Vocational Course Accounts (V999110)

Accounts & Tally

Inventory maintenance is about keeping stock organized, up-to-date, and accessible, while
inventory control focuses on optimizing inventory levels, minimizing costs, and ensuring
availability without overstocking or understocking. Together, they help businesses operate
efficiently, reduce costs, and meet customer demand effectively.
Inventory maintenance and control refer to the systematic process of managing, tracking,
and regulating the stock of goods, materials, or resources that a business holds. It ensures
that the right amount of inventory is available at the right time to meet demand while
minimizing costs associated with overstocking or stockouts.
Key Components of Inventory Maintenance and Control:
1. Inventory Maintenance
• Tracking and Recording Stock: Keeping a detailed record of the quantities,
locations, and statuses of stock items in the warehouse or store.
• Stock Classification: Categorizing inventory into different groups (e.g., raw
materials, work-in-progress, finished goods) for easier management.
• Updating Inventory Levels: Continuously updating stock levels based on purchases,
sales, and production activities.
• Stock Replenishment: Timely restocking to maintain sufficient inventory levels and
prevent stockouts.
• Stock Rotation: Ensuring older stock is sold or used first (e.g., through methods like
FIFO - First In, First Out) to avoid obsolescence or expiration.
2. Inventory Control
• Optimizing Stock Levels: Maintaining the right amount of stock to meet demand
while minimizing the carrying costs (such as storage, insurance, or spoilage).
• Demand Forecasting: Predicting future demand to ensure proper stock levels are
maintained.
• Reorder Point and Safety Stock: Setting minimum stock levels to trigger reordering
and ensuring extra stock is kept as a buffer against unexpected demand spikes or
supply chain disruptions.
• Stock Auditing: Periodic physical checks of inventory to match it with the records in
the system and identify discrepancies like theft, damage, or misplacement.
 • Stock Valuation: Assessing the value of inventory using methods such as FIFO (First
In, First Out), LIFO (Last In, First Out), or Weighted Average to accurately reflect the
inventory's worth on financial statements.
• Inventory Turnover Ratio: Monitoring how frequently stock is sold and replenished,
which helps in evaluating how efficiently inventory is being used.
• Order Quantity Optimization: Using techniques like Economic Order Quantity
(EOQ) to determine the optimal order size that minimizes total costs (ordering costs
+ holding costs).
Importance of Inventory Maintenance and Control:
1. Cost Management: Proper inventory control reduces carrying costs (such as storage
fees, insurance, and wastage) and helps prevent overstocking, which ties up capital.
2. Improved Cash Flow: Managing inventory efficiently frees up cash that can be used
for other business operations by preventing excess stock buildup.
3. Meeting Customer Demand: Ensuring that the right products are available at the
right time improves customer satisfaction and prevents lost sales due to stockouts.
4. Minimizing Waste: Controlling inventory levels and using strategies like stock
rotation (FIFO) minimizes losses due to obsolescence, expiration, or damage.
5. Accurate Reporting: Proper inventory control provides accurate data for financial
reporting, tax calculations, and audits, ensuring compliance with legal and financial
regulations.
6. Operational Efficiency: Streamlined inventory processes improve overall business
efficiency by reducing time spent on stock management and ensuring timely
restocking.
Creating Inventory Masters in Tally :
Creating Inventory Masters in Tally involves setting up inventory-related components, such
as stock groups, stock items, units of measure, and godowns, to manage and control your
inventory effectively. Here's a step-by-step guide to creating different types of inventory
masters in Tally:
1. Creating Stock Groups
Stock Groups help classify and categorize stock items for better inventory tracking and
reporting.
Steps:
1. Go to Gateway of Tally > Inventory Info > Stock Groups > Create.
2. Enter the Name of the stock group (e.g., Electronics, Clothing).
 3. Select Under: Choose the parent group if it's a subgroup, or choose "Primary" if it's a
main group.
4. If necessary, enable Maintain quantities and Set Alter Stock Group as Group/Item.
5. Press Enter to save.
2. Creating Units of Measure
Units of Measure help define how stock items are quantified (e.g., kilograms, pieces, liters).
Steps:
1. Go to Gateway of Tally > Inventory Info > Units of Measure > Create.
2. Enter the Symbol (e.g., KG, PCS, LTR).
3. Enter the Formal Name (Kilogram, Pieces, Liters).
4. Specify the Number of Decimal Places if required (e.g., for KG, you may set 3 for
precision).
5. Press Enter to save.
3. Creating Stock Items
Stock Items are the individual products or materials that the business sells, buys, or
manufactures.
Steps:
1. Go to Gateway of Tally > Inventory Info > Stock Items > Create.
2. Enter the Name of the stock item (e.g., Laptop, Shirt, Oil).
3. Select Under: Choose the appropriate stock group (e.g., Electronics for a laptop).
4. Select the Units of Measure (e.g., PCS, KG).
5. Enter the Opening Balance if you're starting with existing stock. Enter the quantity
and rate, and Tally will automatically calculate the value.
6. Press Enter to save.
4. Creating Godowns (Storage Locations)
Godowns (or warehouses) allow you to manage inventory stored in different physical
locations.
Steps:
1. Go to Gateway of Tally > Inventory Info > Godowns > Create.
2. Enter the Name of the godown (e.g., Main Warehouse, Delhi Branch).
 3. Select Under: Choose the parent godown, or select "Primary" if it's a main godown.
4. Press Enter to save.
5. Creating Stock Categories (Optional)
Stock Categories allow for an additional level of categorization, useful for analyzing items
across different stock groups.
Steps:
1. Go to Gateway of Tally > Inventory Info > Stock Categories > Create.
2. Enter the Name of the stock category (e.g., Branded, Non-Branded).
3. Select Under: Choose "Primary" if it's a main category or select a parent category.
4. Press Enter to save.
6. Creating Bill of Materials (BOM) for Manufacturing (Optional)
Steps:
1. Go to Gateway of Tally > Inventory Info > Stock Items > Create/Alter (Choose the
finished product).
2. In the Stock Item creation screen, choose Set Components (BoM) to Yes.
3. Specify the raw materials and their quantities needed to manufacture the finished
product.
4. Press Enter to save.
7. Managing Inventory Settings
Before creating inventory masters, ensure that the necessary features are enabled in Tally’s
settings.
Steps:
1. Go to Gateway of Tally > F11 (Features) > Inventory Features.
2. Enable options like Maintain Multiple Godowns, Maintain Batch-wise Details, and
Track Expiry Dates based on your business requirements.
3. Press Enter to save.
Example of Inventory Creation Flow:
• Create Stock Groups (e.g., Electronics).
• Define Units of Measure (e.g., PCS for pieces).
• Add Stock Items (e.g., Laptops, Mobiles).
 • Set up Godowns (e.g., Main Warehouse, Branch Warehouse).
Let’s take an example of an inventory item, “LED TV”, and explore how various types of units
(e.g., quantity-based units, compound units) can be created in Tally for managing this
inventory, along with the relevant entries for maintaining it.
Example: LED TV
1. Basic Unit of Measure (Simple Units)
A simple unit refers to a single measurable unit, like pieces, kilograms, meters, etc.
In this example, let’s assume we sell LED TVs in “Pieces” (PCS).
Steps to Create a Simple Unit:
• Go to Gateway of Tally > Inventory Info > Units of Measure > Create.
• Under Symbol, enter PCS (for Pieces).
• Under Formal Name, enter Pieces.
• Number of Decimal Places: Set this to 0 (since pieces are whole numbers, not
fractional).
• Press Enter to save.
Entry for Purchasing/Selling LED TV in Pieces:
• Purchase Entry:
o Go to Accounting Vouchers > F9 (Purchase).
o Select the Supplier.
o In the item details section, select LED TV.
o Enter the Quantity (e.g., 10 PCS).
o Enter the Rate (e.g., ₹15,000 per piece).
o Tally calculates the total value (e.g., 10 × 15,000 = ₹1,50,000).
o Save the entry.
• Sales Entry:
o Go to Accounting Vouchers > F8 (Sales).
o Select the Customer.
o Choose LED TV from the stock items.
o Enter the Quantity (e.g., 5 PCS).
 o Enter the Rate (e.g., ₹18,000 per piece).
o Tally calculates the total (e.g., 5 × ₹18,000 = ₹90,000).
o Save the entry.
2. Compound Unit of Measure
A compound unit is a combination of two units, such as "box of 10 pieces" or "dozen of 12
items."
For this example, we can sell LED TVs in “Boxes of 5 Pieces”.
Steps to Create a Compound Unit:
• Go to Gateway of Tally > Inventory Info > Units of Measure > Create.
• Enter Box as the Symbol.
• Enter Box as the Formal Name.
• Set Number of Decimal Places to 0.
• Under the Compound Unit section:
o Choose First Unit: Select PCS (Pieces).
o Enter the conversion (e.g., 1 Box = 5 PCS).
o Press Enter to save.
Entry for Purchasing/Selling LED TV in Compound Units (Boxes):
• Purchase Entry:
o Go to Accounting Vouchers > F9 (Purchase).
o Select the Supplier.
o In the item details section, select LED TV.
o Enter the Quantity (e.g., 2 Boxes).
o Tally automatically calculates this as 10 Pieces (2 Boxes × 5 Pieces per Box).
o Enter the Rate per Box (e.g., ₹75,000 per Box).
o Tally calculates the total value (e.g., ₹75,000 × 2 = ₹1,50,000).
o Save the entry.
• Sales Entry:
o Go to Accounting Vouchers > F8 (Sales).
o Select the Customer.
o Choose LED TV.
o Enter the Quantity (e.g., 1 Box).
o Tally converts this to 5 Pieces automatically.
o Enter the Rate per Box (e.g., ₹90,000).
o Tally calculates the total (e.g., 1 × ₹90,000 = ₹90,000).
o Save the entry.