Tally Entries for Construction Company + GST Works Contract Accounting

Tally Construction Entries

In this post, we are going to look at tally entries for a construction company. We will also be looking for accounting entries for works contract in tally.

It is because construction and works contract are inter-related.

In short, we are going to look at everything in tally there is, related to construction or real estate or builder (as we call it in India).

I am going to explain you everything including the accounting entries with GST in tally.

After going through this post, you will be able to pass the construction entries in tally easily.

What you will learn in this post

  • How to pass Construction Company Accounting Entries in Tally (This includes real estate or builder entries as well.) – Example – 1
  • Sales Entry for Constructed House with GST in Tally ERP 9 – Continued Example
  • How to pass GST Works Contract Entry in Tally – Example – 2
  • Labour Charges Journal Entry in Tally – Example – 3

How to pass Construction Company Accounting Entries in Tally

In a construction company, inventory goes in thousands and therefore managing inventory in tally is a very important step.

We will take an example of a construction company so it will be easy to understand the entire process.

Example – 1

There is a construction company which builds houses. I have assumed that it has 5 different types of inventories from which a house is built.

They are:

  1. Cement – 1,000 kg @ ₹500 per kg
  2. Bricks – 5,000 no @ ₹10 per no.
  3. Plywood Sheets – 3,000 no @ ₹2,000 per no or sheet
  4. Water – 2,000 liters @ ₹5 per liter
  5. Colour – 1,500 liters @ ₹700 per liter
  6. House – 5 no. @ ₹50,00,000 per house.
  7. Scrap – 200 kg @ 1% of the cost of the project.

In reality, there are thousands of stock items which you have to create in tally in order to manage it.

But, the process is the same, whether it is 5 or thousand stock items. 

And, builders generally have a team of accountants who are working full time so this process does not take that much time as you are thinking.

I have already created the above 5 stock items in tally. You can read this post about creating stock items in tally if you want to know how to create them. It is a very detailed post.

By using the above stock items, we will build 5 houses.

These 5 houses will be worth ₹50,00,000 per house so in total it will be ₹2.5 crores.

While building the houses, there are other related expenses as well of ₹20,00,000 and 200 kg scrap will also be produced. We will take that into the accounting entry as well.

Let’s get into tally and see how everything is done.

Firstly, we will have to pass a stock journal entry for manufacturing which is found in the inventory vouchers in tally.

The reason is because we have to convert the above stock items into a house.

Currently, we just have raw materials like cement, water and so on. We have to convert them into finished goods.

Here is how you do the construction entry for building a house in tally.

  • From Gateway of Tally, go to Inventory Vouchers.
  • Press ALT + F7 and then select Manufacturing Voucher from the list of voucher types.
  • Now, you will see a voucher like manufacture of materials voucher just like in the picture below.
Manufacturing Voucher in Tally with Co-Product By-Product Scrap
Manufacturing Voucher in Tally with Co-Product By-Product Scrap
  • Select the appropriate voucher number and date.
  • Now, the first option you have to select is the name of the product. In this field, we have to input the name of the finished product which in our case is a house.
  • Select House from the list of stock items and Quantity will be 5 since we are producing 5 houses.
  • In the left hand side, which is Components (Consumption) side, we have to select all the raw materials which are cement, bricks, water, colour and plywood.
  • We will use all the quantities of the raw materials.
Construction Voucher in Tally
Construction Voucher in Tally
  • Now, come to right hand side which is called Co-Product/By-Product/Scrap. As per our example, there is a scrap of 200 kg @ 1% of the entire effective cost.
  • It will be ₹96,100 as 1% of the total of the raw materials + other expenses – scrap.
  • Press Enter and you will see an option for – Type of Additional Cost. In that we will enter our other expenses.
  • Enter the ledger of Other Expenses and input ₹20,00,000 in the amount column.
  • Entire accounting entry for construction company in tally is now complete.
  • Press Enter and save the entry.

You will see effective rate of primary item which is a house is ₹19,02,780 per house.

Let me explain how it came.

Total cost is ₹96,10,000. We will sell the scrap so we will deduct it from the total cost. Now, the total cost will be ₹96,10,000 – ₹96,100 = ₹95,13,900.

Divide it by 5 and you will get – ₹95,13,900/5 = ₹19,02,780 per house.

This is how the accounting entries for construction is done in tally.

Now, when we sell the house, the entry will be a simple sales entry in tally along with GST of 1%.

Let’s do the sales entry of selling a house with GST in tally. Or, we can say it is GST construction entry in tally.

Sales Entry for Constructed House with GST in Tally ERP 9

Then select the CGST and SGST or IGST or UTGST ledgers as per the location of the buyer and your location. These are the GST Taxation ledgers in tally which are necessary to calculate automatic GST in tally.

Accounting Entry for Sale of a House
Accounting Entry for Sale of a House
  • Now, press Enter and you will be asked to fill in the GST e-Way bill details in tally which are not mandatory here. So, select No.
  • Press Enter and save the entry.

That’s it. Congratulations! You have successfully created tally entries for construction companies including the sales entry for a house in tally.

If you look at the profit and loss account in tally now, you will see the sale of a house of ₹50,00,000.

Profit and Loss Account of a Construction Company in Tally
Profit and Loss Account of a Construction Company in Tally

For creating the above sales entry, you need to do some changes in tally.

Firstly, you will have to create 2 different ledgers which are:

  1. Priya – A Sundry Debtor Ledger – for a person to whom we are selling the house.
  2. Sales – 1% – A Sales Ledger – for recording the sale of the house in tally with GST configuration.

Also, you have to alter the stock item of House and enter the GST details in it like in the picture below.

GST Details of Stock Item named House
GST Details of Stock Item named House

Now, we will look at the GST Works Contract Entry in Tally.

How to pass GST Works Contract Entry in Tally

Till now we have seen what normally a builder or a real estate developer does and how to pass accounting as well as inventory entry for that.

But, let’s say you get a contract for work to build houses from the government.

From raw materials to the house, we know what construction entries we have to do.

Now, after you have built the houses for the government, you completed the contract and now you will be paid the contract amount.

This is what a typical works contract entry will look like. Let’s take another example to understand this better.

Example – 2

You have completed the works contract given to you by the government. The contract amount is ₹6,00,000 with additional GST @ 18% in the form of IGST.

For this example, we have to pass a simple journal entry in tally.

Here is how you can do it in tally.

  • From Gateway of Tally, go to Accounting Vouchers.
  • Press F7 or select Journal from the right hand side green bar.
  • On the debit side, you have to select the ledger for Government. Enter ₹7,08,000 in the amount column.
  • On the credit side, select the Works Contract ledger and enter the amount of ₹6,00,000.
  • Press Enter and save the entry. It will look something like in the picture above.IGST will also be on the credit side. The amount will be ₹1,08,000.
Works Contract Journal Entry in Tally ERP 9
Works Contract Journal Entry in Tally ERP 9

For the works contract accounting under GST in tally, you need to create additional ledgers in tally apart from the ledgers that we have discussed above.

  1. Government Ledger – under Sundry Debtors since we have to take money from them.
  2. Works Contract Ledger – under Sales Account with GST enabled.

Note: Learn easily how to select which group under which ledger in tally. For example, how do you know when it is sundry debtor for government ledger? Learn it now.

As works contract is a service, in tally, we have to configure it as a service so it will be correctly picked up in the GST returns as well.

Here is the picture on how the ledger for Works Contract should be configured in tally with GST.

GST Details for Woks Contract as a Service in Tally
GST Details for Woks Contract as a Service in Tally

Labour Charges Journal Entry in Tally ERP 9 in Construction Company Entries

When you are doing construction or real estate accounting entries, you need to record the labour charges for the same as well.

Labour charges journal entry in tally is very easy.

It is exactly the same as any other expenses entry in tally.

Although, we are passing building or construction expenses entry but still expenses are expenses and therefore the accounting entry for that will be the same.

Example – 3

For this example, we will pay ₹20,000 as labour charges.

Here is the journal entry for the labour charges in tally, step by step.

  • From Gateway of Tally, go to Accounting Vouchers.
  • Select Journal Voucher or press F7.
  • Debit the Labour Expenses ledger with ₹20,000 and credit the Cash ledger with ₹20,000.
  • Press Enter and save the entry.
Labour Charges Journal Entry in Tally
Labour Charges Journal Entry in Tally

Congratulations! You have successfully passed the journal entry for labour charges in tally.

Tally Entries for Construction Company – Video

The video will be uploaded soon.

Conclusion

At the end, I want to make it clear that the construction company entries in tally are very easy and they are much like manufacturing entries in tally.

Works contract is different from construction.

I have explained construction assuming that we are on our own doing the construction. While for works contract, you got the work from someone else.

Of course, you can use both of them in your accounting in tally.

For example, when you get a works contract, you can use that entry and then when you build something, you can use the construction entry.

If you have any questions, comment down below and I will be happy to help you out.

I reply to each and every single comment. :0

4 thoughts on “Tally Entries for Construction Company + GST Works Contract Accounting

    • Rishit Shah says:

      Hi, Hitesh!

      In Tally, when you pass a sales or a purchase voucher, automatically, it is done as credit.
      Then, when you receive the money via cash or bank, the account is squared off.

  1. sanjay vahadane says:

    ours is a construction company. We are working for Government projects. We get running bill every month. The passing of Government bill is like :
    Gross Amt 1,00,000
    add 6%cgst 6000
    add 6% sgst 6000
    Total 1,12,000/
    less TDS 2% 2,000
    less SGST tds 1% 1000
    less CGST tds 1% 1000

    Net Cheque Amt 1,08,000

    How to create voucher of this entry?
    Please guide

    • Rishit Shah says:

      Hi, Sanjay!

      For the above government construction bill, you can pass the following entry in journal voucher in tally.

      Bank A/c Dr 1,08,000
      TDS A/c Dr 2,000
      SGST TDS A/c Dr 1,000
      CGST TDS A/c Dr 1,000

      To CGST A/c 6,000
      To SGST A/c 6,000
      To Government A/c 1,00,000

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