Preparing Balance Sheet in Tally
Preparing Balance Sheet in Tally

 

Balance Sheet is one of the most important financial statements prepared by a business firm. It’s like a one-stop shop for gauging the financal status and position of a company. The financial details of the balance sheet helps the business and the external stakeholders to evaluate the financial performance of the business on a given date. Preparing a balance sheet in Tally.ERP 9 is an important skill to master in any Tally course.

Just like every other report, the source to preparing a balance sheet is from the transactions accounted in the firm’s books of accounts. In the process of preparing the balance sheet, the maker needs to prepare other financial statements which will help gather the accounting data.

The major steps of preparing a balance sheet are as follows :

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(Source – AccountingTools.com)

Preparing ledger accounts

From the first transaction accounted in the journal book (a book where day to day transactions are recorded), the accountant must prepare an account statement for each ledger to determine the closing balance. This is because, a ledger account may have several transactions and there is no way that journal book will reflect the current balance of each account.

A ledger account of a fictitious company ‘Sundaram Pipes, Fittings and Motor Pumps’ are as follows :

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(Source – TallySchool)

Creating trial balance

Trial balance provides a snapshot of all the ledger accounts. It presents all ledger accounts with closing balance posted from individual ledger accounts statement. The format of trial balance consists of the Debit column and Credit column in which the closing balance of each ledger accounts is posted.

The main rule is that the total of debit balance in trial balance should match the total of credit balance. Only when it matches, it is assumed that the posting and ledger accounts are mathematically correct. The purpose of preparing trial balance is to ascertain whether recording and posting of ledger accounts are correct.

The procedure to create a trial balance in Tally is as follows :

tally course

(Source – TallySchool)

Making trading and profit & loss account

Profit and loss accounts is prepared to ascertain the profitability of the business. This consists of 2 sections which are : Trading account and Profit & Loss Account. Many businesses combine these two in a single statement as a convention. Others, especially those into manufacturing segment prefer to prepare separately.

Trading Account shows the resulting value of buying and selling of goods including the direct cost associated with it. It shows the gross profit or loss without taking the operational expenses and incomes into account.

On the other hand, Profit & Loss Account shows you the net profit considering the gross profit/loss and all the indirect expenses and income.

Here is how to do the needful in Tally :

tally course

(Source – TallySchool)

Final step – Preparing the balance sheet

Now that all the above statements have been prepared, it’s time for the final step – to prepare a balance sheet. All the ledgers which are non-revenue in nature need to be considered. In other words, all the ledgers expect the one which has been already considered for Trading and Profit & loss account should be considered for the balance sheet.

tally course

(Source – TallySchool)

The balance sheet is mostly prepared after the closure of the financial year as per ‘tradition’. But these days with modern-day business requirements, the balance sheet is looked upon as one of key financial statement for decision making.

Preparing balance sheet is not easy. It requires a lot of time and efforts in identifying, preparing and verifying the accounting data. To make the processes easier, most businesses are using accounting software which automatically generates the balance sheet along with various other financial statements. Tally is one of the best accounting software addressing major accounting needs 

Here at ICA Edu Skills, we offer the best Tally course in the market which you guys might want to check out.

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