Tally allows you to calculate simple and advanced modeinterest easily and quickly. You don’t need to do much except entering some basic data like percentage, select yes or no for activationetc.
In modern business interest plays a vital role. Interest is the return on the money invested.When money is deposited in bank is eligible for interest; treated as income of the business. Like wise you may be paying the interest on loans, late payments etc. So interest can be treated in both ways income and expense.
Simple Mode interest calculation in tally
Let us do this with a simple example.
Your business borrowed Rs 10000.00 on 01.05.2009 from private finance company, interest @ 12 % per annum .You need to calculate interest on monthly basis and book interest expense at the month end.
Activation of interest calculation in tally
Gateway of tally » F11» Accounting features
Press enter to have the accounting features screen, now type yes against the field “Activate interest calculation
Save the screen by pressing Ctrl+A or by pressing enter key
Gateway of tally »Accounting info» Ledger» Create
Create Ledger account “Interest paid” as usual if not already created
Create a Ledger named “Private finance company “under group Loans (liability)
TypeYes for the field Activate interest calculation
Press enter you will see a new screen called interest parameter screen; enter the rate of interest, and the frequency of calculation either monthly or yearly as per requirement.
Here we are calculating interest on monthly basis, select 30-day Month or Calendar Month. Say calendar month.
The interest rate is 12% per annum so find out the rate of interest for one month which is equal to interest rate divided by number of month in a year i.e. 12/12=1.
Enter the rate and interest style as displayed in the below screenshot and save the screen.
Gateway of tally »Accounting Vouchers »
Press F6 to invoke Receipt voucher entry screen. Next step is to make the Accounting entry of loan receipt by debiting cash and crediting Private finance company on 01.05.2009 as given in the example.
View interest report in tally
On 31st May you can see the interest amount by entering in to following report
Gateway of tally »Display» Statements of Accounts» Interest calculation »Interest Payable
Interest payable report gets displayed .press F2 to select the range of date, select from 01.05.2009 to 31.05.2009
The report shows you how much interest to be payable at the end of this month. But remember this is only report and nowhere affect in your books of account. Now your next duty is to bring the interest expenses to you books of account.
Booking of interest in tally
Since this is an expense to the company and payable to private finance company you have to prepare a credit note to credit the account of our loan provider.
To do this you have to create a voucher class, how?
Gateway of tally »Accounts info» Voucher Types» Alter
Select the credit note from the list, in the very last field Name of class; type interest-simple just naming the voucher class, you can name it at your choice.
Now press enter to have a new screen, select Yes for Use class for interest accounting
Save the screen by pressing enter key.
So you will prepare Debit note in case interest is receivable; no doubt.
Come back to the Gate way of tally, select Accounting vouchers for interest booking , select Credit note from right button panel or press Ctrl+F8. A screen will be displayed to select the voucher classas in the screen shot below.Select the class created i.e., Interest simple press enter to come on credit note voucher entry screen
Make sure that the voucher date is 31.05.2009( Last date of the month).If you are booking on 30th of May interest will be calculated only up to 30th so date is important here.
Now credit the Ledger Private finance company, the amount field is automatically filled by tally and debit the Ledger interest paidwith the same amount and save the entry.
We have completed the interest calculation and its booking in simple mode the advance mode interest calculation will be discuss in the next post.
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