance premium A/c

    Here Prepaied insurance premium is a assets….

    —————————————————————

    But you telling like this…

    Insurance premium a/c dr
    to Prepaied insurance premium a/c
    to New assurance A/c

    Which one is Right…?

    Reply
  • I just want to remove slow moving inventory from tally , How Can I do it ? It should show in profit & loss as expense and remove the item from inventory .
    Looking for a reply

    Reply
  • hello sir,
    when the services charges paid wht will be the entry?

    Reply

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