Simple or Compound Interest Calculation in Tally

Dear Friends, You know very well about the Tally software. Tally provides different accounting and inventory features that allow any user to maintain his company accounts effectively. There are two way of simple or compound interest calculation in Tally software.

At present time Tally is one only most popular accounting cum inventory software that handles the day to day all routine operations of any business unit very effectively. It is widely accepted by the different accounts for its user friendly nature.

Today we talk about most important topic how to calculate interest on any debtor or creditor due amount either simple or compound mode in active company of Tally. To charge interest for debtor bills otherwise if creditor charges interest to us, bank a/c, & loan a/c, use interest calculation feature. In other words if any party does not pay the bill amount of specific date then you can charge interest on the party.

Must Read: Meaning of Tax and Types of Tax in India

Simple or Compound Interest Calculation in Tally:

You have to take following steps to applicable interest feature in tally.

Step 1: Press F11 –> Accounting Features (F1 ) > Select any one option given below:

1. Activate Interest Calculation – If you want to apply in your company then turn on this feature. After applicable of this feature you can maintain interest calculation.

2. Use Advance parameter – after applicable of this feature together interest some other feature is activate. After applicable of this feature you also maintain more than one interest rate on the one Bill or Invoice.

Step 2: Create or alter ledger a/c of any debtor on which you want to apply interest calculation. After applicable of interest feature create ledger a/c which youwant calculate the interest. If ledger a/c is already exist then open that & turn on Activate Interest Calculation – Yes
After Applicable of this feature give the rate of interest or date etc. Together this there are     some other features are display.

1. Calculate Interest Transaction By Transaction – If you are turn on this feature then Interest is show on each bills amount but if this is turn off (NO) then the interest will show total amount of party or A/c.

2. Override Parameter for each transaction – If you want to apply separate rate of interest for separate bill or invoice then turn on this feature.

3. Override advance parameters – After applicable of this feature you can be fill up separate date for interest in time of passing entry (Whenever Purchase or sales).

How to View/Print Interest Calculation Report:
GOT > Display > Statement of Accounts > Interest Calculation >Interest Payable/ Receivable.

Step 3: Creation of voucher type –

Name of voucher – Interest Payable / Receivable
Type of Voucher – If interest is payable then select credit note voucher type & if interest is receivable then select debit note voucher.
Name of Class – You have to type class name as per your requirement.
Use class for interest accounting – Select this option “Yes”.

Note: This option is applicable both (interest payable/ Interest receivable) of the voucher. If you want to calculate compound interest then turn on (yes) the following feature in voucher creation window.

Amount to be treated as compound interest – “Yes”

Step 4: Make following transaction entries for due interest amount either in “Journal” voucher (F7) or you can also make these entries in the Interest Calculation voucher which is created in “Debit / Credit note” vouchers:

1.    Due Entry for Interest payable.

Interest payable a/c…………………………Dr.
To Party

2.    Due Entry of Interest Receivable.

Party A/c…………………………………….Dr.
To Interest receivable

Must Read: How to recovery of corrupted data in Tally

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