Tally Accounting
Posted by Asok K Nadhani on

Trade Bills Overdue Interest in Tally

Interest on overdue Trade Bills in Tally

Apart from Interest on use of Money (in case of Borrowing & Lending), Interest is also charged when Payment is not made by Debtor to the Creditor within Bill Due Dates. Such overdue Interest is paid by Debtor to Creditor in respect of specific Trading Transaction, as per terms of trade.

To use Interest  feature on overdue bills, Bill Reference Features, as explained earlier, must have been activated, first at Company Feature  and also at the respective Party Ledger Account , and also have set the default Credit Period for Party Ledger.

Activation for overdue Interest feature : At GoT>F11:Feature>Accounting Feature . Set Yes at Activate Interest Calculation to activate Interest Computation Features. Consequently, the Interest Features as per Simple Parameters would be available.

Activation of Interest Feature for Company in Tally

Ledger Account Interest Activation in Tally

Having activated Interest Features for the Company, you have to set up Interest Features for  Debtor / Creditor Ledger Account, for whom you like to compute Interest for Overdue Bills / delayed Payments

Ledger Account Interst Computation  acivation in Tally

At Ledger Account entry / alteration screen (GoT>Accounts Info> Ledger), set Yes at Activate Interest Calculation to get Interest Parameter screen .

Ledger Account Single Interest Rate Parameters in Tally

Ledger Account Single  Interest Rate Specification in Tally

Having set Yes at Activate Interest Calculation at Party ledger creation / alteration screen, at Interest Parameter screen, set as follows :

Activation of Voucher Interest : At Interest Parameters screen of the Ledger Account, set Yes at Calculate Interest Transaction by Transaction  to activate Voucher Interest Computation .

Voucher Interest Rate Method : Having activated Voucher Interest computation (i.e set Yes at Calculate Interest Transaction by Transaction), at  Over-ride parameters for each Transaction, you may further  set Voucher Interest Computation Method as follows:

  • Uniform Rate Interest: At the Interest Parameter screen, at Over-ride parameters for each Transaction, Set No to apply same parameter rates in each voucher. The Rates are carried from the parameter, which cannot be modified during voucher entry. So, same parameter is applied (Rate specified in Ledger Account) for all transactions related to the ledger account.
  • Variable Rate Interest: Set Yes to apply variable parameter rates in each voucher. During voucher entry, the rates are carried from the Interest parameter specified in Ledger Account, which may be modified during voucher entry. So, different parameter may be applied in vouchers of the same Ledger Account, as per Voucher Specified Rate (Rate specified in Voucher).

For Sale / Purchase  bills, Interest is computed on each transaction (against each Bill). So, even within one ledger account, different Interest parameters may be applied for each transaction. For example in one Bill Interest may be @ 12% pa, while in another Bill Interest Rate may be staggered with increasing rates for advanced periods (e.g 12% for first 30 days, 15%  for next 30 days and 24% thereafter)

The default Voucher Interest parameters specified in the Ledger Account  is carried for each Voucher, which may be overwritten during voucher entry. This way, you may specify Interest Rate for each voucher, during voucher entry.

Interest  Rate :  At Rate, enter the default Interest Rate  and the applicable period  for Rate. The Interest Default Rate as specified is carried as default in Voucher for  Voucher Interest Computation (which may be changed  in voucher entry, if Variable Interest Rate is activated)

Voucher Singe  Interest Rate set up in Tally

Overdue Bills Interest Rate Computation in Tally

Following examples show various methods of computation of Interest on overdue bills

Sold to B K Das on 3-4-09 for Rs 25000. Payment received  – Rs 10000 on 12/5/09, Rs 5000 on 12/6/09 & finally Rs 10000 on 29/6/09. Interest computed at various Interest Rates, from the date of bill to date of payment, is shown below

Interest  Computation  @12% / Calendar Year

Voucher Interest computation based on Calendar Year

Interest  Computation @1% / Calendar Month

Voucher Interest computation based on Calendar Month

Interest  Computation @1% / 30 day Month

Voucher Interest computation based on 30 day Month

Overdue Bills Multiple Interest Rate Parameters in Tally

Under Overdue Bill Simple Interest Rate  Parameters, you can specify only one Interest Rate for a voucher. So, same Interest rate would be applied for the entire Interest applicable period of that voucher

To apply Overdue Bill Multiple Interest rate  Parameters, for different applicable Interest period,

at Accounting Features (F11:Features>Accounting Features), having set Yes at Activated Interest Features, further set Yes at Use Advanced parameters

Overdue Bills Multiple Rate Interest feature set up in Tally

Multiple Rate Ledger Overdue Bill Interest  Parameters set up in Tally

Consequently, you get Advanced Interest Parameters set up screen, to set Multiple Rate  Overdue Due Bill Ledger Interest parameters, as follows:

Multiple Rate  Overdue Due Bill Ledger Interest parameters set up in Tally

  • Set Yes at Calculate Interest Transaction by Transaction to activate Voucher Interest Computation.
  • Having activated Voucher Interest Computation, set Yes at Over-ride parameters for each Transaction  to activate Variable Rate Voucher Interest Computation.
  • Having activated Variable Rate Voucher Interest Computation, i.e override Parameters) , at Override Advanced Parameters, you may further set Yes to enable to change the default Interest rate in Voucher.  Set No, to apply the Default Advanced Interest Parameters (cannot be changed in voucher)

Multiple Rate Voucher Interest parameters set up in Tally

In Voucher Interest, the period may be different for each voucher, as the vouchers are added later on after creation of ledger Account. So, the parameters are mostly unknown at the time of creation of Ledger Account. So, you may specify default parameters with option to override the default Ledger Interest parameters during voucher entry. 

If you specify multiple parameters in Voucher Interest, you must make sure that they are for different non overlapping period or non-overlapping Balance Types (Debit / Credit Balances only), else there will be double interest computation.

Multi Rate Multi Period Overdue Bills Interest Parameters set up in Tally

Having set the Advanced Interest Methods at the upper portion of Interest parameters set up, set the advanced interest Rate parameters at the lower part, as follows

  • Interest Rates: At Rate, enter the Rate for Ledger in % (e.g 12)
  • Interest Rate Period : At Per , select the Period from Interest Style list for which the Interest Rate (entered in the preceding field) would be applicable, from the following available Rate periods :
  • Monthly Interest Rates : When  Monthly Interest Rate is specified :
  • 30 day Month : Select it to compute the Interest on 30 day month basis (so the Interest for Feb and Interest for March would be same for the same number of days),
  • Calendar Month  : Select it to compute the Interest on number of days in the calendar (so the Interest For Feb and Interest for March would different for the same number of days),
  • Yearly Interest Rates : When Yearly Interest Rate is specified :
  • 365 day Year  : Select it to compute the Interest on 365 day year (so the Interest for the year 2012 (366 days leap year) and Interest for the year 2013 (365 days year) would be same for the same number of days),
  • Calendar Year  : Select it to compute the Interest on the basis of number of days in the Year (365/ 366). So the Interest for the year 2012 (366 days leap year) and Interest for the year 2013 (365 days year) would be different for the same number of days),
  • Balance Type : At On, select the Balance Type as follows  :
  • All Balances: Select it to consider both Debit & Credit Balances into account for computation of Interest.
  • Credit Balances Only: Select it to consider Credit Balances only into account for computation of Interest 
  • Debit Balances Only: Select it to consider Debit Balances only into account for computation of Interest 
  • Applicability Rule : At Applicability, select the following Due Period option from the list., as follows:
  • Always : To compute Interest from Voucher Date
  • Past Due Date : To compute Interest from Due Date.

Overdue Days : If you have select Past Due Date at Applicability, then at By,  you should further specify the number of days after the Due Date, from which the Interest would be applicable

  • Applicability Date : At  the field Calculate From, select the Interest Applicable Date option from the following
  • Due date of Invoice / Ref : To compute Interest from Due date of the Invoice / Ref
  • Date of Applicability : To compute interest from applicable date as specified
  • Effective Date of transaction : To compute interest from Effective Date of transaction
  • Rounding Method : At Rounding, select the Rounding Method from the list and specify the Rounding Limit. The computed Interest amount would be rounded off as per Rounding rules specified:
  • No Rounding: Select Not Applicable if no rounding is applicable. The fraction figure after 2 places of decimal is truncated.
  • Lower Rounding:  Select Down ward Rounding to Round off the amount to lower value. The rounded amount is lower than (or equal the computed) amount.
  • Higher Rounding: Select Up ward Rounding to Round off the amount to higher value. The rounded amount is higher than (or equal to computed amount).
  • Nearest Rounding: Select Normal Rounding to round off to the nearest Value. The Rounded amount may be higher or lower than the computed amount, as per Rounding limit set

Rounding Limit  : If any  Rounding Methods is selected (other than Not Applicable), specify the Rounding limit (like .01, .10, 1.00, 10.00. etc).

You may specify such multiple definitions for different Interest applicable Periods

Multi Rate overdue Bill Interest Computation in Tally

Following example shows rules, methods with examples of Overdue Bills Interest computation.

Sold to B K Das on 3-4-09 for Rs 25000 ag Bill No 1. Credit Period 30 Days.  Payment received against Bill – Rs 10000 on 12/5/09, Rs 5000 on 12/6/09.

Interest to be charged @1.5% pm (30 day) past due date from  Bill date and then

2% / Calendar Month  past due date by 90 days from  Bill date ,

Overdue Bill Interest parameter set up in Voucher in Tally

The standard overdue Interest rates applicable for the Party are set in Ledger Interest Parameters. The standard rates applicable for the Party in Ledger Interest parameters are carried in Voucher entry, which may be changed in Voucher Interest rate parameter, as per rules applicable for the specific transaction

The Overdue Bill Interest is then computed for the period 1-4-09 to 30-9-09, as per rates specified in the voucher

Bill Overdue Interest Computation details in Tally

Billwise Overdue Interest parameters set up

In Ledger Account, you specify default Interest Parameters for current period transactions. There may be some outstanding Bills of pervious year being carried, on which Interest may be chargeable. In such case, the Interest parameters are to be set up for Financial Year Opening Outstanding Bills

Bill Allocation of Opening Balance of Party Ledger Account

At Ledger Creation/ Alteration, after entry of Opening Balance, enter the Billwise allocation details of Opening Balance.

Bill Allocation of Opening Balance in Tally

Interest parameter of each Open Bill Reference

To compute overdue Interest on the previous year open bills, set the Interest parameters like Voucher Interest Parameters in respect of each Opening Bill Reference

Interest parametrs for previous year Open Bills in Tally

Overdue Bill Interest parameters set up in Voucher in Tally

During Voucher Entry, the applicable Standard Ledger Interest rate (or Voucher Interest rate if specified) are carried and shown.

Ovoverriding Interst parameters during Voucher entry in Tally

To override the standard rate, change the voucher interest parameters during voucher entry.

Overriding Voucher Interest parameters in Tally

Overdue Bill Interest Reports in Tally

Having set the Interest parameters in Party Ledger & Vouchers, Select GoT>Display>Statement of Accounts>Interest Calculations to get Interest Reports menu, to get various Interest Computation Reports

Interest Reports Menu in Tally

Interest Receivables & Payables Statement in Tally

Interest Receivables / Payables report shows Interest on Receivables (from Debtors) and Payables (to Creditors).

Interest is computed as per Interest parameters set, for the specified period.  At Interest Calculations Menu, select :

  • Interest Receivables Report :  Interest Receivables to get Interest Receivables Report, showing accrued overdue Interest on Receivables
  • Interest Payables Report : Interest Payables to get Interest  Payables Report showing accrued overdue Interest on Payables

Interest Receivables Report in Tally

The contents for Interest Receivables & Interest Payables Reports are similar

Interest Receivables / Payables Configuration in Tally

At Interest Receivables or Interest Payables  reports, click F12: Configure to get the Interest Report Configuration screen.

Bill Interest Receivables / Payables Configuration in Tally

  • Type of Open Bills : At Range of Bills to show, select  Overdue Bills to show the Balance & Interest accrued on Overdue Bills only, as at the end of current period. Select Pending Bills to show the Balance & Interest accrued on all Outstanding (Open) Bills as at the end of current period.
  • Bill details  : Set Yes at Expand all levels to show the Party Ledger balances of each party in detailed mode (when F1:Details toggle button is clicked)

Interest Statement Buttons in Tally

Interest Reports Button Bar in Tally

At Interest Report Configuration screen, you get the following buttons :

–   F1: Detailed / Condensed: Click Detail toggle button to see the next level details of outstanding  & accrued Interest of Groups / Ledgers. Click Condensed toggle button to see the top level figures of outstanding & accrued Interest of Groups / Ledgers.

–  F4  Group :To select Group from list of Groups

–  F5  Ledger / Group Interest : Click F5:Led-wise toggle button to see the figures of outstanding  & accrued Interest of Ledger Accounts in alphabetical order. Click F5: Grouped toggle button to see the figures of outstanding  & accrued Interest of Accounts Groups / Ledger Accounts in hierarchical order.

–  F7  Billwise Details / Summary: Click F7:Billwise toggle button to see the figures of outstanding (like Outstanding Statement) & accrued Interest of each outstanding Bill. The Configuration screen (when you press F12:Configurtaion button ta Billwise  Statement) is similar to Outstanding Statement. Click F7: Summary toggle button to see the figures of outstanding & accrued Interest of Accounts Groups / Ledger Accounts in hierarchical order.

Ledger Account Interest Statement in Tally

Having set the Interest parameters in Ledger & Voucher, you may get the overdue Ledger Account Interest Statements showing Interest in respect of each Bill Reference.

Ledger Account Interest Statement Display in Tally

At Interest Reports Menu (GoT>Display>Statement of Accounts>Interest Calculations), select Ledger and select the Ledger Account  to get Ledger Interest Report Display, for the selected Ledger Account.

Ledger Interest Statement Display in Tally

Ledger Account Interest Statement Printing in Tally

At Ledger Interest Display, click P:Print to get Ledger Interest  Report in Print, similar to Ledger Interest  Display

Ledger Account Interest Statement Configuration in Tally

 At Ledger Interest Display, click F12:Configure to get  Ledger Interest Configuration screen, similar to Ledger Outstanding Bills report configuration options.

Ledger Interest Statement Configuration in Tally

Ledger Account Interest Statement Buttons in Tally

At Ledger Interest Display, you get buttons, as described below

  • F4: Ledger : Select this button to get the list of Ledger Accounts to select a Ledger Account to get Ledger Interest  Statement for the selected Ledger Account
  • C:Contact : Click this button to get Ledger Contact screen showing the complete details of Party Address, Contact person etc of the selected Ledger Account. The information is displayed in a pop up screen for reference.

Party Ledger Interest Button Bar in Tally

Account Group Overdue Bill Interest Statement in Tally

Account Group Overdue Bills Interest Statement shows Interest for all ledger accounts under the selected Group (listing all Sub-Groups and Ledgers). The Contents of the report is similar to Interest Receivables / Payables.

Account Group Overdue Bill Interest Statement Display in Tally

Select Display > Statement of Accounts > Interest Calculations > Group  and select the Account Group. Like Ledger Interest details, you Interest computation for each ledger showing Billwise details of transactions and  Interest computation details, for all ledgers under the selected Group .

Account Group Overdue Bill Interest Statement in Tally

Account Group Overdue Bill Interest Statement Printing in Tally

At Group Interest Statement, click P:Print to get the Group Interest Printing screen, with options similar to Group Interest Configuration..Set the printing options to get Group Interest Statement in Print

Account Group Overdue Bill Interest Configuration in Tally

At Group Interest Statement, click F12: Configure to get the Account Group Overdue Bill Interest Configuration screen, similar to Group Interest Receivable / Payable Statement Configuration

Account Group Overdue Bills Interest Configuration in Tally

Group Interest Buttons : At Account Group Interest Statement, you get buttons  as follows:

–  F1: Detailed / Condensed : Set the F1:Detail toggle button to see the next level details of outstanding  & accrued Interest of Groups / Ledgers. Set F1:Condensed toggle button to see the top level figures of outstanding & accrued Interest of Groups / Ledgers.

  • F4 : Group : To get the list of Account Groups  to select an Account Group to get Group Interest  Statement for the selected  Account Group.
  • F5  Ledger / Group Interest : Click F5:Led-wise toggle button to see the figures of outstanding  & accrued Interest of Ledger Accounts in alphabetical order. Click F5: Grouped toggle button to see the figures of outstanding  & accrued Interest of Accounts Groups / Ledger Accounts in hierarchical order.
  • F7  Billwise Details / Summary: Click F7:Billwise toggle button to display figures of outstanding   (like Outstanding Statement) & accrued Interest of each outstanding Bill. Click F7: Summary toggle button to display the figures of outstanding & accrued Interest of Accounts Groups / Ledger Accounts.

Account Group Overdue Bills Interest Button Bar in Tally

Interest Debit Note Voucher Class in Tally

For Interest Receivable, you may create Interest Debit  Note on the Debtor. There are 2 ways to create Interest Debit & Credit Notes :

  • Create  Debit Note  : Get the Interest Receivable figures from the Interest Receivable Report. Then Create the Debit Note on the respective Party, for the Interest Amount
  • Create Interest Debit Note through Debit Note Voucher Class: Create Interest Debit Note Voucher Class which would compute the Interest and auto create the Interest Debit Note

Interest Voucher Class creation

To create Voucher Class, select Accounts Info > Voucher Type > Create to get Voucher type creation screen. Now enter as follows:

  • Name : Enter Voucher Type  Name (e.g IntCls)
  • Type of Voucher : Select Debit Note, to create Debit Note Voucher Class
  • Abbn : Enter a short abbreviation of Voucher Class that would be printed in all reports

Enter other information. At Voucher Class, enter the name of Voucher Class to get Voucher Class Specification screen

Interest Debit Note Voucher Class creation in Tally

At Voucher Class Specification screen, specify the following in respect of Interest Voucher Class.

  • Interest Class: Set Yes at Use Class for Interest Accounting to create Interest Voucher Class. The process of setting up Debit Note Voucher is similar to Voucher Class explained earlier.
  • Interest Method: Having set Yes at Use Class for Interest Accounting, at Amounts to be treated as Compound Interest, Set Yes to compute the Interest by Compound Interest Method. Set No  to compute the Interest by Simple Interest Method

Interest would be computed as per Interest Method (Simple or Compound) as set in Voucher Class.

Interest Voucher Class set up in Tally

Interest Debit Note entry using Voucher Class in Tally

Having created Interest Voucher class, you may create Interest Debit Note voucher using voucher class. Interest Voucher Class is used to charge compound Interest. Otherwise, Debit Note may be created in normal method.

Interest Debit Note Voucher Class selection in Tally

At Voucher entry screen (GoT>Accounts Voucher), Click F9: Debit Note button

Select the Voucher Type and the Voucher Class to get Interest Debit Note voucher entry screen

Inrerest Debit Note Voucher Class Type selection in Tally

Inrerest Debit Note Vouche Class selection in Tally

Interest Debit Note Voucher entry using Voucher Class in Tally

At Voucher Entry screen, after selecting the Party, you get the Bill allocation screen

Interest Debit Note creation in Tally

At Bill allocation screen, select the Open Bills for which you like to prepare Interest Debit Note, from the list of Interest Bills. Select the open Bill for which you like to include the Interest amount in the current Debit Note

Overdue Bill Interest in Debit Note Voucher class in Tally

On selection of the open bill references, you get back the main voucher entry screen with computed Interest shown in the voucher. Select the Interest Account. Enter narration, if any,  and save the voucher

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