Accounts Receivables & Payables in Tally

Debtors and Creditors Accounts in Tally

Trade Cycle of Sales & Purchase

When Trade is done on credit, the transaction (Sale / Purchase) happens first and then the payment is made (by Debtor to Creditor) to clear up the dues (in some cases, the advance payment may be made first, and the sale / purchase transaction happens later).

The complete payment of dues on account of the transaction by the debtor to creditor closes the trade cycle and the ledger account balances of the Party (Customer / Supplier) in their books become zero.

Closed Account : So, when the trade cycle is completed (closed), the balance on account of the transaction becomes zero, indicating that no amount is payable or receivable on account of the transaction.

Open Account : Open Account means there is some balance still receivable / payable, on account of a specific transaction

Often there are numerous transactions and open balance amounts in respect of multiple deals. To avoid dispute, maintain complete details of transactions, make payment in time and to charge Interest / penalty for delayed payments, it is necessary to keep details of each Transaction and Open Balance in respect of each such deal.

Transaction Reference for Unpaid Bills Tracking

Transaction Reference (or Bill Reference) is the unique Identity Number to link all the transactions in respect of a deal (Invoice Number, Order Number, Contract Number or any other reference initiating the transaction).

The Bill Reference Number is used to link all the transactions chronologically and to compute the Balance due (Payable / Receivable) against the Reference Number.

Accounts Receivables & Payables (A/R & A/P)

Accounts Receivables & Payables are the statements of all Open Accounts with details of transactions and the balance amount Payable & Receivable, in respect of each Bill Reference

A/R & A/P. Vs. Ledger Account

The Party (Debtor / Creditor) Ledger balance also reflects the total amount of Open Bills in respect of all transactions with the Party. So, the Ledger Balance and the total amount of Dues in respect of the Party in the accounts Receivable / Payable statement should match.

So, the Accounts Receivables & Payables statement is the bill wise details of open amount of the Ledger Account Balance of the Party.

The ledger account is the chronological statement of each transaction (irrespective of Bill Reference). So, the ledger balance does not show the Bill Reference wise breakup. In ledger, the pivot point is date of transaction, while in Accounts Receivable & Payable, the pivot point is Bill Reference. The Closing Balance Amount of Ledger gives the net balance , but does not give the bill wise details of Balance,

The Ledger is part of Statutory Books of Accounts, while Accounts Receivable & Payable is just an Accounting statement, used for control of Receivables & Payables by the management, to tackle and manage accounts of multiple transactions.

Bill Reference for Outstanding Bills Tracking in Tally

Often, the payment of a transaction is not made immediately, and may be made in several parts. To track a transaction, until squared up, a unique Bill Reference is assigned.

Bill Reference for outstanding Bills tracking is the unique ID of a new transaction trail, along which all transaction related to the reference and its balance is tracked till the Bill Reference is squared up (balance becomes NIL).

Normally, the Bill Number (Invoice Number is considered the Bill Reference Number, but any other suitable reference (e.g Contract Number, Order Number) may be considered as Bill Reference, for the purpose of tracking the balance.

Activation of Bill Reference for Company

To activate Bill Reference feature, at F11:Features>Accounting Features, under the section Outstanding Management, set as follows:

Bill Reference for Traders : At Maintain Billwise Details, set Yes to activate Bill Reference for Ledger Accounts under Customer / Supplier and Branch Account Groups
Bill Reference for Non-Traders: Having set Yes at the above option, you may further, set Yes at for Non Trading Accounts also, to activate Bill Reference for other Ledger Accounts also (like Loan Account etc)

Company Bill Reference Activation in Tally

Activation of Bill Reference for Party Ledger Accounts

Having activated Bill Reference for Company, you may selectively activate Bill Reference for respective Debtor / Creditors Ledger Accounts for which you like to maintain Bill Reference details.

Bill Reference Activation in Party Ledger Accounts in Tally

Bill Reference Activation : To activate Bill Reference for the Ledger Account, at Ledger creation / alteration screen, at Maintain Balances Bill by Bill, set Yes to enable entry of Bill Reference details (Ref Number & Due Date) in Voucher

Default Credit Period : Having set Yes at Maintain Balances Bill by Bill, at Default Credit Period, you may further enter default Credit Period (standard credit period normally applicable for almost all parties) to avoid repeated entry of credit period in all vouchers. The credit period may be specified in days, Weeks, Months & Years.

The default credit period is carried when you create new Bill Reference during voucher entry (which you may change in the voucher). Set zero (0) if you do not want to set any default credit period. In that case, you have to enter credit period or Due date in voucher entry for new References.

Consequently, during voucher entry, you will be prompted to enter Bill Reference details also, whenever the ledger account is transacted in a voucher.

Voucher Effective Date entry in Tally

The Due Date is normally considered from Voucher Date. However, you may opt to compute Due Date from any other date (other than voucher date like L/R Date, Delivery Challan Date, GRN Date, Order Date, Hundi Date, Bank Advice Date etc),

To activate the feature of Effective Date entry in Voucher for a specified Voucher Type, at respective Voucher Type creation / alteration (GoT>Accounts Info>Voucher Type >Alter), set Yes at Use Effective Date for Vouchers.

Effective Date activation in Voucher Type

Having activated the Effective Date at Voucher Type, at voucher entry, you may enter the Effective Date also after the Voucher Date. All Accounting Reports are shown as per Voucher Date, while Interest and Due Date may be optionally computed as per Effective Date.

Accounting Vouchers Bill Reference Configuration

Having activated Bill Reference for the Company, you should set up respective options related to Bill Reference, in Voucher Entry Configuration.

At Gateway, click F12: Configure> Voucher Entry to get Voucher Entry configuration screen. At Accounting Voucher section, set the following options, to enter Bill Reference details in Voucher

Voucher Entry Bill Reference Configuration

Bill Reference Selection: At Show Table of Bill Details for Selection , set Yes to get the list of open bill references for selection in Bill Reference entry screen, else you will have to enter the Bill Reference (no list will be displayed).

Bill Balance : Having set Yes at Show Table of Bill Details for Selection, you may further set Yes at Show Bill Final balances, to show the net balance of the Bill also in pending Bill Reference list for selection of Bill reference during voucher entry (else Net balance is not separately shown)

Bill Reference Details: At Show Bill-wise Details set Yes to get Bill Allocation displayed in Voucher entry screen , else the Bill allocation details will not be shown main voucher screen.

Bill Due Date : Having set Yes at Show Billwise Details, further at, Expand into Multiple Lines, set Yes to get Bill Due Date is also shown in main screen in next line (else Due Date entered is not shown in main screen, leaving more space in voucher entry screen for more Bill details entry)

Party Ledger Bill Outstanding Opening Balance entry in Tally

When you enter the Ledger Opening Balance of a Party Ledger, for which you have activated Bill Reference feature, you get a screen to enter Bill Reference wise details of Party Ledger Opening Balance.

Billwise details Opening Balance entry

Enter the Billwise details as follows :

Date : Enter Date of Bill (Prior to Books Beginning From date).
Name : Enter Bill Reference (normally Bill No.) or Advance (as the case be)
Due Date, or Credit Days : Enter the Due Date of the Bill or Credit Days – Bill Due Date would be arrived at by adding the Credit Days from Date of Bill.
Amount : Enter the Opening Outstanding Bill Amount (not original bill amount, if part paid).
Dr / Cr : Enter the sign, D (for Debit Balance) or C (for Credit Balance).

The Opening Balance may contain multiple references of several voucher types (like Bills, Debit Notes, Credit Note, etc). and may comprise of Bill References of Open Bills, Advance, On Account also. Each reference would be entered in separate row.

On Account in Opening Balance : If there is any difference between the Ledger opening balance & net of all Billwise break up, that will be treated as On Account

This amount (difference) is auto computed and carried by Tally. You do not have to enter the On Account Amount.

For example, if Ledger Balance is Rs.12000 but you have entered Bill Reference details of Rs 9000 only, then Rs 3000 is automatically set up as On Account .

However, in Voucher, you may enter On Account amount.

Vouchers Entry

The voucher entry relating to credit transactions with a party (Debtor or Creditor) contain several details. Here we discuss about the additional steps for Bill Reference details entry in voucher.

Voucher Entry with Bill Details

Voucher Date & Effective Date Entry : If you have activated Effective Date feature for the Voucher Type, enter the effective date also at the time of Voucher Entry
Bill Reference Details : Enter the Bill Reference details (Bill Ref Type and Reference ID) to track outstanding for the transaction
Bill Due Date : Bill due date or credit period to compute the Bill Due Date
Bill Reference Amount : At Amount column, enter the Amount in respect of the Reference
Dr/Cr sign : In case of Agnst Ref, the Dr / Cr is carried from the selected pending reference record (otherwise type D/C)

The rules and steps of entry for each of these components are explained next

Effective Date Entry in Voucher

If you have activated Effective Date feature for the Voucher Type being entered, then you may also optionally enter Effective Date for the Bill in Voucher. (if different from Voucher Date). Click F2:Date button to get Voucher Date entry prompt. At Effective Date, the Voucher Date is carried as default, overtype the Effective Date.

Effective Date Entry in voucher

Bill Reference Details entry in Voucher

During Voucher entry, having selected the Party Ledger Account and entered the amount, you should enter Bill Reference Details in the voucher, as follows:

Bill Reference Type

Select the relevant Type of Bill Reference at Type of Reference , from the Method of Adjustment list and enter the Reference Number

Bill Reference Type selection

New Ref.: Select New Ref when a new Ref is created (normally a Sales or Purchase Voucher). Consequently, At Name field, the Ref Number from the voucher would be auto carried as New Ref Number, which you may change.
Against Ref.: Select Agnst Ref it when the transaction is for adjustment of an existing reference (like payment is received or made against any existing Ref).

All existing references are listed from which select the Ref to which the current entry relates

If any part of the payment is not to be adjusted against any specific reference, you may select Reference Type as follows

Advance: Select Advance when you make a Receipt or Payment as Advance (which would be adjusted against a reference later on) and enter the amount
On Account: Select On Account when payment is received or made but not against specific Bill or Advance (or Bill reference is not known), and enter the amount. On Account amounts are not reflected in Interest Statement, Outstanding (Open Bills) Statements or Age Analysis Statement.

Pending Reference selection

Usually, a Sale or Purchase Bill contains New Reference and Receipt & Payment Voucher contains Against Reference (though sometimes it may differ according the flow of business transaction or on Account).

Bill Reference Amount : Enter the Amount in respect of the Reference

Bill Due Date / Credit Days entry in Voucher

When you select New ref. or Advance, you may enter the Bill Credit Days (it is carried by default from Credit Days specified in the respective Party Ledger Account, if specified, which you may change in the voucher) in terms of Days, Weeks, Months or Years, or enter Due Date directly, as explained next.

Credit Days / Due Dates for various period units

You may even enter multiple due dates. Credit Days may be specified in different period units (Days, Weeks, Months, Years).

Bill Reference Amount

Enter the Amount of each reference and specify D for Debit, C for Credit for each reference amount.

As soon as the net total (net of all Debits and Credits) of Amount is equal to the amount entered in the Voucher, the bill details entry is terminated and cursor returns to Voucher entry screen to continue Voucher entry further.

Bill Due Date Computation Rule

Credit Period may be specified in 4 units : Days, Weeks, Months & Years. Bill Due date is computed according to the units of Credit Period specified (in whole numbers only)

Days : To enter credit period in days, just type the number of days (e.g 3). You may add d after the credit days (e.g 1d), but that is not necessary for days (if no period unit is given, it is considered as Days). The number of days are added to effective date.

So, the Due date will vary according to the number of days in the calendar month in the intervening period.

For example, If the credit days is 3 and Effective Date is 28 Feb 2008, then Due date (computed from Effective Date) is 2^nd March 2008. But if the Effective Date is 28 Feb 2009, the Due date is 3^rd March 2009. If the Effective Date is 28 Mar 2009, Due date is 31^st March 2009.

Weeks : To enter credit period in weeks, type w after the credit period (e.g 1w to indicate credit period of 1 week, 2w to indicate credit period of 2 weeks). The due date would be computed as same day of the following number of weeks.

For example, if Effective Date is 26^th Feb 2009 (Thu), and the credit period is 1w (1 week), the due date would also be on Thu, 5^th March 2009. Similarly, if Effective Date is 28^th Feb 2009 (Sat), and the credit period is 2w (2 weeks), the due date would be on Sat, 14^th March.

Months : To enter credit period in months, type m after the credit period (e.g 1m to indicate credit period of 1 month, 2m to indicate credit period of 2 months).

The due date would be computed as same date of the following number of months, irrespective the number of days in the calendar month in the intervening period.

For example, if Effective Date is 26^th Feb 2009, and the credit period is 1m (1month), the due date would be on 26^th Mar 2009. If Effective Date is 26^th Feb 2009, and the credit period is 2m (2months), the due date would be on 26^th Apr 2009.

Years : To enter credit period in Years, type Y after the credit period (e.g 1y to indicate credit period of 1 year, 2y to indicate credit period of 2 Years.

The due date would be computed as same date of the following number of years, irrespective the number of days in the year in the intervening period (365 or 366).

For example, if Effective Date is 26^th Feb 2008, and the credit period is 1y (1year), the due date would be on 26^th Feb 2009. If Effective Date is 26^th Feb 2008, and the credit period is 2y (2years), the due date would be on 26^th Feb 2010.

The following table shows the example of Due Date computation from Voucher Date or Effective Date.

Voucher Date / Effective Date	Credit Period	Due Date
1-4-2008	1 week	8-April-2008
1-2-2008	1 month	1-Mar-2008
1-3-2008	1 month	1-April-2008
1-3-2008	30 days	31-Mar-2008
25-2-2008	7 days	3 Mar-2008
25-3-2008	7 days	1- April-2008
31-3-2009	1 year	31-Mar-2010
31-3-2007	365 days	31 Mar-2008
31-3-2008	365 days	30 Mar-2009
31-3-2009	365 days	31 Mar-2010

In case of New Ref / Advance, you may enter Reference Number and Due Date / Credit Days (or change the default date carried).
In case of Agnst Ref, Due date of selected reference is shown
In case of On Account, due date is not applicable, so it is shown blank.

Reversal of Adjusted Reference

When a Bill is fully adjusted, Bill reference does not appear in the list of pending bills any more (i.e. there is no outstanding amount in respect of the bill),. So, if the cheque in final payment of a bill gets bounced, you cannot restore the balance any more. In that case, you have to create a new reference in the voucher for bounced cheque.

For example, you got final payment of a bill ref 08-09/105, for Rs 1,500 and adjusted the payment against the bill to set off finally. A receipt voucher is prepared. The bill is now fully adjusted and no balance remains.

Receipt Voucher entry in respect of a bill paid in full

Cheque Dishonour Entry

You get back the cheque from bank as it got bounced. So, you have to debit the Customer Account (from whom you got the cheque). So, you have to create a payment voucher in respect of the returned cheque. In Reference entry sub screen, you cannot select ‘Agnst Ref’ as the old Reference number (i.e 08-09/105) will no longer be available in the list.

Payment Voucher entry in respect of cheque Dishonour

So, you have to select New Reference at Bill Reference allocation screen and enter ‘Ch. Ret.’ (you cannot enter Ref 08-09/105 as New Reference again, you may, however, enter the returned cheque number at New Ref).

Dishonoured Cheque Replacement Entry

On receipt of new cheque against the dishonoured cheque, enter a Receipt Voucher and select Against Ref at Bill Allocation screen. Select the pending Reference ‘Ch. Ret

Receipt Voucher entry for new cheque in lieu of dishonoured cheque

Now the account gets squared up. The Customer Ledger shows the entries of cheque return and replaced cheque.

Debtor Ledger account with bill-wise details

Post-Dated Vouchers

Often traders issue post dated cheque against Outstanding Bills. You can enter such post-dated voucher. Tally would not update the accounts until the date has arrived and you convert it as Current Voucher. This is useful when you issue or receive post dated cheques, to defer the reflection until made current, but reflect immediately as Post Dated in Party Outstanding Statements for tracking.

When the cheque gets matured, at Voucher Alteration screen, convert the Post -Dated Voucher to Current

Creation / Conversion of Post Dated Voucher

Creation of Post Dated Voucher : To enter an Post Dated Voucher, at Voucher Entry screen, click T:Post Dated toggle button (or press Ctrl+T). The Voucher would be marked as Post Dated
Conversion of Post Dated Voucher : To convert a Post Dated / Current Voucher, get the Voucher in Alter Mode. At Voucher Alteration screen
Conversion from Current to Post Dated : Click T:Post-Dated toggle button (or press Ctrl+T). The Voucher would be marked as Post-Dated
Conversion from Post Dated to Current : Click T:Current toggle button (or press Ctrl+T). The Post-Dated tag in the voucher would be removed

Post Dated Voucher entry

The outstanding receivable & payables report shows Post Dated Cheque until the Post Dated Cheque is regularized.

You may even create a Post dated Optional Voucher (click L:Optional & T:Post Dated toggle button), to pre plan receipt & issue of post dated cheques.

The post dated cheque would be reflected in Outstanding Bills statement.

Outstanding Bills Settlement in Tally

Outstanding Bills Settlement is a quick voucher entry process to conveniently create a voucher to clear up the pending balance of open bill of a Party. The voucher to settle the Accounts may be created conveniently through Outstanding Display screen.

At Party Outstanding statement, select the Bills to be settled (move the cursor over the Bill and press Space bar – the colour of the selected Bills will change). As you select the Bills, the total pending amount of the selected Bills is displayed at the top of the Ledger Outstanding Report. This way, you may select one or more open bills for which you like to make settlement.

Outstanding Bills Settlement Voucher Entry in Tally

You normally enter Payment Voucher (to settle Bills Payable), and enter the details of Bill Reference of the Bills settled.

Bill Settlement is an alternate method to create Payment Voucher in respect of settlement of open Bills, by automatically carrying the details of open bills to be settled. This makes the voucher entry much faster and accurate.

At Party Outstanding statement, Click B:Bills Settlement button (or press Alt+B) to get the Bill Settlement screen, showing the Party Name & the outstanding amount at the header.

Outstanding Bill Settlement Voucher in Tally

Now create a voucher to settle the open Bills, as follows:

Voucher Type : At Voucher Type, the Voucher Type Payment is shown (as a Payment voucher is to be created to settle the Bill), If the Bill is payable.
Voucher Date : At Voucher Date, The current date is shown by default (which you may change if necessary), to set the Date of Voucher.
Account : Select the desired Cash / Bank Account through which the transaction is carried out
Narration : Enter the Voucher Narration

Outstanding Bill Settlement Voucher details Entry in Tally

You get the voucher entry screen for full settlement, showing the outstanding balance in respect of each Bill Reference for the selected Ledger.

Full Settlement : To make full settlement of the outstanding of the Party, set Yes at Accept (Y/N) prompt to save the voucher, (or press Ctrl+A)
Part Settlement : If only a part payment is received or you like to make any amendment in the voucher, type N and change the Amount in the voucher. Now set Yes at Accept (Y/N) prompt to save the voucher, (or press Ctrl+A)

However, you may enter Vouchers in usual way, selecting the Bill Reference, as described earlier. The resulting voucher is created in same manner irrespective the method how you create the voucher.

Bill Settlement Voucher Entry in Tally

Bill settlement is final payment to clear all outstanding till date.

We show examples of Billwise details entry as follows:

Date	Transaction
10-6-2008	Goods sold to T Pal Bill No. 08-09/110 for 1,500 on 30 days credit
22-8-2008	Goods returned by T.Pal under CN 08-09/010 for Rs 1,850 (from earlier paid purchases)
11-9-2008	Rs 350 paid to T Pal to square up the C/N and Bill by payment voucher

Sale Bill & Credit Notes are adjusted fully.

Sales Voucher Entry

1^st Transaction is entered in Sales Voucher

Bill Allocation Entry (New Reference)

C/N entry for goods returned

2^nd Transaction is entered in Credit Note Voucher for Goods returned (the goods were purchased` by them earlier)

Bill settlement Payment Voucher Entry

3^rd Transaction is entered in Payment Voucher for the balance payment of Rs 350 is made to square up the Credit Note and the Sales Bill. So, both the references have been selected in the Voucher. Otherwise, though the Ledger Balance would show Nil Balance, the Outstanding (Open) Bills Statement would show the Bill and the Credit Note as outstanding.

Payment Voucher Entry with Bill Adjustments

The account of T Pal is squared up. The ledger will show no Balance and the pending Bill statement will also show no Balance.

Click here to see PDF