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27/02/2019

How to Charge Interest on Due Date of Invoice from Party in Tally?

Friends, Today we discuss about the Interest charge by party on late payment of Invoices. Before we start we request you to please subscribe our YouTube Channel. We start Accounting Course step by step on our YouTube Channel. You can learn here from beginning to expert level so don't forget to subscribe our YouTube Channel.


So we are talking about Interest calculation on due date of Invoice from Party. First you need to enable Interest Calculation for each ledger through settings.


For enable Interest Calculation - Gateway of Tally - F11 - Accounting Features. There is heading Outstanding Management having some options:

1. Maintain Bill wise Details - Set Yes
2. For Non Trading Account Also - Remains No (This option show you and allow you to maintain profit and loss account bill wise. If you use this option too you see every bill is entered double as invoice wise in your outstanding details, So remain this option as no).
3. Activate Interest Calculation - Set Yes
4. Use Advanced Parameters - Set Yes


Enabling this option will provide you to maintain bill invoice number wise and if party delay to make payment then you can charge interest on invoice after due date.

Now go to ledger creation / alteration and set yes to Maintain Bill wise details and also set yes to Activate Interest Calculation.


After Set Yes or activating Interest Calculation following window appear on your screen.


Set the details as per above image. Mention rate as per agreed by customer. For Calculate Interest only on Sales Invoices not on receipts select Debit Balances Only. Set always in applicability and Calculate Interest from due date of Invoice/Ref No.

As i show in above image i set 15 days of credit period it means party needs to make payment with in 15 days otherwise, party will be liable to pay 18% interest on due invoices.

For Example: ABC sales goods to XYZ for Rs. 29500 (Including CGST / SGST - 4500 @ 18%) on dated 1/1/2019 and payment terms of the invoice is within 15 days. But party make payment on 30/1/2019, then party will be liable to pay interest @ 18% for 15 days i.e. 16th Jan 2019 to 30th Jan 2019.

Create Sales invoice and you can see in Bill wise details, there is 15 days appear automatically credit period. 15 days appear because you set 15 days in ledger creation/ alteration. You can change the days in entry manually also.


Enter sales invoice and save. Now go to Gateway of Tally - Display - Statement of Accounts - Interest Calculations - Interest Receivable - Current Assets - Sundry Debtors - Party Name - Enter. You can see there is Interest Calculation appear on your screen which will be applicable from Due date of Invoice to date of period you select. Press Alt + F2 for change the period and interest will automatically calculate on due days.


In above image you can see my invoice date is 1st January 2019 and credit days is 15 days. System calculate the interest from 16th Jan-2019 to date i mentioned. Calculation is as follows:

29500*18% = 5310 Per Annum. Now we want to calculate interest for 75 days then

(5310/365)*75 = 1091

It means system calculate interest correct.

Now you need to create a sales voucher of Rs. 1287 (Including CGST and SGST 18%).

In the same manner you can calculate interest on unsecured loans. For more information see below video tutorial:


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