Journal Entries in Tally Prime
Journal voucher F7 for non-cash adjustments — depreciation, provisions, and year-end entries for Sunrise Retail
Prerequisites: Module 7 — Payment and Receipt Vouchers
Learning Objectives
- Understand when to use a Journal voucher (F7) vs Payment or Receipt
- Record depreciation, provisions, and month-end accruals
- Enter Sunrise Retail's April 2025 adjustment entries
- Use Journal for GST RCM and ITC adjustment entries
What Is a Journal Entry?
A Journal voucher (F7) is used for accounting adjustments that do NOT involve any cash or bank movement.
Use Journal (F7) when:
- Recording depreciation (asset reduces, expense increases — no cash moves)
- Creating provisions (estimating future liabilities)
- Transferring amounts between ledgers
- Recording accrued expenses (expense recognized, not yet paid)
- GST adjustments (ITC reversals, RCM entries)
- Bad debt write-offs
- Year-end closing entries
Do NOT use Journal when:
- Any cash or bank is involved → use Payment (F5) or Receipt (F6)
- Buying or selling goods → use Purchase (F9) or Sales (F8)
Opening Journal Voucher
Total Debits must always equal Total Credits — Tally enforces this.
Sunrise Retail — April 2025 Journal Entries
Sneha Reddy enters April adjustment entries on April 30, 2025
Journal Entry 1 — Depreciation on Office Computer
Sunrise Retail has a computer worth ₹80,000. Annual depreciation @ 33.33% (WDV). Monthly = ₹80,000 × 33.33% ÷ 12 = ₹2,222.
ASCII Screen: Journal Voucher — Depreciation
Alternative — Accumulated Depreciation method (better for disclosure):
This keeps Computer at cost (₹80,000) and shows accumulated depreciation separately.
Journal Entry 2 — Provision for Outstanding Expenses
Sunrise Retail's electrician fixed wiring in April but hasn't sent an invoice. Estimated ₹3,500.
When the actual invoice arrives in May, the provision is reversed and a proper payment entry made.
Journal Entry 3 — Accrued Interest on Loan
Sunrise Retail has a ₹5,00,000 loan at 12% p.a. April interest accrued = ₹5,000.
When interest is paid, a Payment (F5) settles the Interest Payable ledger.
Journal Entry 4 — RCM on Goods Transport
Sunrise Retail hires an unregistered GTA (Goods Transport Agency) for ₹5,000 to deliver phones. Under GST, GTA services are under RCM at 5%. Sunrise Retail pays RCM:
The Output IGST RCM of ₹250 appears in GSTR-3B Section 3.1(d); the Input IGST ₹250 in Section 4(A)(4).
Journal Entry 5 — Bad Debt Write-Off (Example)
If an old debtor (example) owes ₹10,000 and is confirmed unrecoverable:
Note: ITC reversal may be needed if GST was charged on the original invoice.
GST-Specific Journal Entries
ITC Reversal Entry
If Sunrise Retail claimed ITC on a purchase later found ineligible (used for exempt supply):
Debit Note Auto-Treatment (reference)
When Sunrise Retail issues a credit note to Digital Hub via Alt+F8 (Debit Note), Tally auto-creates:
No separate journal needed — Tally's debit note handles it.
Year-End Journal Entries (Reference)
| Entry | Debit | Credit | Purpose |
|---|---|---|---|
| P&L Appropriation | Net Profit (from P&L) | Capital Account | Transfer profit to owners |
| Depreciation | Depreciation expense | Fixed Asset ledgers | Full-year depreciation |
| Provisions | Gratuity, leave encashment exp | Provision Ledgers | Estimate employee benefits |
| Pre-paid reversal | Pre-paid Expense Asset | Expense Ledger | Reverse prepaid |
| Accruals reversal | Accrual Liability | Expense | Reverse prior year accruals |
Year-end profit transfer happens automatically when you close the FY (covered in Module 26).
Practice Exercise
Exercise 1: Sunrise Retail has a delivery vehicle worth ₹1,20,000. Depreciation under Companies Act is 15% p.a. (SLM). Calculate and record monthly depreciation for April 2025.
Show Solution
- Annual: ₹1,20,000 × 15% = ₹18,000
- Monthly: ₹18,000 ÷ 12 = ₹1,500
Exercise 2: Sneha wants to record interest income of ₹3,200 earned on the SBI FD for April (not yet credited to account). What journal entry does she make?
Show Solution
When FD interest is actually credited to the account, a Receipt (F6) clears the Accrued Interest Receivable.
Key Terms
| Term | Meaning |
|---|---|
| Journal Voucher (F7) | Non-cash, non-bank accounting adjustment entry |
| Depreciation | Systematic reduction in asset value over useful life |
| Provision | Estimated liability — amount set aside for a future obligation |
| Accrual | Recognizing income/expense when earned/incurred, not when cash flows |
| RCM | Reverse Charge Mechanism — buyer pays GST for unregistered supplier |
| Write-off | Removing an unrecoverable balance from books |
| WDV | Written Down Value method — depreciation on reducing balance |
| SLM | Straight Line Method — equal depreciation each year |
Module Summary
Checklist — you're ready to proceed when you can:
- Press
F7and enter the depreciation journal for the office computer (₹2,222) - Enter the provision for electrician charges (₹3,500)
- Explain why depreciation uses Journal (F7) and not Payment (F5)
- Record the RCM journal with both Output IGST (liability) and Input IGST (ITC) entries
- State the difference between WDV and SLM methods with a one-line example each
- Confirm that Dr total = Cr total in every journal entry before pressing
Ctrl+A
Quick Quiz
1. Depreciation is recorded using which voucher in Tally?
- a) Payment (F5)
- b) Receipt (F6)
- c) Journal (F7)
- d) Purchase (F9)
Answer
c) Journal (F7) — depreciation involves no cash or bank movement; it reduces an asset and recognizes an expense.
2. If Sunrise Retail hires an unregistered GTA, the GST under RCM is paid by:
- a) The GTA
- b) Sunrise Retail (the recipient)
- c) The GST department directly
- d) No GST applies to transport
Answer
b) Sunrise Retail — under Reverse Charge Mechanism, the recipient (registered taxpayer) pays GST when the supplier is unregistered or the service is notified under RCM.
3. A Journal entry for "Provision for Doubtful Debts ₹5,000" credits:
- a) Cash
- b) Sundry Debtors
- c) Provision for Doubtful Debts (Current Liabilities)
- d) Bad Debts (Expense)
Answer
c) Provision for Doubtful Debts — creating a provision credits the provision account (liability/contra-asset), debiting the expense. The actual debtor ledger is not touched until the bad debt is written off.
Next up → Module 9: Purchase Voucher — recording Sunrise Retail's TechWorld phone purchase with IGST in full invoice mode.