Free Online Tally.ERP9 Help & Tutorial : www.tallyerp9help.com
 

Interest Calculation in Tally.ERP 9

Tally.ERP 9 allows you to obtain reports on interest calculated by Tally.ERP 9 based on the instructions you furnish. Interest figures are typically desired in the following situations:

  • On outstanding balance amounts

  • On outstanding bills/invoices/transactions (Receivable and payable)

Tally.ERP 9 gives you an tremendous capability to obtain interest implications on both.
  1. Activate Interest Calculations in Tally.ERP9

  2. Interest Calculation in Simple Mode in Tally.ERP 9

  3. Interest Calculation in Advance Mode in Tally.ERP 9

  4. Interest Calculation Reports in Tally.ERP 9

  5. Interest Calculation on Group in Tally.ERP 9

  6. Interest Calculation on Ledger Balances in Tally.ERP 9

  7. Statement of Interest Due on Invoices in Tally.ERP 9

  8. Interest Calculation based on Bank Date / Voucher Date in Tally.ERP 9

1.   Activate Interest Calculations in Tally.ERP9

The feature Interest Calculation can be activated for any ledger in Tally.ERP 9. The Interest Calculation Report in Tally.ERP 9 gives only the implication of interest for the selected account.  The amount is not charged to the books of account until an entry is passed.

To enable Interest Calculation for a Ledger:

  1. Go to Gateway of Tally > F11:Features > Ac counting Features .

  2. Set the option Activate Interest Calculation? to Yes .

  3. Select the ledger for which the interest calculation needs to be activated from the Ledger Alteration screen.

  4. Set the option Activate Interest Calculation? to Yes .

Note : This option can also be enabled for a new ledger during the ledger master creation.

  • Enter the rate of interest and select the Interest Style in the Interest Parameters screen. On enabling interest calculation for ledger, the Ledger Alteration screen is displayed as shown below:

Activate Interest Calculations in Tally.ERP9

2.   Interest Calculation in Simple Mode in Tally.ERP 9

To calculate Interest in the Simple Mode:

  1. Go to Gateway of Tally> F11: Features> Accounting Features > Set Activate Interest Calculation to Yes. > Set Use Advanced Parameters to No.

  2. In the Ledger Creation screen set Activate Interest Calculation to Yes.

  3. The Interest Parameters sub screen is displayed. Enter the Rate and select the interest style from the list.

2.1.  Interest calculations on outstanding balances

Enter Interest details in Vouchers (only in case of transaction by transaction/Bill-by-bill) and view Interest reports.

You will have to alter existing ledger accounts to permit interest calculations on them. The same operation will apply when creating a new ledger account.

Interest calculation on outstanding balances is allowed for any ledger account. You simply specify the interest rate and style of calculation. Nothing is required to be done for interest during voucher entry.

Let's take an example: Interest calculated on Outstanding Balances.

  1. Go to Gateway of Tally> Accounts Info.> Ledgers> Alter (Single)> XY Bank (bank account)

  2. Set Activate interest Calculation to Yes.

  3. On activation, the Interest Parameters must be set. It is the basis on which interest will be calculated for this Ledger account.

  4. Rate: This is the rate at which the interest has to be calculated. In this case, specify 15%.

  5. Interest Style: It is the basis on which the rate is applied. Of the four options, select 365-Day Year.

  6. Accept the screen.

You can now view the amount of interest that could be charged by the Bank.

2.2.  Report on Interest Calculated on outstanding balances

The Interest Calculations Report can be displayed and printed.

Go to Gateway of Tally> Display> Statements of Accounts> Interest Calculations> Ledger> XY Bank (Bank Account)

2.3. Interest calculation transaction by transaction

Activate and specify interest calculations in ledger masters.
Transaction by transaction or Bill-by-Bill interest calculation is permitted for 'Party' accounts like accounts falling under the groups Sundry Debtors and Sundry Creditors. For example:

  1. Alter a Customer account (under the group Sundry Debtors or one of its sub-groups).

  2. Set Activate Interest Calculation to Yes. In the Interest Parameters now you have three lines to answer.

  3. Set Calculate Interest Transaction-by-transaction to Yes.

  4. Set Over-ride Parameters for each transaction to No.

If set to No, you are not allowed to change interest parameters in voucher/invoice entry. If set to Yes, you can change the interest parameters during entry.

2.4. Report on Interest Calculated on outstanding transactions/bills

To view the Interest calculated

Go to Gateway of Tally> Display> Statements of Accounts> Interest Calculations> Ledger> CP Ltd

The report is similar to the Bill-wise Outstanding Statement. The last column gives the interest amount on the transaction. Select the line to be viewed in detail for its calculations.

3.   Interest Calculation in Advance Mode in Tally.ERP 9

The advanced parameters are particularly useful where interest rates change from time to time.

  • Go to Gateway of Tally> F11: Features > Accounting Features > Set Activate Interest Calculation to Yes. > Set Use Advanced Parameters to Yes.

  • The Interest Parameters sub-screen is displayed

For Ledgers created under the Group Sundry Debtors/Sundry Creditors, the Interest Parameters sub-screen is displayed as shown below:

Interest Calculation in Advance Mode in Tally.ERP 9

  • Set Calculate Interest Transaction-by-Transaction to Yes, if you want to calculate interest for each transaction.

  • Set Override Parameters for each Transaction to Yes, if you want to override the interest rates and parameters set here during voucher entry.

  • Enter the interest rate in the Rate field.

  • Select the interest rate calculation period from the Interest Style list in the Per field.

  • Select the choice of balances for which the interest has to be calculated from the Interest Balances list in the On field. The balances are All Balances, Credit Balances only and Debit balances only. Interest can be calculated on all outstanding balances, whether debit or credit. You would like to select only credit balances in case of accounts like Bank accounts, if you want to know the interest that the bank might charge on overdrawn balances.

  • Select the rounding method applicable from the Rounding Methods list. The amount can be rounded off normally or upward or downward. If you do not want any rounding method, select Not Applicable.

For Ledgers created under the Group Bank Accounts, or if the option Calculate Interest Transaction by Transaction is set to No, then the Interest Parameters sub-screen is displayed as shown below.

Interest Calculation in Advance Mode in Tally.ERP 9

Enter the interest rate in the Rate field.

  • Select the interest rate calculation period from the Interest Style list in the Per field.

  • Select the choice of balances for which the interest has to be calculated from the Interest Balances list in the On field. The balances are All Balances, Credit Balances only and Debit balances only. Interest can be calculated on all outstanding balances, whether debit or credit. You would like to select only credit balances in case of accounts like Bank accounts, if you want to know the interest that the bank might charge on overdrawn balances.

  • Specify the interest rate applicable period from the Applicable From: and To: fields.

  • Select the rounding method applicable from the Rounding Methods list. The amount can be rounded off normally or upward or downward. If you do not want any rounding method, select Not Applicable.

3.1.  Display Report – Interest on Outstanding Balances in Tally.ERP9

To view the report on Outstanding balances:

Go to Gateway of Tally> Display> Statements of Accounts.> Interest Calculations> Ledgers> XY Bank

Interest on Outstanding Balances in Tally.ERP9

3.2. Advanced Parameters - Interest calculation transaction by transaction in Tally.ERP9

Activate and specify interest calculations in ledger masters.
The following extra options now become available:

  • You can now have Multiple Rates of Interest.

  • You can Override Advanced Parameters during voucher entry. Hence, each entry could have different parameters.

  • Choice of Balances – All Balances, Credit Balances only, Debit Balances only.

  • Applicability - This actually applies to the viewing of the statement and not the levy of interest.

  • Calculate from - You can decide whether interest is to be levied from the Due Date or from the Effective Date of the transaction (or the voucher date if effective date is not activated) or even Date ranges specified during Voucher Entry.

  • Choice of methods for Rounding off of interest amounts.

Interest calculation transaction by transaction in Tally.ERP9

Note: To obtain the option Calculate from Date Specified during Entry, you must have Override advanced parameters set to Yes. The option is required if you want to specify interest to be calculated at different rates for different periods. If you choose to override parameters then information would be asked during voucher/invoice entry. The interest information is required after the bill-wise details have been entered.

3.3. Report on Interest Calculated on outstanding transactions/bills in Tally.ERP9

Go to Gateway of Tally> Display> Statements of Accounts> Interest Calculations> Ledger> CP Ltd

Press the button F1: Detailed on the Button bar to see the calculation and the period. Previous transactions are calculated from Effective date of Transaction as default. Date Specified during Entry has not been used.

Note: Part monies received have been accounted for and interest calculated on the balance.

Report on Interest Calculated on outstanding transactions/bills in Tally.ERP9

A look at Calculate From Dates Specified during Voucher Entry

You have set up the Interest Parameters for CP Ltd to calculate on Dates specified during Voucher Entry.

We will take one invoice and put in the interest information

Report on Interest Calculated on outstanding transactions/bills in Tally.ERP9

To view the interest amount:

Go to Gateway of Tally> Display> Statements of Accounts> Interest Calculations> Ledger> CP Ltd

Report on Interest Calculated on outstanding transactions/bills in Tally.ERP9

Book Entries and adjustment of interest

We have seen the reports on interest amounts calculated in different ways but these have not been brought into books! They simply give you the interest implications. You must book them now.

How to enter the calculated interest amounts?

Use Debit Notes and Credit Notes with Voucher Classes

Use Debit notes for Interest receivable and Credit Notes for Interest Payable. Interest is calculated on Simple or Compound basis and separate classes should be used for them.

Set-up Debit/Credit Note Classes for interest entries

Set up Debit Notes. Credit Notes will behave the same way.

Go to Gateway of Tally> Accounts Info.> Voucher Types> Create/Alter

  • Alter the Voucher Type Debit Note.

  • Tab down to the field Class.

  • Type the name of the Class.

  • Type Interest - Simple

Likewise, create a Class – Compound Interest and set Yes to Amounts to be treated as Compound Interest.

Accept the Voucher Type and return to the Gateway of Tally. Create a ledger account Interest Received under Group Indirect Income.

Voucher Entry for booking Interest

  • Go to Gateway of Tally> Accounting Voucher

  • Select Ctrl+F9: Debit Note

  • There are two situations for interest adjustment:-

  • Simple Interest – Interest amounts are not debited onto the same bills. Create a fresh reference for it.

  • Compound Interest – Amounts are auto-debited to the selected bills. Bill-wise details will not appear in this case.

  • Interest on balances only

Bill-wise interest entry

  • Debit CP Ltd

  • Credit Interest Received

When you debit the party account, a list of bills for which interest is applicable pops up. Select the bills to adjust. Note that even cleared bills appear.

Bill-wise interest entry in Tally.ERP9

Select the respective interest bills from the list . The debit amount is filled up with the total. Select New Ref in the bill-wise allocation. In the interest sub-screen, ensure that the rate of interest is 0. Now, Credit Interest Received. The amount is already filled in.

Your voucher will resemble the one below:

Bill-wise interest entry in Tally.ERP9

Entries for compound interest are exactly the same as for Simple Interest where all you do is select the Voucher Class Compound Interest. Also the Bill-wise details popup sub-screen does not come up as the amounts are added onto the bills.

Select the required bill from the list and complete a Debit Note.

Now display Outstandings for CP Ltd

Bill-wise interest entry in Tally.ERP9

The Bill reference CP/00466993 is the invoice onto which interest has been compounded.

A new Reference no 2 has been created for Simple Interest due from CP Ltd.

Entries for Interest on Balances only

Again, the issues are Simple and Compound Interest

Compound Interest

Make the following entries in a Debit note with Compound Interest Voucher Class

  • Debit Bank Ltd (the amount is automatically filled up with the calculated interest)

  • Credit Interest Received

And nothing needs to be done! The Bank Account has been increased by the amount of interest due and the Income account of Interest Received also credited.

Simple Interest

Make the same entry as above.

However, since it has the effect of increasing the Bank Ltd account with the amount due (compound effect), you must make a journal entry to reverse it. The reversal entry would be something like this:

  • Debit Interest Receivable (a current asset account)

  • Credit Bank Ltd

Use a normal Journal voucher for this entry.

We have to necessary go this route to take advantage of the auto filling of the interest amount which can appear only when we use the Bank Ltd account in Debit Note in the first place.

4. Interest Calculation Reports in Tally.ERP 9

Interest Calculation Reports are automatically produced if the feature is activated In F11: F1: Accounting Features and the parameters are set for individual ledger accounts.

There are two types of reports, one pertaining to interest on balances of accounts like loans, and the other interest on overdue invoices.

Interest reports are available for individual ledger accounts as well as for Groups

5.   Interest Calculation on Group in Tally.ERP 9

The Group Interest Calculation statement is a list of all accounts and sub-groups belonging to the selected group that displays the current balance in each account or sub-group and the total interest.

Go to Gateway of Tally> Display > Statements of Accounts > Interest Calculations > Group
Select a Group, E.g. Loans (Liability)

Interest Calculation on Group in Tally.ERP 9

The Cr in the interest amount should not be confused to mean an Income. It only means that it is payable and is a liability.

To ease interest recording, Tally.ERP 9 has an interest template, a special voucher class in Debit Note and Credit Notes.

Drill down to the Ledger level Interest report.

6.   Interest Calculation on Ledger Balances in Tally.ERP 9

You can get a report on the Ledger balances for the interest calculated.

Go to Gateway of Tally> Display> Statements of Accounts> Interest Calculations> Ledger

Select Account E.g. Bank Loan Account.

Interest is re-calculated with every change in balance outstanding. The Cr in the interest amount should not be confused to resemble an Income. It only means that it is payable and is a Liability.

To ease interest recording, Tally.ERP 9 has an interest template, a special voucher class in Debit Note and Credit Notes.

The interest screen will appear similar to the one below:

Interest calculation on Bank Loan account

Interest Calculation on Ledger Balances in Tally.ERP 9

7.   Statement of Interest Due on Invoices in Tally.ERP 9

You can calculate interest on each invoice for the period it is outstanding, wholly or partly. Transaction by transaction or bill-by-bill interest calculation is permitted for 'Party' accounts like accounts falling under the groups Sundry Debtors and Sundry Creditors. Bill-wise details should be active for the company and the party.

The report is similar to the Bill-wise Outstandings Statement. The last column gives the interest amount on the transaction. Press F1: Detailed to see the calculation.

Go to Gateway of Tally > Display > Statements of Accounts > Interest Calculations > Ledger

Select the ledger Account XYZ Agency

Statement of Interest Due on Invoices in Tally.ERP 9

Interest is re-calculated with every change in balance outstanding. The Cr in the interest amount should not be confused to mean an Income. It only means that it is payable and is a liability. The figure is illustrative only and you will need to account for the interest expense and liability through a journal entry.

To ease interest recording, Tally.ERP 9 has an interest template, a special voucher class in Debit Note and Credit Notes.

8. Interest Calculation based on Bank Date / Voucher Date in Tally.ERP 9

Interest can be calculated on ledger balance as per the bank reconciliation statement , using simple or advanced parameters. The transaction date for interest calculation can be as on bank date or voucher date.

To capture the transaction details of reconciled vouchers and provide flexibility to drill-down to the last level of voucher entry, a new report - Bank Reconciled Transactions has been introduced.

The option to calculate interest based on either Bank reconciliation date or voucher date will be displayed for ledgers grouped under Bank Accounts, Bank OCC A/c and Bank OD A/c. The interest calculated on:

  • Voucher date will be displayed in the Ledger Interest report

  • Reconciliation date will be displayed in Bank Reconciled Transactions report.

8.1.  Bank Master - Interest Calculation on Bank / Reconciliation Date using Simple Parameters in Tally.ERP9

To calculate interest on Bank Reco Date using simple parameters

  1. Ensure the option Use Advanced Parameters is set to No in F11 (Features )> F1 Accounting features ).

  2. Create a ledger under Bank Accounts with Activate Interest Calculation set to Yes .

  3. Press Enter . The Interest Parameters screen appears.

  4. Select Bank/Reco Date in the field Calculate Interest Based on .

  5. Enter Rate and Interest Style , as required.
    Interest Calculation on Bank / Reconciliation Date using Simple Parameters in Tally.ERP9

  6. Press Enter .

  7. Press Ctrl+A to save the ledger.

8.2.  Bank Master - Interest Calculation on Bank/Reconciliation Date using Advanced Parameters in Tally.ERP9

To calculate interest on Bank Reco Date using simple parameters

  1. Ensure the option Use Advanced Parameters is set to Yes in F11 (Features )> F1 Accounting features ).

  2. Create a ledger under Bank Accounts with Activate Interest Calculationset to Yes .

  3. Press Enter . The Interest Parameters screen appears.

  4. Select Bank/Reco Date in the field Calculate Interest Based on .

  5. Enter the Rate , and Interest Style as required.

  6. Enter the applicability period.

  7. Press Enter and enter the interest calculation details for another period.

  8. The Interest Parameters screen appears as shown below:

    Interest Calculation on Bank/Reconciliation Date using Advanced Parameters in Tally.ERP9

  9. Press Enter .

  10. Press Ctrl+A to save the ledger.

8.3. Voucher Entry ( Recording Transaction)

To record a Payment transaction

  1. Go to Gateway of Tally Accounting Vouchers F5: Payment .

  2. Click F12: Configure and set the option - Use Single Entry mode for Pymt/Rcpt/Contra to Yes to record the transaction in single entry mode.

  3. Press Enter to save the Voucher Configuration screen.

  4. Enter the bank details in the Bank Allocations screen.

The Bank Allocations screen appears as shown below:

Bank Allocations screen during Voucher Entery in Tally.ERP9

8.4.  Interest Calculation Report in Tally.ERP9

Since the bank ledger is configured to calculate interest based on reconciliation date, interest will be calculated only if the transactions are reconciled.

Scenario 1 Reconciling the Payment Vouchers and Viewing Interest Calculated on Simple Parameters

To view the Interest Calculation report

  1. Go to Gateway of Tally Display Statement of Accounts Interest Calculation Ledger .

  2. Select the Bank ledger required.

  3. Enter the Bank Date as shown below:

Interest Calculation Report in Tally.ERP9

Viewing Interest Calculation report after reconciliation

To view the Interest Calculation report

  1. Go to Gateway of Tally Display Statement of Accounts Interest Calculation Ledger .

  2. Select the Bank ledger.

  3. Click F2: Period and enter the From and To dates.

The Ledger Interest report appears as shown below:

Viewing Interest Calculation report after reconciliation

Depending on the dates entered for reconciliation, the interest gets calculated and displayed here.

Scenario 2 Reconciling the Payment Vouchers and Viewing Interest Calculated on Advanced Parameters

In the Interest Calculation report, click F2 Period and enter the From and Todates as 1-5-2013 and 30-6-2013 respectively to view the interest for the period of June as defined in the advanced interest parameters.

The Ledger Interest report appears as shown below:

Ledger Interest report in Tally.ERP9

Depending on the dates entered for reconciliation, the interest gets calculated and displayed here.

8.5.  Bank Reconciled Transactions in Tally.ERP9

To view the Bank Reconciled Transactions report

  1. Go to Gateway of Tally Display Statement of Accounts Interest Calculation Ledger .

  2. Select the Bank ledger required.

  3. Press Enter on any one of the rows (ledger balances) to drill down.

  4. Click F2: Period and enter From and To Dates .

  5. Click F12: Configure and set options as shown below:

Bank Reconciled Transactions in Tally.ERP9

The Bank Reconciled Transactions report appears as shown below:

Bank Reconciled Transactions in Tally.ERP9
The Bank Reconciled Transactions report provides columnar details on reconciled transactions.

 
Get...Tally.ERP9 Book + GST Assignment (2 Set) @ Rs.550
 
 
Disclaimer :

Tally, Tally 9, Tally9, Tally.ERP, Tally.ERP 9, Tally.Server 9, Tally.NET & Power of Simplicity are either registered trademarks or trademarks of Tally Solutions Pvt. Ltd. in India and/or other countries. All other trademarks are properties of their respective owners.

The visitors may click here to visit the web site of Tally Solutions Pvt. Ltd. for resolving their doubts or for clarifications

Trademarks :
Tally,Tally GST,TallyERP9 GST, Tally9, Tally.ERP, Tally.ERP –9, Tally.Server 9, Tally.NET & Power of Simplicity are either registered trademarks or trademarks of Tally Solutions Pvt. Ltd. in India and/or other countries. All other trademarks are properties of their respective owners. This Website is not associated with any product or vendor mentioned in this Website
© 2018 : www.tallyerp9help.com