d How to calculate Interest in Tally
• • • # How to calculcate interest in Tally

Interest is an income or return on investment made in the form of loan in business, some time interest is also paid on late payments in Tally Accounting Software

Simple Interest

This is calculated on Principal amount at a given rate for given period. For example principal amount is Rs. 1,00,000 and rate of interest is 10% per annum then interest for 3 years.

• The interest amount for 1st year will be Rs. 10000
• The interest amount for 2nd year will be Rs. 10000
• The interest amount for 3rd year will be Rs. 10000

Important Notes:-

Activate and specify interest calculation in ledger masters. nter Interest details in Vouchers. Interest is calculated on a rate and style. The style determines the divisor period in the interest calculation. The difference could be significant depending on the month and total period.

Compound Interest in Tally -

This kind of interest is calculated on Compound basis, in this case the interest amount will be added to the principal amount. For example principal amount is Rs. 1,00,000 and rate of interest is 10% - we are calculating interest for 3 years. In case of compound interest, interest is charged on principal as well as interest thereon.

• The compound interest amount for 1st year will be Rs. 10000
• The compound interest amount for 2nd year will be Rs. 11000
• The compound interest amount for 3rd year will be Rs. 12100

Tally can calculate interest on bank balances, receivables & payables Tally provides four different styles of calculation of interest.

• 30 – days month (It assumes that all months have 30 days)
• Calendar Month (It assumes that all months have different days as per calendar)
• 365- day year (It assumes that all years have 365 days)
• Calendar Year (It assumes that all years have different days as per calendar)

## Interest Calculation on Bills

We can calculate interest on each bill for the period it is pending wholly or partly. Transaction by transaction or bill-by-bill interest calculation is permitted for those accounts falling under the groups sundry debtors or sundry creditors, before tally starts calculating interest, bill-wise details should be activated for the company and the concern party’s account.

We will use the simple interest voucher class and make the first entry as above. However, the above entry has the effect of increasing the bank account with the amount due (compound Effect).