Intrest Calculation in Tally.ERP 9
1. What is Interest?
Any charge for the privilege of borrowing money and expressed as annual percentage rate (APR) is referred to as Interest in dictionary of business. It can also refer to as the amount of ownership a stock holder has in a company, usually expressed as a percentage.
2. Break Down of Interest Rate
Interest can be broken down as : simple and compound
Simple interest : It is the rate set on the principal amount originally lent to the borrower that the borrower has to pay for the ability to use the money.
Compound interest : It is the interest on both the principal and the compounding interest paid on that loan.
3. How to Activate Simple Interest Calculation in Tally. ERP 9 ?
|Mapping||From Gateway of Tally navigate to Features Screen by pressing F11 on the keyboard.|
|Action to perform||In the company feature screen enable the option activate interest calculation by typing ‘Yes’ and to set maintain bill-wise details: to Yes . It is important to set Use advanced parameters to No for Simple interest calculation.|
4. Learning to Pass an Entry and see How Interest Calculation Feature Works in Tally.ERP 9
Example : On 01-04-2018 Sold goods to XYZ Ltd (Sundry Debtor) for Rs. 1,00,000/- for a credit period of 60 days. Agreed an interest of 20% p.a., on delayed payment. XYZ Ltd cleared it’s payment on 31-07-2018. How to calculate interest as agreed and account the same in Tally.
|Step 1 :||Create Party Ledger||Two possibilities : We have to create a customer ledger with interest activated or we can edit existing ledger for activating interest calculation for that particular party.
Mapping : Gateway of Tally > Accounts Information > Ledger > Alter/Create
Action to perform : In the ledger creation/Alteration screen set the following option :
Setting Interest rates parameters :
|Step 2 :||F8 : Sales Voucher Entry||
|Step 3 :||Generating Interest calculation report||In the given example, the credit period set is 60 days which ends on 31.05.2018. The amount to be paid by XYZ company is overdue by 60 days.
As agreed the party due an interest of 20% p.a., to the total number of over due days. To know the total interest go to :
Mapping : Gateway of Tally>Display>Statement of Account > Interest Calculations>Interest Receivable.
And to view the Interest calculation report do the following :
|Step 4 :||Passing Interest receivable entry||
5. Benefits of Calculation of Interest with Tally.ERP 9
- If we forget to account any interest receivable or payable, with the help of Tally.ERP 9 now we can avoid all such uncertainties by generating interest calculation report.
- This interest amount generated is correct amount because of Tally 9 database calculation.
- Interest calculation in Tally.ERP 9 is very much suitable for bank loan, personal loan or general business loan's interest.
- 4. Parameters of calculation of interest satisfy different type of user’s needs. Some may be interested to calculate interest on current credit balance or some may interest on total amount but Tally.ERP 9 provide both facility in parameters about calculation of interest.