Tally Prime basics

In short

Tally Prime is the accounting and compliance software made by Tally Solutions (Bengaluru) that most Indian MSMEs use to record vouchers, maintain ledgers, handle GST and TDS, track inventory and generate statutory reports. It replaced Tally.ERP 9 from 2020 with a redesigned navigation (the "Go To" search bar and top menu bar) while keeping the same accounting engine and double-entry logic. B.Com and BBA syllabuses under CBCS examine it as a practical/lab paper — company creation, ledger grouping, voucher types, GST configuration and report extraction — usually with a viva and a machine test. Recruiters for accounts-executive, audit-assistant and billing roles treat Tally fluency as the baseline screening skill, and job ads routinely specify "Tally Prime with GST".

Explained

What Tally Prime is and how it is organised

• Nature: a desktop, offline-first double-entry accounting package; data is stored locally in a company folder (a numeric folder such as 10001 inside the data directory) and can be accessed remotely through TallyPrime's licence-linked remote access.
• Editions: *Silver* (single user, one computer), *Gold* (multi-user on a LAN), plus *Educational mode* — free, fully functional for learning but vouchers can only be dated on the 1st, 2nd or 31st of a month and printing is restricted. Exam labs usually run Educational mode.
• Release line: Tally Prime 2.x added e-invoicing, 3.x reworked GST returns and added multi-GSTIN in one company, 4.x/5.x added WhatsApp sharing and GST reconciliation features. Exact feature-to-release mapping shifts with each update, so verify against the release notes of the version installed.
• Three-level data hierarchy: *Company* (the accounting entity) → *Masters* (groups, ledgers, stock items, voucher types, cost centres) → *Transactions* (vouchers). Reports are always derived, never typed.
• Navigation: Gateway of Tally is the home screen; Go To (Alt+G) opens any report or master without leaving the current screen; Switch To (Ctrl+G) replaces the current screen; the top bar holds K: Company, Y: Data, Z: Exchange, O: Import, M: E-mail, E: Export, P: Print, F1: Help.

Company creation and configuration

1. Create Company: name, mailing name, address, State (drives GST treatment), country, PIN, financial year beginning (1-Apr-2026 for FY 2026-27) and books beginning date (later than FY start if books are opened mid-year).
2. Base currency: symbol ₹, formal name INR, 2 decimal places, "in millions?" = No for Indian lakh/crore formatting.
3. Maintain Accounts only vs Accounts with Inventory — the second enables stock items, godowns, units and invoicing.
4. F11 Features: enable GST, TDS, TCS, payroll, cost centres, bill-wise details, multi-currency, batches, multiple godowns, interest calculation, budgets.
5. Security: enable TallyVault (encrypts the data folder — a lost password means lost data) and User access control with role-based rights.
6. Statutory details: GSTIN, registration type (Regular / Composition), periodicity of GSTR-1, e-invoicing and e-way bill applicability, PAN/TAN for TDS.
7. Data safety: Y: Data → Backup / Restore; split company data by date to archive old years; Ctrl+Alt+R repairs (rewrites) corrupt data.

Groups and ledgers — the accounting backbone

• 28 predefined groups: 15 primary + 13 sub-groups. Of the 15 primary groups, 9 are balance-sheet (Capital Account, Loans (Liability), Current Liabilities, Fixed Assets, Investments, Current Assets, Branch/Divisions, Suspense A/c, Misc. Expenses (Asset)) and 6 are profit-and-loss (Sales Accounts, Purchase Accounts, Direct Incomes, Indirect Incomes, Direct Expenses, Indirect Expenses).
• Two ledgers exist by default: *Cash* (under Cash-in-hand) and *Profit & Loss A/c* (under Primary). Every other ledger must be created and placed under the correct group — the group decides which report the balance lands in.
• Common placements asked in exams: Sundry Debtors → Current Assets; Sundry Creditors → Current Liabilities; Bank Accounts and Bank OD → under Current Assets and Loans (Liability) respectively; Duties & Taxes (GST, TDS) → Current Liabilities; Salary, Rent, Printing → Indirect Expenses; Wages, Carriage Inward, Factory Power → Direct Expenses; Discount Received → Indirect Incomes.
• Ledger options: maintain balances bill-by-bill (for debtors/creditors ageing), credit period, credit limit, opening balance, "Is GST applicable", HSN/SAC, "Inventory values are affected" (for sales/purchase ledgers).
• Multiple creation/alteration: Chart of Accounts → Ledgers → Multi-Create to key in many ledgers at once; Alt+D deletes a master only if no voucher uses it.

Voucher types and entry

• Accounting vouchers: F4 Contra (cash↔bank), F5 Payment, F6 Receipt, F7 Journal (depreciation, provisions, TDS and other adjustments), F8 Sales, F9 Purchase, Ctrl+F8 Credit Note (sales return), Ctrl+F9 Debit Note (purchase return), Alt+F7 Stock Journal, Alt+F10 Physical Stock.
• Order/other vouchers: Purchase Order, Sales Order, Receipt Note (GRN), Delivery Note, Rejections In/Out, Memorandum (Ctrl+F10) for unverified entries, Reversing Journal and Optional vouchers (Ctrl+L) which do not affect books until marked regular.
• Entry modes: *Item Invoice* (quantity × rate, used for goods), *Accounting Invoice* (ledger-wise amount, used for services), toggled with Ctrl+H: Change Mode; *As Voucher* vs *As Invoice*; *Double-entry* vs *Single-entry* mode for payment/receipt.
• Key voucher features: Alt+C creates a master on the fly; F2 changes voucher date; bill-wise allocation (New Ref / Against Ref / Advance / On Account); narration per line (switched on in the voucher's F12 configuration); Ctrl+A accepts the screen.
• Numbering: Automatic, Automatic (Manual Override), Manual or None — set in the voucher type, with prefix/suffix and restart rules (common exam point: invoice series must be continuous for GST).
• Post-dated and cancelled vouchers: post-dated vouchers (Ctrl+T) stay out of reports until the date arrives; Alt+X cancels a voucher but keeps the number so the series has no gap.

GST, TDS and statutory compliance in Tally

• Setup: F11 → GST = Yes → set GSTIN, state, registration type, applicable-from date, and whether e-invoicing/e-way bill applies. Rates can be set at company, stock group, stock item or ledger level — the most specific level wins.
• Tax ledgers: CGST, SGST/UTGST, IGST and Cess, each under *Duties & Taxes* with type of duty/tax = GST.
• Intra-state vs inter-state: Tally compares the party's state with the company's state — same state → CGST + SGST (half each); different state → IGST (full rate). This is the single most tested GST concept.
• Returns and reports: GSTR-1, GSTR-2A/2B reconciliation, GSTR-3B, GST Annual Computation, and the *GST Returns* summary which classifies vouchers as Included / Not relevant / Incomplete or mismatch — uncertified vouchers must be corrected before filing.
• Reverse charge (RCM), composition levy, exports (zero-rated with/without LUT), SEZ supplies and advance receipts are handled through the party/ledger "Nature of transaction" setting.
• TDS: F11 → TDS = Yes; create expense ledger with "Is TDS applicable", deductee type and nature of payment (e.g. 194C contractor, 194J professional fees, 194I rent); Tally deducts automatically and produces Form 26Q data and Challan 281 details. Rates and thresholds change with each Finance Act — confirm current rates before relying on defaults.
• E-invoicing and e-way bill: generated directly from the invoice screen through the IRP/NIC portal, returning IRN, acknowledgement number and QR code. Applicability thresholds have been reduced in stages by notification, so check the current limit rather than memorising one.

Inventory, cost centres and MIS reports

• Inventory masters: Stock Group, Stock Category, Stock Item, Unit of Measure (simple and compound, e.g. Box of 12 Nos), Godown/Location, Batch with manufacturing and expiry dates.
• Valuation methods: FIFO, LIFO, Average Cost, Standard Cost, Last Purchase Cost, At Cost, Avg. Price — set per stock item; the method changes closing stock value and therefore profit.
• Price levels and price lists for customer-category-wise rates; discount columns (the separate discount column is switched on in the invoice F12 configuration) and *Actual vs Billed quantity* for free quantities.
• Cost centres and cost categories allocate expenses to branches, projects or salespersons without disturbing the ledger structure; *Budgets* and *Scenarios* support variance reporting.
• Core reports: Day Book, Trial Balance, Profit & Loss A/c, Balance Sheet, Ratio Analysis, Cash/Funds Flow, Stock Summary, Godown Summary, Movement Analysis, Ageing Analysis (Bills Receivable/Payable), Cash Flow Projection, Bank Reconciliation (F5 Reconcile inside the Bank ledger's voucher report).
• Report tools: F2 period, Alt+F2 change period range, F5 ledger-wise/group-wise toggle, F8 Columnar, Alt+C multi-column, Alt+N auto-column (month-wise), Ctrl+B Basis of Values, Ctrl+H Change View, F12 Configure, Alt+F5 detailed/condensed, Alt+E export to Excel/PDF/XML/JSON, and Ctrl+Q quits without saving.

Advantages and limitations

• Advantages: very low learning curve for keyboard-driven data entry; real-time reports after every voucher; built-in Indian statutory compliance; inexpensive compared with full ERPs; huge pool of trained users and accountants; data portability via export and ODBC/TDL customisation.
• Limitations: primarily single-site desktop data (no native multi-branch consolidation in real time without synchronisation setup); limited user-rights granularity compared with enterprise ERPs; no built-in audit trail of edits in older releases (edit logs were added in later Prime releases and must be enabled); weak native workflow/approval and document management; customisation needs TDL programming; no true cloud-native multi-tenant version — hosting is usually on a third-party virtual desktop.

Key points

• Double entry - every voucher must have total debits = total credits; Tally will not accept an unbalanced voucher.
• Group decides the report - a ledger's group, not its name, determines whether it appears in the Balance Sheet or P&L.
• 28 default groups - 15 primary (9 balance sheet + 6 P&L) and 13 sub-groups; two default ledgers (Cash, Profit & Loss A/c).
• F11 vs F12 - F11 switches company features on/off (GST, payroll, cost centres); F12 configures only the current screen or report.
• Alt+G Go To - opens a report/master in a new layer; Ctrl+G Switch To replaces the current screen.
• Intra vs inter-state GST - same state gives CGST+SGST at half rate each; different states give IGST at the full rate.
• Item invoice vs accounting invoice - goods are billed by quantity and rate; services by ledger amount only (Ctrl+H to change mode).
• Bill-wise details - needed for debtor/creditor ageing; references are New Ref, Against Ref, Advance or On Account.
• Alt+X cancels, Alt+D deletes - cancellation keeps the voucher number intact; deletion removes it and breaks the series.
• Educational mode - free, but voucher dates are limited to the 1st, 2nd and 31st of any month.
• Valuation method - FIFO/LIFO/Average chosen per stock item directly changes closing stock and reported profit.
• Contra voucher (F4) - only for cash-and-bank movements, including cash deposits and withdrawals.
• Memorandum and Optional vouchers - recorded but excluded from books until regularised, used for estimates and pending entries.
• Bank Reconciliation - done inside the bank ledger's voucher list by entering the bank date against each entry.
• Backup and TallyVault - Y: Data → Backup for safety; TallyVault encrypts data and has no password recovery.
• Export (Alt+E) - reports go out as Excel, PDF, JSON or XML for MIS, GST filing and audit.
• Statutory rates change - GST rates, TDS sections and e-invoice thresholds are notification-driven; always verify against the current law.

Formulas and examples

Example 1 — Intra-state sales invoice (item invoice, F8). Sold 40 office chairs at ₹2,500 each to a Maharashtra customer; company is also in Maharashtra; GST 18%; trade discount 5%.

• Gross = 40 × 2,500 = ₹1,00,000; discount 5% = ₹5,000 → taxable value = ₹95,000.
• CGST 9% = 95,000 × 0.09 = ₹8,550; SGST 9% = ₹8,550.
• Invoice total = 95,000 + 8,550 + 8,550 = ₹1,12,100.
• Tally entry: Party A/c Dr ₹1,12,100; Sales @18% Cr ₹95,000; Output CGST Cr ₹8,550; Output SGST Cr ₹8,550.

Example 2 — Inter-state purchase and net GST payable. Same company buys goods worth ₹60,000 from Gujarat (IGST 18%) and makes the sale in Example 1 in the same month.

• Input IGST = 60,000 × 0.18 = ₹10,800; purchase voucher: Purchase @18% Dr ₹60,000, Input IGST Dr ₹10,800, Party Cr ₹70,800.
• Output = CGST ₹8,550 + SGST ₹8,550 = ₹17,100. IGST credit of ₹10,800 is set off first against IGST (nil), then against CGST and then SGST.
• Set off ₹8,550 against CGST (fully) and ₹2,250 against SGST → SGST payable = 8,550 − 2,250 = ₹6,300; CGST payable = ₹0.
• Total cash payable = ₹6,300, which the GST Returns/GSTR-3B report in Tally shows as the liability after credit utilisation.

Example 3 — FIFO vs Average cost on closing stock. Purchases: 100 units @ ₹50 on 05-Apr, 100 units @ ₹60 on 20-Apr. Sold 120 units in April.

• Closing quantity = 200 − 120 = 80 units.
• FIFO: the 120 sold are the 100 @ ₹50 and 20 @ ₹60 → closing 80 units all @ ₹60 = ₹4,800.
• Average cost: total cost = 5,000 + 6,000 = ₹11,000 for 200 units → ₹55 per unit → closing = 80 × 55 = ₹4,400.
• Difference of ₹400 raises FIFO gross profit by ₹400 for the same sales — this is why the valuation method is a master-level decision.

Example 4 — Ledger grouping and its effect on the Balance Sheet. Raj Traders creates "Furniture A/c" under *Indirect Expenses* instead of *Fixed Assets*, and buys furniture for ₹80,000.

• Wrong grouping: P&L expenses overstated by ₹80,000 → profit understated by ₹80,000; Fixed Assets understated by ₹80,000.
• The Balance Sheet still balances (capital falls by the same ₹80,000 through lower profit), so the error is not caught by a trial balance — only by reading the group.
• Fix: alter the ledger master (Chart of Accounts → Ledger → Furniture A/c → change group to Fixed Assets); all past vouchers reclassify automatically because reports are derived.

Example 5 — TDS on professional fees (Section 194J). Audit fee bill of ₹1,00,000 + 18% GST = ₹1,18,000; TDS at 10% under 194J (verify the current rate and threshold).

• TDS base is the fee excluding GST when GST is shown separately → 1,00,000 × 10% = ₹10,000.
• Journal (F7): Audit Fees Dr ₹1,00,000; Input CGST Dr ₹9,000; Input SGST Dr ₹9,000; TDS Payable Cr ₹10,000; Auditor (Sundry Creditor) Cr ₹1,08,000.
• Payment voucher pays the auditor ₹1,08,000; a separate payment with Stat Payment (Ctrl+F) remits ₹10,000 to the government via Challan 281.

Where it is used

• MSME accounts departments and CA firms: day-to-day book-keeping, GST return preparation, TDS working and client finalisation; most Indian CA articleship work happens on Tally.
• Retail, trading and distribution: invoicing with price lists and discounts, godown-wise stock, batch and expiry tracking in pharma distribution, reorder levels.
• Job roles: Accounts Executive, Accounts Payable/Receivable Assistant, Billing Executive, GST Practitioner, Audit Assistant, Junior Accountant in BPO/shared-service centres (WNS, Genpact, TCS, Infosys BPM handle client books on Tally and similar tools).
• Manufacturing SMEs: Bill of Materials, stock journals for production, cost centre allocation to job orders.
• Education and certification: B.Com/BBA practical papers, Tally Education Pvt Ltd certifications (TallyACE, TallyPRO, TallyGURU), NSDC/skill-centre courses — commonly asked for in entry-level job ads.
• Transition to larger systems: firms outgrowing Tally move to SAP B1, Oracle NetSuite, Zoho Books or Odoo; Tally skills transfer directly because the underlying double-entry and GST logic is the same.

Interview questions

• Q: How many default groups and ledgers does Tally Prime provide? A: 28 groups — 15 primary and 13 sub-groups — and two ledgers, Cash and Profit & Loss A/c.
• Q: What is the difference between F11 and F12? A: F11 turns company-wide features such as GST, payroll or cost centres on or off; F12 configures only the screen or report currently open.
• Q: When does Tally apply IGST instead of CGST and SGST? A: When the party's state differs from the company's state (or for exports/SEZ supplies), Tally treats it as inter-state and applies IGST at the full rate.
• Q: Which voucher records cash deposited into the bank, and why not a payment voucher? A: A Contra voucher (F4), because it moves money between two of the company's own cash and bank accounts rather than paying an outside party.
• Q: What is the difference between cancelling and deleting a voucher? A: Alt+X cancels it — the entry has no effect but the number is retained, keeping the series continuous; Alt+D deletes it entirely and leaves a gap, which is a problem for GST invoice numbering.
• Q: What are bill-wise details used for? A: To track each invoice against a debtor or creditor using New Ref, Against Ref, Advance or On Account, which drives ageing and outstanding reports.
• Q: How is bank reconciliation done in Tally Prime? A: Open the bank ledger, choose Reconcile (F5), enter the bank date against each cleared entry; the difference shown reduces to zero when the balance matches the statement.
• Q: What does a Memorandum or Optional voucher do? A: It records a transaction without affecting the books — used for estimates, pending approvals or unverified entries — until it is converted to a regular voucher.
• Q: If you change a stock item's valuation method, what changes in the financial statements? A: Closing stock value changes, which changes gross profit, net profit and the current-assets figure, with no change in cash flow.
• Q: How would you find out why a GSTR-1 figure does not match your sales ledger? A: Open GST Returns → GSTR-1 and check the Incomplete/Mismatch section for vouchers with missing GSTIN, HSN, state or tax-rate details, and reconcile Included vs Not-relevant transactions.
• Q: What is TallyVault and what is its risk? A: It encrypts the company data with a password so the company is invisible without it; there is no recovery mechanism, so losing the password means losing the data.
• Q: Your trial balance tallies but the Balance Sheet looks wrong — what do you check? A: Ledger grouping, because a misgrouped ledger still balances; also check opening balances, the report period (F2) and whether closing stock is being picked up from the inventory or a manual ledger.

Common mistakes

• Creating ledgers under the wrong group (Furniture under Indirect Expenses, Bank OD under Current Assets) and assuming a tallied trial balance means correct classification.
• Treating an inter-state party as local by not setting the State/GSTIN in the party master, producing CGST+SGST where IGST was due.
• Using a Journal voucher (F7) for payments and receipts, so cash/bank books and reconciliation go wrong; also entering sales through Journal and losing the GST and inventory effect.
• Deleting vouchers instead of cancelling them, breaking the invoice number series required under GST.
• Forgetting F11 settings — entering GST or payroll data before enabling the feature, or missing bill-wise details and then being unable to produce ageing reports.
• Taking TDS on the GST-inclusive amount, or quoting memorised GST/TDS rates and thresholds instead of checking the current notification.
• Exiting with Ctrl+Q (quits without saving) instead of Ctrl+A, and working without any backup before a data split or rewrite.

Related topics

Accounts payable and receivable · Month-end close and reconciliations · Payroll basics: PF, ESI and professional tax · Financial reporting and MIS in Excel · Careers in commerce: CA, CMA, CS, CFA and jobs · GST law and return filing.