Tally Erp9 Lesson 9 Budgeting And Control In Tally Erp9

  Module 9: Budgeting and Controls in Tally ERP 9

Introduction

Budgeting is a crucial tool in financial management, allowing organizations to set financial targets and control expenses. In Tally ERP 9, budgeting enables users to define their financial goals by allocating resources for specific accounts, cost centers, and groups. This module covers creating budgets, assigning them to accounts and groups, and analyzing variances to compare actual performance against the set budgets.

Key Topics Covered:

Budget Creation in Tally ERP 9

Budgeting by Account and Group

Variance Analysis in Tally ERP 9

Each section is explained in detail with practical methods, examples, and exercises to help you gain a thorough understanding of budgeting in Tally ERP 9.

1. Budget Creation in Tally ERP 9

Step-by-Step Process:

Enable Budgets in Tally:

Open Tally ERP 9.

Go to Gateway of Tally > F11: Features > F1: Accounting Features.

Set Maintain Budgets and Controls to Yes.

Press Ctrl + A to save the changes.

Create a Budget:

Go to Gateway of Tally > Accounts Info > Budgets > Create.

Enter the Name of the budget (e.g., “Annual Budget 2024”).

Select the Period for the budget, starting from the beginning to the end of the financial year (e.g., 1st April 2024 to 31st March 2025).

Choose On Closing Balance if you want to set budgets based on the closing balance or On Nett Transactions if based on transactions.

Define the Budget Type:

You can apply the budget to specific Groups, Ledgers, or Cost Centers.

For example, choose Groups if you want to create a budget for an entire group of ledgers like “Salaries” or “Sales.”

Set Budget Values:

Enter the budget amounts for each group, ledger, or cost center.

For example, you can allocate $100,000 for the group "Sales" or $10,000 for the ledger "Advertising Expenses."

Save the Budget:

Press Ctrl + A to save the budget.

Practical Example:

Let’s assume we are creating a budget for Sales and Advertising Expenses for the financial year 2024-25.

Budget for Sales: $500,000

Budget for Advertising Expenses: $50,000

Lab Exercise 1: Create a Budget

Enable budgets in Tally ERP 9.

Create a budget named “Marketing Budget 2024-25” for the group "Sales" and the ledger "Advertising Expenses."

Allocate $500,000 for Sales and $50,000 for Advertising Expenses.

Save the budget and verify the budget settings in Accounts Info > Budgets > Display.

2. Budgeting by Account and Group

Step-by-Step Process:

Select a Budget Type:

Budgets in Tally ERP 9 can be assigned to either individual Accounts (i.e., Ledgers) or Groups (a collection of Ledgers).

Assign Budgets to Groups:

Go to Gateway of Tally > Accounts Info > Budgets > Alter.

Select the budget you created (e.g., “Annual Budget 2024”).

Under Groups, select the desired group (e.g., Indirect Expenses or Sales Accounts).

Define the budget amounts for each group.

Assign Budgets to Ledgers:

Alternatively, you can allocate budgets to specific ledgers within a group.

For example, within Indirect Expenses, assign $5,000 to the ledger Travel Expenses and $10,000 to the ledger Office Supplies.

Budget at Cost Center Level:

If your organization uses cost centers (departments, projects, etc.), you can create budgets for them as well.

Go to Cost Centers under the budget creation screen and allocate amounts to each cost center.

Practical Example:

Group: Indirect Expenses

Budget: $50,000 for Indirect Expenses

Ledger-Level Budgeting: $5,000 for Travel Expenses, $10,000 for Office Supplies.

Lab Exercise 2: Assign Budgets to Accounts and Groups

Create a budget for the group Indirect Expenses with a total allocation of $50,000.

Divide this budget among specific ledgers:

$5,000 for Travel Expenses.

$10,000 for Office Supplies.

Save and verify the budget by displaying it under Accounts Info > Budgets > Display.

3. Variance Analysis in Tally ERP 9

Variance Analysis is the process of comparing the actual financial results with the budgeted figures. This helps businesses understand where they are overspending or underperforming compared to their financial goals.

Step-by-Step Process:

View Budget Variance Report:

Go to Gateway of Tally > Display > Statement of Accounts > Budgets & Controls > Budget Variance.

Choose the Group or Ledger for which you want to perform the variance analysis.

Interpret the Variance Report:

The variance report shows three columns:

Budgeted Figures: The financial target for a group or ledger.

Actual Figures: The real financial performance during the period.

Variance: The difference between the budgeted and actual amounts (either positive or negative).

Analyze the Variance:

A positive variance means that the actual spending or income is within or below the budget, while a negative variance means overspending or underperforming.

For example, if you budgeted $50,000 for advertising but spent $60,000, you have a negative variance of $10,000.

Practical Example:

Let’s assume:

Budget for Advertising Expenses: $50,000.

Actual spending: $60,000.

Lab Exercise 3: Perform Variance Analysis

Create actual transactions for Advertising Expenses in the ledger, totaling $60,000.

View the Budget Variance Report for the group Indirect Expenses.

Analyze the variance between the budgeted $50,000 and the actual $60,000.

Identify areas of overspending or underperformance.

Practical Application and Lab Work:

Objective: Learn how to manage budgets and perform variance analysis to maintain control over financial performance.

Step-by-Step Lab Guide:

Setting Up Budgets:

Enable budget features in Tally.

Create a budget for specific groups and ledgers such as Sales, Indirect Expenses, and Cost Centers.

Assign appropriate amounts to each budgeted item.

Entering Actual Transactions:

Record sample financial transactions, e.g., sales, advertising expenses, and travel expenses.

Ensure that some actual transactions exceed the budgeted amount to illustrate variance.

Performing Variance Analysis:

Run the Budget Variance Report.

Compare the actual figures with the budgeted amounts.

Identify where the business overspent or underperformed and suggest corrective actions.

Conclusion

Budgeting in Tally ERP 9 provides a powerful tool for managing financial goals and controlling expenses. By setting up budgets for accounts, groups, and cost centers, you can ensure that your financial targets are met and that your business is operating efficiently. Additionally, variance analysis allows you to monitor performance in real time and make necessary adjustments to stay within budget.

Lab Exercises offer hands-on experience in creating and managing budgets, assigning them to accounts and groups, and performing variance analysis to compare actuals against set targets.