Journal entry in TallyPrime | Tally solutions


While running a business, every business is involved in a business transaction on a daily basis. They may be other business entities (B2B) or customers (B2C). Moreover, it may be on a “cash” or “credit” basis. It is very important to track it properly to understand the overall health of a business. As an entrepreneur, it is crucial that you understand when, where and how money flows into/out of your business.

What is a journal in accounting?

To keep track of your daily business transactions, having the details of each transaction is very important. The basic information to track is the transaction history, the purpose of the essentially double-effect business transaction, a brief explanation of the transaction, and its amount. The activity of recording this business transaction in the books of accounts of the company is called Journalising.

In accounting terminology, the first step in the accounting cycle is to record a journal entry for a business transaction following the double-entry system. Each transaction will affect at least two accounts, one “debited” and the other “added” with an equal transaction amount.

For now, just understand the following rule,

The nature of the deal

Examples (office/factory purposes only)

Balance

Increases

missing

assets

machinery, cars, furniture etc.,

Debtor

Debtor

attributed to him

Liabilities

Suppliers, taxes, bank loans, etc.

attributed to him

attributed to him

Debtor

expenses

Telephone, rent, electricity, labor charges, employee salary, etc.

Debtor

Debtor

attributed to him

Enter

Sales, interest earned on deposits etc.

attributed to him

attributed to him

Debtor

  • assets account It will always carry a ‘debit’ balance, so when there is an increase in the value of the ‘Assets’ account we will debit the ‘Assets’ account and vice versa
  • Liabilities account It will always carry a “credit” balance, so when there is an increase in the value of the “liability” account we add the liability account and vice versa
  • expense account It will always carry a “debit” balance, so when there is an overstatement of the Expense account, it will be “debited” and vice versa
  • Income Account It will always carry a “credit” balance, so when there is an increase in the value of the “income” account, we will “debit” it and vice versa.

Let us understand this with the help of an example.

Example of a journal in accounting

On 1st November 21st, Mehta Traders purchased Furniture @75,000/- from Sharma Enterprises on credit (30 days).

Given the above business transaction which takes place between two business entities – Mehta Traders (the buyer) and Sharma Enterprises (the seller), let us analyze how it will be recorded in the books of both entities.

Since Mehta Traders buy from Sharma Enterprises, it is a cost to them. So, the two accounts involved in this business transaction are –

Furniture A/c – Origin

Sharma Projects A/C – Responsibility

When the assets increase, it will “debit” the assets account (assets have a debit balance)

When the liability increases, it will ‘credit’ the liabilities account (liabilities have a credit balance)

Mehta Traders Magazine Book

date

details

Amount in riyals.)

Debtor.)

1 November 21

Dr.. Furniture A/C

75000

Commercial Record. Sharma Projects A/c

75000

[Being Furniture @ 75000/- purchased from Sharma Enterprises on credit]

Likewise, since Sharma Enterprises sells furniture to Mehta Traders, this is an income for them. So, the two accounts involved in this business transaction are –

Sales A/c – Income

Mehta Traders A/c – Asset

When the sale increases, you will “credit” the sales account (for sales credit balance)

When the assets increase, it will “debit” the assets account (assets have a debit balance)

Sharma Enterprises Magazine Book

date

details

Amount in riyals.)

Debtor.)

1 November 21

Traders d. Mehta A/c

75000

Commercial Record. Sales A/c

75000

[Being 25 Washing Machines @ 75000/- sold to Mehta Traders on credit]

Noticeable:

  • Furniture is an ‘origin’ for Mehta Traders and, therefore, it will be traced as ‘Air Conditioned Furniture’ and not an ‘A/C Purchase’
  • Furniture is ‘stock’ for Sharma establishments as it is in the furniture business, so it will be considered under ‘sales conditioners’

To summarize the entry and give a comparative analysis –

mr no.

mahta dealers

Sharma Projects

1

Purchase of fixed assets for office use

Furniture sale (inventory)

2

Sharma Enterprises is a liability as there will be an outflow of funds due to the purchase

Mehta dealers will be an asset where there will be an influx of money due to sales

3

Dr.. buy a/c

Commercial Record. Sharma Projects A/c

Traders d. Mehta A/c

Commercial Record. Sharma Projects A/c

Journal voucher at TallyPrime

We discussed the above journal voucher as per the accounting principle. However, from TallyPrime’s accounting software perspective, every business transaction gets a forked basis of receipt types. So, in Tally, you can see different types of vouchers, such as purchase, sales, payment, receipt, records, etc. instead of just one type of transaction (receipt) like Journal.

Using different types of coupons in TallyPrime basis and nature of transactions will help you to record your transactions and analyze your reports easily.

mr no.

Transaction

Coupon type in TallyPrime

1

To record a payment made to your supplier

premium

2

To record the receipt of funds from clients/clients

receipt

3

To register the purchase of goods from your supplier

Purchase

4

To record the sale of goods to your customers

‘sales

The above helps you in entering transaction data faster. But if that’s the case, the question that might come to your mind is that When should the journal voucher type be used?

Therefore, there is a specific use of the “journal” voucher type. Let’s understand by taking examples of a few business transactions.

  • When you buy a fixed asset for your business, for example, machinery, cars, furniture, etc., you cannot register it in a “Purchase” voucher type because you are not a dealer of these fixed assets but are using them for office use. (As shown above in the case of Mehta dealers). If you were a trader like Sharm Enterprises, then you would have used ‘Purchase/Sales (based on trade transaction)’ instead of ‘Journal’
  • To record the depreciation of your fixed assets
  • To record prepaid expenses (the amount paid but the expenses will accrue over the months/year etc.)
  • To record a tax adjustment before making a payment to the government department (input vs output GST)
  • To register correct entry due to wrong debit/credit calculation

How to record a journal receipt in TallyPrime

Let’s take the trade deal for Mehta Traders.

date

details

Amount in riyals.)

Debtor.)

1 November 21

Dr.. Furniture A/C

75000

Commercial Record. Sharma Projects A/c

75000

[Being Furniture @ 75000/- purchased from Sharma Enterprises on credit]

The above entry can be registered in TallyPrime in these simple steps

Step 1

Next Gate > Transactions (coupons) > F7: Journal

Step 2

You can configure – Use Cr / Dr instead of To / By while entering the coupon by pressing Press F12: Configure to your preference

Step 3

Set the transaction date as 1-Nov-21 by pressing F2: Date

Step 4

Dr.. Furniture a / c (fixed assets) and set the value against it 75,000 kr. Sharma Enterprises (Miscellaneous Creditors)

Note: In the ledger field, you can press alt and c keys to create ledgers on the go and group them under Fixed Assets and Part-time Payables respectively.

Fifth step

Select the narrative for future reference purpose

Step 6

Press “Enter” to accept the transaction

This is how TallyPrime helps you quickly and simply record your journal receipt!

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