Accounts with Inventory

Prerequisites: Module 11 — Double Entry Practice

Learning Objectives

By the end of this module, you will be able to:

• Enable Accounts with Inventory mode in Tally
• Create stock groups, stock items, and units of measure
• Set up a godown for stock storage
• Record a purchase with full inventory details in Tally (F9)

Accounts with Inventory — What Changes?

When you enable inventory in Tally, every purchase and sale voucher requires item-level details — which item, how many, at what rate. This unlocks:

• Stock ledger — Tally tracks how many units of each item you have at any time
• Item-wise profitability — Gross profit per product
• HSN code compliance — Required for GST invoices
• Stock reports — Stock summary, movement summary, ageing analysis
• Reorder alerts — Warning when stock falls below reorder level

The accounting entries (Dr/Cr) remain exactly the same. The difference is that each purchase/sale line item now carries quantity and rate information.

Key Inventory Masters in Tally

1. Stock Groups

Stock Groups organise your products into categories — like ledger groups but for inventory.

Structure for Sunrise Retail:

Consumer Electronics (Main Group)
├── Mobile Phones
├── Laptops
├── Tablets
└── Accessories

2. Units of Measure

Define how items are counted or measured:

• Nos (Numbers) — for phones, laptops, tablets
• Pcs (Pieces) — for accessories sold individually
• Box — for bulk packing (if applicable)
• Kgs, Mtrs — for other types of goods

3. Stock Items

A Stock Item is an individual product. Each item has:

• Name
• Stock Group
• Unit of Measure
• Opening Stock (quantity + rate)
• HSN/SAC Code (for GST)
• GST Rate

4. Godowns

A Godown is a storage location in Tally — a warehouse, showroom, or any physical place where stock is kept.

By default, Tally creates "Main Location" as the single godown. You can add more for multi-location businesses (covered in Module 15).

Enabling Inventory in Tally

Gateway of Tally → F11 (Company Features) → Inventory Features

Enable:

• Maintain Stock Items: Yes
• Maintain Multiple Godowns: No (for now — single godown)
• Use standard rates for stock items: Yes (for price list feature later)
• Enable GST for stock items: Yes

Also in F11 → Statutory Features:

• Enable GST: Yes
• Set/Alter GST details for stock items: Yes (allows HSN code per item)

Sunrise Retail — Case Study Application

💼 Sunrise Retail Pvt Ltd — Setting Up the Inventory

Step 1: Create the Godown

Gateway of Tally → Masters → Inventory → Godowns → Create

Step 2: Create the Stock Group

Gateway of Tally → Masters → Inventory → Stock Groups → Create

Step 3: Create the Unit of Measure

Gateway of Tally → Masters → Inventory → Units → Create

Step 4: Create the Stock Item — Samsung Mobile Phones

Gateway of Tally → Masters → Inventory → Stock Items → Create

Press Ctrl+A to save.

Create additional stock items (no opening stock):

Step 5: Record the April 5 Purchase with Inventory

Now let's record the April 5 purchase from TechWorld — 100 phones — using the full inventory-linked Purchase Voucher.

Gateway of Tally → Accounting Vouchers → F9 (Purchase)

Header Fields:

Item Details (bottom section of voucher):

Auto-calculated GST:

Invoice Total: ₹14,16,000

The accounting entry Tally creates automatically:

What the inventory ledger shows:

Tally's Stock Summary (Gateway → Reports → Inventory → Stock Summary) now shows:

• Samsung Mobile Phones: 150 Nos | Value: ₹18,00,000

The Power of Inventory Linking

Once inventory is set up, every purchase and sale automatically:

1. Updates the stock count (quantity)
2. Values the remaining stock (at cost using weighted average or FIFO)
3. Calculates Cost of Goods Sold when items are sold
4. Generates item-wise reports

You no longer need to manually count stock — Tally does it from the voucher entries.

Practice Exercise

Exercise 1: Sunrise Retail receives a shipment from Galaxy Electronics (Delhi) on May 10:

• 20 Dell Laptops @ ₹35,000 each (IGST 18%)
• 15 iPad Tablets @ ₹28,000 each (IGST 18%)
• Payment terms: 30 days credit

Calculate the total invoice value and write the journal entry. What would the Stock Summary show after this purchase?

Exercise 2: What is the HSN code concept and why does Sunrise Retail need to enter it for each stock item? What happens in Tally if HSN code is missing?

Key Terms

Module Summary

• Accounts with Inventory mode links each purchase/sale voucher to specific stock items with quantity and rate
• Setup sequence: Godown → Stock Group → Unit of Measure → Stock Items → then transactions
• Samsung Mobile Phones opening stock: 50 Nos @ ₹12,000 = ₹6,00,000
• After April 5 TechWorld purchase: stock jumps to 150 Nos @ ₹12,000 = ₹18,00,000
• HSN codes are mandatory for GST invoices and GSTR-1 returns
• The accounting journal entry is identical with or without inventory — inventory just adds quantity tracking

Quick Quiz

Test yourself before moving on:

1. In Tally, which master defines "how many units are in a box" for stock items?
   • a) Stock Group
   • b) Godown
   • c) Unit of Measure
   • d) Voucher Type

2. After Sunrise Retail's opening balance (50 phones) and April 5 purchase (100 phones), the Stock Summary shows:
   • a) 50 Nos
   • b) 100 Nos
   • c) 150 Nos
   • d) 200 Nos

3. HSN code 8517 is used for:
   • a) Laptops
   • b) Mobile phones
   • c) Screen guards
   • d) Accessories

4. What happens to the accounting journal entry when you switch from Accounts Only to Accounts with Inventory?
   • a) Entirely different entries
   • b) Extra GST entries are added
   • c) The Dr/Cr entry is identical — inventory just adds quantity tracking
   • d) Journal entries are no longer needed

Next: Module 13 — Credit Purchases and Sales — Record all April credit transactions in full, navigate outstanding payables and receivables reports, and see how TechWorld and Digital Hub's balances appear on Sunrise Retail's Balance Sheet.