Profit & Loss Account in Tally – With Profit Transfer to Capital Entry

Profit & Loss Account in tally is situated on the gateway of tally menu just beside the balance sheet option.

P/L in tally is divided into 2 parts:

First part is Trading Account which includes

• Opening Stock
• Purchase Accounts
• Sales Accounts
• Direct Expenses
• Direct Incomes
• Closing Stock
• Gross Profit or Loss

Second part includes indirect expenses and indirect incomes which we generally consider profit and loss account.

In tally, trading and the P/L accounts are mixed together so it gives a wholesome view of the business transactions.

What you will learn in this post – bullet points

• Where is Trading Account in Tally
• How to prepare Profit and Loss Account in Tally
• Profit & Loss Account Format in Tally
• Profit/Loss Transfer to Capital Entry in Tally
• Export Profit & Loss Account or Statement in Excel/PDF format

Where is Trading Account in Tally ERP 9

As we have discussed in the beginning of the post that trading account is included in the profit & loss account in tally.

That means there is no separate trading account in tally.

You can access the trading account in tally by going to it from the gateway of tally.

Just press P which is the shortcut for Profit & Loss A/c in tally and you will see trading account as well as the profit and loss account.

Look at the image below:

As you can see in the above image, the part that is in the red coloured box is considered as the trading account in basic accounting language.

After the trading account, there are certain indirect expenses and indirect incomes, which form part of what we generally call as profit and loss account.

In tally, everything is on the same page for ease of use.

Now, we will look at the entire P/L account in tally. Let’s move ahead.

How to prepare Profit and Loss Account in Tally ERP 9

Fortunately, you don’t have to prepare a profit & loss account in tally. It is prepared automatically by tally.

This is what is tally is known for. Its simplicity.

You can access the P/L account from the gateway of tally.

It is situated in the reports menu exactly under the balance sheet. I am sure you must knowing this option.

Once you enter into the profit & loss account, press ALT + F1 which is the shortcut for detailed view in tally.

Entire profit & loss account will look something like in the image below.

On the left hand side of the profit & loss account, there is opening stock, purchases and direct expenses.

On the right hand side, there are sales accounts, direct incomes and closing stock.

You can also see how neatly each of the GST Sales and Purchases in tally are shown separately as per the rate of GST applicable.

In our case, there is a gross loss and it is transferred to the profit and loss account below.

After that, if there are any indirect incomes or indirect expenses; they are accounted for and finally the net profit or loss is arrived at which is to be transferred to the capital account.

We will see the profit transfer to the capital entry later in this post.

All of the above items in the profit & loss account appears when you create the respective accounting vouchers in tally.

For example, if you create a GST sales entry in tally, after that entry, it will automatically appear in the profit & loss account.

Closing stock in tally is automatically calculated on the basis of purchases, sales and opening stock. If you are maintaining the stock the same closing stock will be appear in stock summary in tally as well.

In the stock summary, you can find item wise profit in tally which can be used to take important product related decisions.

The point that I am trying to make here is that you don’t have to prepare a profit and loss account in tally.

You just have to take care of the different accounting entries that you create and everything else will be taken care of by tally.

Profit & Loss Account Format in Tally ERP 9

There are 3 types of formats for P/L accounts in tally.

It will also include the trading A/c format because it is a part of the profit and loss account in tally.

The 3 types of formats are:

1. Horizontal Format
2. Vertical Format
3. Schedule VI Format

Horizontal Format – P/L Account in Tally ERP 9

It is the simplest format to create a profit & loss account in tally and it is most commonly used by most of the people.

It looks something like in the picture below:

This format is also called T-shape format because it looks like a capital T.

In this format, all the things which are debit are on the left hand side and all the things which are credit are on the right hand side of the statement.

Now, we will see the next format of the P/L account which is the vertical format.

Vertical Format – P/L Account in Tally ERP 9

Vertical format of P/Laccount in tally is not enabled by default in tally. You have to enable it.

You can enable it by using the following steps:

• While in the P/L account, press F12 or Configure.
• First option in the configuration menu is to Show Vertical Profit & Loss.
• Set it you YES.
• Finally, press CTRL + A to save the options.

As soon as you save the configuration options, you will see the entire profit and loss account in vertical format.

Every amount and every ledger in tally will be converted into the vertical format automatically for you by tally.

You can also notice the trading account in the vertical format of profit and loss account clearly as it is mentioned on the top itself.

Now a days, as the world is moving towards IFRS, more and more people are adopting vertical formats for P/L account as well the balance sheet.

Now, we will see the Schedule VI format of the P/L account in tally.

Schedule VI Format – P/L Account in Tally ERP 9

Schedule VI is the format that is used under the Companies Act, 1956.

If you are a company, whether private limited or public limited, you need to create your profit and loss statement or accounts as per the Schedule VI.

It is very easy to convert your profit and loss account into the Schedule VI format.

You just need to click one button. It is called Schedule VI. Alternatively, you can also press ALT + S which is the shortcut.

Entire profit and loss account has been converted into Schedule VI format which is used by private limited and public limited companies.

A comparative statement of the previous year is also added since it is included in the format.

Now, we will look at the profit or loss transfer entry to the capital a/c in Tally.

Profit/Loss Transfer to Capital Account – Entry in Tally ERP 9

This is one of the easiest journal entries in tally.

Once you know whether there is a profit or loss, you have to pass a simple journal entry against the capital account and your profit or loss will be transferred to the capital account in the balance sheet.

If you are preparing the accounts for a company, the profit or loss with be transferred to reserves and surplus.

Let’s see the balance sheet in tally before the transfer of profit or loss to the capital account.

You can see that the total loss is of ₹3,72,159.62 which includes the opening balance as well as the current period’s loss.

We will transfer the entire loss to the capital account by passing a simple journal entry.

• From Gateway of Tally, go to Accounting Vouchers.
• Select Journal Voucher

We will debit the capital account since we have to transfer the losses. If you are transferring the profits, you will have to credit the capital account.

On the credit side, select profit & loss account. The balance of the profit and loss account should be zero at the end.

Here is the journal entry for transfer of profit/loss to the capital A/c in tally.

Save the entry and have a look at your balance sheet.

This is how you can easily transfer the profit or loss, whatever it may be, from your P/L account to the capital account which is ultimately in the balance sheet.

Now, we will see how you can export the P/L account in different formats including Excel and PDF formats from tally.

Export Profit & Loss Account or Statement in Excel/PDF Format

It is very easy to export anything from tally.

When you are in the profit & loss account in tally, click on the Export button which is located on the top left corner of the screen beside the Print button.

Or you can simply press ALT + E from your keyboard.

You will be presented with different export options. Select Excel if you want the profit and loss account in Excel format or select PDF if you want it in the PDF format.

Check all the export options and press Enter a few times to export the profit & loss account from tally.

Right now, I will show you how the profit & loss account in tally looks when it is exported in the Excel format as well the PDF format.

Profit & Loss Account or Statement Exported in Excel Format from Tally

Profit & Loss Account or Statement Exported in PDF Format from Tally

Common Questions related to P/L Account in Tally

• P/L Account under which head in Tally?

P/L account is under the head of P/L account itself in tally. There are two ledgers which are pre-created by default in tally when you first create a company in tally.

They are Cash account and P/L account.

There is a special ledger group for P/L account in the list of ledger accounts in tally under which the ledger of P/L is grouped.

• What is P/L Account entry in Tally?

Basically all the entries that you do in the business are routed through the P/L account and it will show up in the balance sheet.

That is the reason the system of accounting that we follow is a double entry system of accounting.

I am also suggesting some tally accounting books with GST which will help you learn tally in a much better way.

Profit & Loss Account in Tally – Video

The video will be uploaded soon.

Conclusion

At the end, I am sure you have understood the P/L account completely in tally.

The main point that you will take from going through this post is that you don’t have to prepare a P/L account in tally.

It is automatically prepared for you.

We discussed different formats inside tally and different formats for exporting the P/L account from tally as well.

If you still have any doubts, please feel free to comment down below.

I reply to each and every comment. 🙂