Accounting Policies

DISCLOSURE OF ACCOUNTING POLICY

                                                                 

Accounting policies are the specific accounting principles and the methods of applying those principles adopted by an enterprise in the preparation and presentation of financial statements.

-          All significant accounting policies should be disclosed.

-          Such disclosure form part of financial statements.

-          All disclosures should be made at one place.

-          Specific disclosure for the adoption of fundamental accounting assumptions is not required.

-          Disclosure of accounting policies cannot remedy a wrong or inappropriate treatment of the item in the accounts.

Any change in accounting policies which has a material effect in the current period or which is reasonably expected to have material effect in later periods should be disclosed.

In the case of a change in accounting policies, which has a material effect in the current period, the amount by which any item in the financial statements is affected by such change should also be disclosed to the extent ascertainable. Where such amount is not ascertainable, the fact should be indicated.

Fundamental Accounting Assumption: (GCA) :

1] Going Concern

2] Consistency

3]  Accrual

Major considerations governing the selection of accounting policies:

1]  Prudence

2]  Substance over form (Logic over Law)

3] Materiality

The following are examples of the areas in which different accounting policies may be adopted by different enterprises:

-                                  Methods of depreciation

-                                  Methods of translation of foreign currency

-                                  Valuation of inventories

-                                  Valuation of investments

-                                  Treatment of retirement benefits

-                                  Treatment of contingent liabilities etc.

F11: Audit Features

The Auditor needs to set the following Tax Audit Rules and Payment Due dates for various clauses:

• Tax Audit Rules for Amounts inadmissible u/s 40A (3) - (Clause 17(h)
• Statutory Payment Due Dates for Value Added Tax and Central Sales Tax
• Statutory Payment Due Dates for Service Tax
• Statutory Payment Due Dates for Tax Collected at Source
• Statutory Payment Due Dates for Provident Fund, ESI and Professional Tax

Tax Audit Rules for Amounts inadmissible u/s 40A (3) - (Clause 17(h)

To set the Tax Audit Rules for Amounts inadmissible u/s 40A (3) (Clause 17(h))(Cash Payments),

Go to Gateway of Tally > Audit & Compliance > 44AB Audit

• Click on F11: Features or Press F11

 Under Inadmissible Cash Payments U/s 40A (3),

• Show Aggregate for the Day : This option should be set to Yes if the Auditor wants to view the Payment Vouchers with Aggregate amount more than specified in Show Aggregate Amounting More than field
• Show the Aggregate Amounting more than :
• When Show Aggregate for the Day is set to Yes, this will display only those Payment Vouchers belonging to a Ledger, which exceeds the aggregate amount as entered in this field for a day.
• When Show Aggregate for the Day is set to No, this will display only those Payment Vouchers belonging to a Ledger, which exceeds the aggregate amount entered in this field for the Period.
• Ignore Vouchers having Amount less than : Enter the required amount in this field. The Payments Vouchers having the amount less than entered in this field will be ignored while displaying the Cash Payments report.

• Press Enter to Accept and save the changes.

Statutory Audit

To enable Audit Working Paper, tab down to Audit Documentation section

• Set the option Enable Audit Working Paper to Yes

• Set the option Enable Audit Working Paper? to Yes. On enabling the option Enable Audit Working Paper, a menu option Audit Working Paper will be displayed in Audit Documentation Menu.
• Set the option Enable Audit Priorities and Categories? to Yes to assign priorities and categories while seeking clarification from users of the company in Tally.ERP 9.

Statutory Payment Due Dates for Value Added Tax and Central Sales Tax

To specify the Due Dates for Value Added Tax and Central Sales Tax,

• Tab down to Value Added Tax & Central Sales Tax section
• Enter No. of Days within which the payment is to be made against the Value Added Tax field and Months payment cycle from Period drop down
• Similarly enter the No. of Days within which the payment is to be made against the Central Sales Tax field and Months payment cycle from Period drop down

Note: The system will check the Challan date with the date entered in the F11: Audit Features screen and display the status as:

On Time: When Payment is made on or before the due date.

Late: When the Payment is made past the due date.

Late (Partially): When atleast one payment is made past the due date.

Due / Late (Partially): When one payment is made past the due date and another payment is due.

Due (Partially): When at least one payment is not made and other payments are made on time.

Due: When the Payment is not made past the due date.

Statutory Payment Due Dates for Service Tax

To enter the due date for Service Tax Payments,

• Tab down to Service Tax section
• Enter No. of Days within which the payment is to be made against the Payment Period field

Note: The system will check the Challan date with the date entered in the F11: Audit Features screen and display the status as:

On Time: When Payment is made on or before the due date.

Late: When the Payment is made past the due date.

Late (Partially): When atleast one payment is made past the due date.

Due / Late (Partially): When one payment is made past the due date and another payment is due.

Due (Partially): When atleast one payment is not made and other payments are made on time.

Due: When the Payment is not made past the due date.

Statutory Payment Due Dates for Tax Collected at Source

To enter the Due date for TCS Payments,

• Tab down to Tax Deducted at Source & Tax Collected at Source section
• Enter No. of Days within which the payment is to be made against the Tax Collected at Source field. By default 7 is prefilled.

Note: The system will check the Challan date with the date entered in the F11: Audit Features screen and display the status as:

On Time: When Payment is made on or before the due date.

Late: When the Payment is made past the due date.

Late (Partially): When atleast one payment is made past the due date.

Due / Late (Partially): When one payment is made past the due date and another payment is due.

Due (Partially): When atleast one payment is not made and other payments are made on time.

Due: When the Payment is not made past the due date.

Statutory Payment Due Dates for Provident Fund, ESI and Professional Tax

To enter the Due dates for Payroll related Payments,

• Tab down to Payroll section
• For Provident Fund payments, enter No. of Days within which the payment is to be made against the Provident Fund field.
• For ESI, payments, enter No. of Days within which the payment is to be made against the Employee State Insurance field.
• For Professional Tax payments, enter No. of Days within which the payment is to be made against the Professional Tax field.

Note: The system will check the Challan date with the date entered in the F11: Audit Features screen and display the status as:

On Time: When Payment is made on or before the due date.

Late: When the Payment is made past the due date.

Late (Partially): When atleast one payment is made past the due date.

Due / Late (Partially): When one payment is made past the due date and another payment is due.

Due (Partially): When atleast one payment is not made and other payments are made on time.

Due: When the Payment is not made past the due date.

Computer Accessories

Tax Audit Dashboard

To view the Tax Audit Dashboard,

Go to Gateway of Tally > Audit & Compliance > 44AB Audit

The Tax Audit dashboard screen shows total number of Vouchers available for Audit, which are checked by the user, which need clarification from the Audit team or client, those to be re-audited and Audit Complete information for each Clause.

• Clause No.: Displays the Clause number as it appears in Form 3CD.
• Audit Type: Provides brief description on the respective Clause.
• Total: Displays the total number of vouchers for each clause.

• Audited: Displays the total number of Audited Vouchers for each clause.
• Internal Observation: Displays the total number of Vouchers marked as Internal Observation for each Clause. Internal Observation column is divided into Pending and Clarified.
• Pending: Pending column displays all those vouchers marked as Internal Observation under each clause and those not clarified.
• Clarified: Clarified column displays all the vouchers clarified which are marked for Internal Observation for each clause.   

• External Clarification: Displays the total number of Vouchers marked for Clarification from the Client.
• Pending: Pending column shows the total number of Vouchers that are pending for Clarification from the Client.
• Clarified: Clarified column shows all those vouchers that are clarified from the client's side.  
• Altered (To be re-audited): Displays the total number of Vouchers that are Altered by the Client post Audit. The Auditor can highlight the respective column to view the Re-Audit Summary for the respective Clauses.
• Audit Complete?: Displays the Audit completion status for each Clause as entered by the Auditor using the F9: Save Audit button.

Note: If the Client alters any Audited Vouchers after the Audit Complete is set to Yes. The Audit Complete status will automatically change to blank for the respective Clause.

Button options in the Tax Audit Dashboard screen

F2: Period

To change the financial year selected, click on F2: Period or press F2 key.

F9: Save Audit

To save the Audit Status for the required Clause, click on F9: Save Audit or press Alt+F9 key to mark the Audit Complete status to Yes. The same will appear in the Audit Complete Column.

Note: The Clause for which the Audit Status needs to be saved, should be selected first by using Space Bar key.

C: Clarification List

To view all the Vouchers which are marked for Client's Clarification (with Audit Status as External Clarification) and the Vouchers which are Clarified (Audit Status as Clarified)  by the Client in a single report,

• Click on  C: Clarification List or press Alt+C keys

The Clarification List report displays all the External Clarification and Clarified Vouchers in a single screen for Auditors' reference.

F10: Audit Reports

Click on F10: Audit Reports or press Alt+F10 keys to navigate to Audit & Analysis (Statutory Audit) Reports.

F12: Configure

To view the Last Audit Details, click on F12: Configure or press F12 key.

• Set option Show Last Audit Details to Yes

The Tax Audit Dashboard displaying the Last Audit Details will appear as shown:

The above screen displays the Last Audit details for each Clause.

• Last audited By: Displays the User name (login name) of the Auditor who performed the last Audit
• Date & Time: Displays the date and time for the last Audit
• Date of Last audited voucher: Displays the Voucher Creation date of the Voucher that was audited last.

Tax Audit in Tally.ERP 9

The Tax Audit feature in Tally.ERP 9 enables the user to compile information in comparatively less time with the required accuracy to form the right opinion. From the vast data available, the required information that needs to be reported can be identified and extracted precisely.

While conducting Tax Audit in Tally.ERP 9, the Auditor and other users can examine, review, analyse the books of accounts and other records with a view to compile information and data required to be reported in Form 3CD, and thereupon express an opinion wherever required.

In Tally.ERP 9, the following clauses are available as Annexures with respect to Form 3CD:

• Bonus, PF, ESI Recoveries (Clause 16)
• Amounts debited to P&L a/c  (Clause 17)
• Payments to Specified Persons (Clause 18)
• Payments u/s 43B (Clause 21)
• Employer’s Contribution
• Tax Collected at Source
• Service Tax
• Value Added Tax
• Loans / Deposits Accepted (Clause 24(a))
• Loans / Deposits Repaid (Clause 24(b))
• Tax Deducted at Source (Clause 27)

Apart from these Annexures to Form 3CD, a separate section - Verification of Vouchers is provided in Tax Audit Dashboard that covers Clauses not covered in the list specified above. 

Printing Form 3CD

To Print the Form 3CD from Tally.ERP 9,

Go to Gateway of Tally > Audit & Compliance > Form 3CD

• Press Alt+P or click on P: Print
• In the Print screen of Form 3CD,

• Set the option Print Form 3CD to Yes, to print Form 3CD
• Set the option Print with Signatures to Yes, to print the Form 3CD with signatures.
• Set the option Print along with Annexures to Yes, to print all the Annexures along with Form 3CD
• Specify the Auditor's CA Firm Name in the Firm Name field
• Specify the Firm Registration Number in the FRN field
• Specify the Auditor's name in the Name of Chartered Accountant field
• In the Salutation filed specify Auditor's salutation
• Specify the membership number of Auditor in the MRN No field
• Specify the address of CA Firm in the Address field
• Specify the city name in the Place field
• In Date field enter the date of generating the Form 3CD
• Specify the Company signatory details on the right side if required

Note: The empty fields in the Print Configuration screen will not be printed in the Form 3CD.

• Press Enter to print Form 3CD and Annexures.

The printed Form 3CD Annexure I  appears

Filling Form 3CD

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The Auditor can enter the required information for the Clauses not available in Tally.ERP 9 in Form 3CD and save the details. This information will be saved against the respective Clauses and will be available for future references.

To enter the Required information in Form 3CD,

Go to Gateway of Tally > Audit & Compliance > Form 3CD

The Form 3CD screen appears as shown below:

The Form 3CD screen is divided into four columns.

• Clause No. : Displays the Clause numbers as stated under the Income Tax Act, 1961.
• Particulars:  Displays brief description of Clauses.
• Applicability: Option to mark a clause as Applicable or Not Applicable.
• Additional Details: Details regarding Annexures or any reports to be attached.

The Auditor can press Enter on the respective clause, specify the required information and save it.

Clause Applicability Details:

A Clause may be relevant or irrelevant to the companies policies and nature of business. If a particular clause is applicable or not applicable to a business, a provision to update the applicability status is provided in Form 3CD screen.  

To mark a clause as Applicable or Not Applicable:

• Press Spacebar to select the clause.
• Press F5 or click on the button F5:Update.

A Clause Applicability Details screen appears.

• Select the required status from the list.
• If, Not Applicable is selected, provide Remarks, if any.

• Press Enter to save the details.

On saving the details, the respective clause will appear with the status selected as shown below:

Note: If a Clause mentioned under 44AB of the Income Tax Act, 1961 is marked as Not Applicable in the Form 3CD screen, then the respective clause will not appear in the Tax Audit Dashboard under 44AB.

In the above screen, Clause 17 (a-m) is marked as Not Applicable.

Therefore, the same Clause 17 (a-m) will not appear in 44AB Tax Audit screen as shown below:

Filling Clause No. 1-6

To enter the information required for Clause No. 1-6,

• Highlight the Clause No. 1-6 in the Form 3CD screen and press Enter.
• In the Particulars of Assessee screen,

• Enter the Company Name in the Name of Assessee field.
• Enter the Company address in the Address field.
• Enter the Company PAN number in the Permanent Account Number field.
• Enter the type of organisation (Company, Individual, firm etc) in the Status field.
• Enter the last date for previous financial year (e.g. 31-March-2012) in the field Previous Year Ended field
• Enter the details of Tax Audit Assessment Year (2012-2013)details in the Clause No. 6

Note: The details for Clause No. 1, 2, 3, 5 and 6 are pre-filled with the information provided in the Company Masters.

If the Auditor alters the default information for these Clauses in this screen, then the same will be stored against these clauses in Form 3CD for future reference. This will not overwrite the Company Master details.

• Press Enter to save the details.

Filling Clause No. 7 (a & b)

To enter the information required for Clause No. 7 (a & b),

• Highlight the Clause No. 7 (a & b) in the Form 3CD screen and press Enter
• In the Particulars of Members/Partners screen,

• Specify the required details for Clause No. 7 (a) in the text field provided

Tally.ERP 9 provides the facility of using the pre-defined text templates to fill the repetitive information viz, Not Applicable, Nil etc.

To use the default text templates available in Tally.ERP 9,

• Press Alt+T or click on T: Select Text button

• A list of text templates appears. The Auditor can select the predefined text or provide User Defined text as required.

For example:

• Select As per Annexure from the text templates.
• The text As per Annexure gets filled in the Clause as shown below:

• Similarly, fill in details for Clause 7 (b).

• Press Enter to save the details

Likewise, an Auditor can enter all the relevant details for each Clause as per the process explained.

Provision of User Defined Text templates:

Tally.ERP 9 provides the Auditor an option to provide User Defined Text Templates.

To add an User Defined Text

• Select Add User Defined Text from the list of text templates by pressing Alt+T or clicking on the button T: Select Text in the respective clause.
• Specify the text in Add User Defined Text sub-screen as shown below:

• Press Enter to save.

The user defined text added will now appear in the list of text templates.

To Remove User Defined Text

• Select Remove User Defined Text from the list of texts by pressing Alt+T or clicking on the button T: Select Text in the respective clause..

• On selection, a Remove User Defined Text sub-screen appears with the list of User Defined Texts mentioned earlier.

• Select the User Defined Text created earlier to remove. For example: In the above screen, the user defined text already created is Not applicable as per the Company Policies.

Filling Annexure I

To enter the information required for Annexure I,

• Highlight the Annexure I in the Form 3CD screen and press Enter
• In the Particulars of Annexure -I screen, enter the required details as shown:

• Press Enter to save the details entered in Annexure I.

Button Options in Form 3CD screen

F1 : Detailed

Press Alt+F1 or F1 : Detailed button to view detailed Form 3CD.

Ctrl+O: Copy From

To copy the data from Form 3CD of a different Company (or same Company for previous year), the Auditor can use Copy From button available in the Form 3CD screen.

Tally.ERP 9 provides the option to copy the information for all the Clauses or selective Clauses from one Company to another.

Note: The Form 3CD information can be copied from the previous Company in the same data or in a different data folder.

Copying entire Form 3CD

To Copy the entire Form 3CD from one Company to another, follow the steps give below:

• Ensure that both the Companies are loaded in Tally.ERP 9 and the Company in which the information has to be copied should be the Active Company.

Go to Gateway of Tally > Audit & Compliance > Form 3CD

• Press Ctrl+O or click on Ctrl+O: Copy From button
• In the Data Configuration screen,

• In the Copy From Company field select the Company in which filled Form 3CD is available

• In the Copy from Financial Year select the year for which filled Form 3CD is available

• Press Enter to Copy and save the details of Form 3CD

Copying individual Clauses in Form 3CD

To Copy the information Clause by Clause from one Company to another, follow the steps give below:

• Ensure that both the Companies are loaded in Tally.ERP 9 and the Company in which the information has to be copied should be the Active Company.

Go to Gateway of Tally > Audit & Compliance > Form 3CD

• Highlight the Clause for which the information needs to be copied and press Enter (e.g. Clause 11 (a-d) and press Enter

• Press Alt+R or click on R: Copy From button.
• In the Data Configuration screen,

• In the Copy From Company field select the Company in which filled Form 3CD is available.
• In the Copy From Financial Year select the year for which filled Form 3CD is available.

• Press Enter to Copy and save details for the selected Clause

 Similarly, the user can copy all the Clauses one by one.

X: 44AB Audit

While filling Form 3CD, an option X: 44AB is provided. On pressing Alt+X or clicking on X: 44AB, the list of vouchers audited under this clause will be listed or the 44AB Audit screen pertaining to this clause will appear.

Note: However, this button appears only if the pertaining Statutory feature is enabled and is covered under 44AB Audit of Tally.ERP 9.

A: Annexure

If a particular clause in Form 3CD has Annexures, then the same can be viewed by clicking on A: Annexure or pressing Alt+A.

The list of Annexures appear as shown below:

• Press Enter to view the Annexure.

The Annexures can be printed from here.

If statutory features are disabled in Tally.ERP 9, then instead of Annexures, A: Report is provided. Click on A: Report or press Alt+A to view the list of Vouchers audited under the clause.

C: View Clause Ref

Clause References are the information or notes provided for a voucher or at the company level. This will act as a reference in future while filling Form 3CD. This will help an auditor in better decision making. While filling Form 3CD, the user can view the Clause references provided at the Company level and voucher level.

To view Clause references from Form 3CD,

• Click on C: View Clause Ref or press Alt+C

A Clause Reference Details screen appears. The Clause Reference details screen contains Clause references specified both at the company level and the voucher level.

Company Note:

Clause References provided at the company level, i.e. those mentioned against a clause by selecting Company, appear in Company Notes.

• Notes: The Clause Reference mentioned against a specific clause is displayed here.  
• Note By: The name of the user who has added the note is shown here.

Voucher Note:

Clause References provided for a specific voucher against a particular clause is shown here.

• Date: The date on which the clause reference is provided is displayed here
• Particulars: The ledger against which the clause reference is given is shown here
• Voucher No.: The Voucher no. containing the ledger for which the clause reference is provided is given here
• Note By: The name of the user who has added the note is shown here.
• Note: The clause reference provided is shown in this column.

Button Options in Clause Reference Details screen

D: Delete

The Clause Reference provided can be deleted.

To delete,

• Press Spacebar to select the clause reference
• Press Alt+D key or click on D: Delete button
• Press Enter to delete the clause reference.

F12: Configure

Press F12 or click on F12: Configure to change the default display.

• Show Clause Reference of: The Clause Reference details screen can be filtered on the basis of notes specified for Company or Vouchers or both as shown below:

• Show Date and Time: To display the date and time of the clause reference given, set this option to Yes.
• Sorting Method: The Clause reference details screen can be sorted on the basis of Date and Time (Increasing or Decreasing) or Audit/Note by (Increasing or Decreasing)

Note: Show Date and Time, Sorting Method options will appear in Configurations only if Company or Voucher is selected in Show Clause Reference of field.

• Show Transaction Value: Set this option to Yes to view the value of the transaction against which clause reference is stated.

Note: This option will be available only if Vouchers is selected in Show Clause Reference of.