Summary of Post
In previous lesson we have created sales and purchase ledger, here we are learning to create Expense and Income Ledger. Expense and income are in two types. One is called direct and other one is called indirect. Direct income and direct expenses are the part of trading account and Indirect income and expenses are the part of profit and loss account. Before creating ledger in tally let’s understand what is expense & income is.
What is an expense?
Expense are the cost incurred while earning profits from the business.Business spend money for the operation of business, buying goods for production, giving the cost of labor,spending for office administration,accounting costs, freight cost involved in the process of buying and selling of goods.All these are termed as expense.
What is direct expense?
The word direct expense in accounting is a relative term.It is an expense which are directly related to production, sales, and services. That is when you spend money for production in manufacturing business, for example, purchase of raw material,payment to labor,electricity are direct expense. In a trading business salary paid to a sales man and Telephone bill paid in a consultancy service business are direct expenses.
What is Indirect expense?
Indirect expense are expenses other than direct expense is indirect expense.The examples of indirect expenses are, salary to office staff,Printing and stationery, Rates & taxes etc.
What is an Income?
Income is the money received by a business during the process of selling its goods or services, or earning through investment.
What is Direct Income?
Direct incomes are incomes which are earned by business through its business activities.For example income through sales, Income through services provided.
What is Indirect Income ?
Indirect Incomes are Incomes earned through non business activities.Like selling of scrap materials.Sale of carton boxes etc.
Let’s create the following Ledgers.
|Travelling Expense||Indirect expense|
|Commission received||Indirect Income|
Go to Gateway of Tally >> Accounts info>>Ledgers >>Create
The hot key to access the screen is A-L-C
Now you are in Ledger Creation Screen.We are creating Travelling Expense ledger.Fill in the following Field.
- Name: Type Travelling Expense here
- alias: here you can type an alternative name, code, numbers etc.
- under : Type indirect expense, Travelling expense is an indirect expense .
- Inventory values are affected: This is applicable if company created in Accounts cum inventory.
- Opening Balance : enter opening balance of previous period ( Financial year) if any
For better clarity see below image
Press enter and save the screen, now we have created expense ledger.
Create Income Ledger In tally
Creating income ledger is similar to creating expense ledger. Here we are going to create Commission received Ledger which is comes under group indirect income.
To do this Type name Commission received under field “Name “
And select indirect income in field “Under”
Rests of the things are same as expense ledger see the image
Press enter and save the screen.
Note: The field displayed in the ledger creation screen may vary in accordance with the option enabled in F11 Company feature.
After creating expense & Income ledger, next step is entering payment voucher & receipt voucher.