Posts

How to configure Tally ERP9 for NGOs – Cost Category

Series – How to Configure Tally ERP9 for NGOs

Topic – Using Cost Category for Three Di-mention Reports

Do you need to provide different reports to different funding agencies in different format ? Are you using EXCEL as main tool to get report ? Do you need to take figures from Tally and present it in different formats ??? If, so than read this blog to configure Tally ERP9 in such a way to get almost all the reports from it.

What is the Problem ?

NGO need to report to different agencies / people in different formats. Like funding agencies wants  to know “Expenditure as per budget Head”, Trustees or Program Head wants to know about Project wise / Area wise / Activity wise expenditures and Auditor wants to know expenditure in standard format like nature wise expenses and so on…

What is the solution ?

To Create such an accounting system so that expenditures are entered once but get the reports from different Di-mentions. Tally ERP9 is capable of doing this by using Cost Category features. Lets take a look how we do it.

Step 1 – Configure General Settings

Gateway → F11 Features → Accounting Features → Cost/Profit Centers Management → Maintain Cost Center → Yes → More than once Cost Category → Yes

Step1_TallyERP9_CostCategory

Step 2 – Create Cost Category

Gateway → Account Info → Cost Categories → Create

I have Created two categories

1) Project wise Expenses – For entering expenses as per Budget Head of the Project

2) Nature wise Expenses – For entering expenses as per Nature like standard expenses i.e Telephone Exp etc..

Step2_TallyERP9_CostCategory

Step 3 – Create Cost Centers (Project Name)

Gateway → Account Info → Cost Centers → Create

I have Created three Projects – Project A, Project B and Project C expenses under Cost Category “Project wise expenditure”

Step3_TallyERP9_CostCategory

Step 4 – Create Ledger Account  (Budget Head)

Gateway → Account Info → Ledgers → Create

Create Ledger Account same as per Budget Head of the Funding Agencies under Project Name as group (Indirect Expenses) .  See below image – I have created Ledger “Communication – Field (PA) under “Project A Expenses” under “Indirect Expenses”

Step4_TallyERP9_CostCategory

Step 5 – Cost Center (Standard Expenses)

Gateway → Account Info → Cost Centers → Create

Now create Standard Expenditures under theses second type of Cost Category “Nature wise Expenditures”. I have Created Telephone Expenses and such other Standard expenses – see below image.

Step5_TallyERP9_CostCategory

Step 6 – Voucher Entry

Now whenever voucher entry is made you have to select two components i) Project wise and ii) Nature wise.- see below image.

Step6_TallyERP9_CostCategory

Step 7 – Reports

Gateway → Display → Statement of Accounts → Cost Centers → Category Summary

From this Report, you can get total expenses bifurcated in both way Nature wise Expenses and Project wise Expenses. Have a look.

Step7_TallyERP9_CostCategory

Step 7 – Reports (Continue…)

Gateway → Display → Statement of Accounts → Cost Centers → Cost Center Breakup

From this Report, you can get total expenses Project wise. Have a look.

Step7.1_TallyERP9_CostCategory

Conclusion – Use your creativity

By using cost category and your creativity, you can fulfill any requirements and have wonderful reports.

I have created Area wise expenditure to know exactly how much expenses in Rural Area and Urban Area or Filed office Expenses and Head office Expenses. Have a look….

Step7.2_TallyERP9_CostCategory

Expenditure of more than Rs. 20000 in Cash

FCRA advisory committee has issued a circular for all the NGOs having registration of FCRA  to spent expenditure of more than Rs. 20000 only by way of CHEQUE or DEMAND DRAFT. This means any CASH Expenditure for more than Rs. 20000 is not advisable as per this circular. The circular issued by FCRA department is attached here.

Let us get into the details.

Why such circular ?

FCRA department has mentioned in the circular that, they have observe many organizations has spend or withdraw huge cash from FCRA Bank and Utilization account.

Is there any provision in FCR Act 2010 ?

As such there is no specific section in the FCR Act, 2010 for limiting expenditure in cash. FCRA Department has given reference of  Sec 40a(3) of Income Tax Act for dis-allowance of expenditure of more than Rs. 20000. However in my opinion that section is applicable to only business income and not grants.

Consequences if spent expenditure for more than Rs. 20000

FCRA department has made it clear in circular that in case of payments expenditure  of more than Rs. 20000 by CASH, such associations are likely to require more intensive scrutiny by Government

What NGO has to do?

Try to make all the payments and expenditure of more than Rs. 20000 by crossed payee cheques or demand draft.

However, in practicality, sometimes NGO has to pay by CASH. In such circumstances there must be valid reason for that and NGO has to keep record for such explanation. So that in case of scrutiny, NGO can put its valid reasons before authorities. (It is author’s personal view)

For any further inquiry click here.

FCRA Department Circular

FCRA Cicrular_Rs20000

 

Year-end 5 points to consider for NGO

As 31st March approaching near, books of accounts has to be reviewed. In this post, we try to answer following questions. Why one has to review its books of accounts get closed? In NGO, who has to review accounts? And Which are main five points to look into while reviewing accounts before 31st March?

Reason for year-end review

Precaution is better than Cure

After year end, any changes to books of accounts may lead to look like postmortem. Accounting is an ongoing activity and whenever books of accounts get changed back dated, auditor can easily smell it.

Responsibility of year-end review

Is it whole and sole responsibility of Accountant? NO. I would rather suggest that, Project Coordinator has also to look into the specific areas, like all the activities, which has to be completed before 31st March, must reflect in the books of accounts. Thus its a joint work of Accountant-Project Coordinator and Top Management.

5 Points one should look

1. Negative Cash

Go to Cash Book maintain in the accounting software and get daily balance. Even a single day negative cash balance cause you trouble. There are many reasons for cash going negative on particular day and also number of ways to solve it. Though there are many ways to solve it, once books of accounts get close and audit is started, it is difficult to rectify.

2. Advance Grant

Check, grant received in advance for programs after 31st March is not taken as current year income, specially when project period is not in consistent with our financial year. Suppose Project Period is from 1/7/2013 to 30/06/2014 and full grant already received before 31/03/2014, then amount equals to estimated expenditure from 1/4/2014 to 30/06/2014 transfer to next year as advance grant. See below image showing extract of Income and Expenditure account :

advance grant

3. Completed Projects

Projects, which are completed during current year, has to look for any over expenditure or savings of funds even of smaller amounts. It is not possible that every total amount spent is exactly same as grant received for particular project. Sometime, there is over expenditure of smaller amount or savings from project. There may be contribution from communities or contribution of NGO. All these transactions are properly accounted for before 31st March.

4. Fixed Assets

In many of NGOs, it it never ending problem, that Fixed Assets mentioned in Audited Report is not matched with Physical Fixed Assets. Though every NGO maintains Fixed Assets registers, they do not have habit of review it before year-end. At the year-end Fixed Assets in physical form, Fixed Assets mentioned in Books of Accounts and Fixed Assets Register must be tallied.

5. Fund Balance

This is most important point. It is best practice that fund balance in books of accounts at any point of time is to be matched with cash and bank balance. For this before year-end, a receipt and payment accounts is to be prepared showing Opening Balance of Cash and Bank, receipts during the year, spent during the year and closing cash and bank balance.

There may me many other points according to situations and scope of your NGO. However above points are crucial to look into before financial year ends.

 

For any inquiry or query. Click Here  or you can chat with us.