Top 10 Basic Accounting Concepts You Must Know Before Learning Tally

Introduction: Why Accounting Concepts Matter

Before you dive into TallyPrime and computerized accounting, it’s crucial to understand the fundamental principles of accounting. These concepts form the foundation of every transaction you’ll enter in Tally — from vouchers and ledgers to balance sheets.

Let’s explore the Top 10 basic accounting concepts that every beginner should know before learning Tally.

1. Business Entity Concept

The business and the owner are treated as separate entities. For example, if an owner invests ₹1,00,000, it is considered a liability for the business.

2. Money Measurement Concept

Only transactions measurable in monetary terms are recorded in accounting. Non-financial elements like employee satisfaction are not entered in Tally.

3. Dual Aspect Concept

Every transaction has two sides — Debit and Credit. Example: When goods worth ₹10,000 are purchased in cash — Goods (Dr) ₹10,000 and Cash (Cr) ₹10,000.

4. Going Concern Concept

It assumes that the business will continue operating indefinitely. Tally maintains records with the expectation that operations won’t stop soon.

5. Accounting Period Concept

Financial results are reported for a specific period (monthly, quarterly, yearly). In Tally, companies define their financial year during creation.

6. Cost Concept

Assets are recorded at their original purchase cost, not market value. For instance, machinery bought for ₹5,00,000 remains valued at cost until depreciation.

7. Matching Concept

Expenses must match revenues in the same accounting period. This ensures profit or loss is accurately determined.

8. Realization Concept

Income is recognized when it is earned, not necessarily when cash is received. Example: Sales made on credit are recorded immediately as revenue in Tally.

9. Accrual Concept

Expenses and incomes are recorded when they occur — not when money changes hands. Tally supports accrual-based accounting by default.

10. Conservatism Concept

“Don’t anticipate profits but provide for all possible losses.” This principle ensures businesses stay realistic and cautious in financial reporting.

Bonus: Accounting Equation

The heart of accounting lies in this equation:

Assets = Liabilities + Capital

Every Tally transaction ultimately affects this equation, maintaining the balance sheet equilibrium.

Conclusion: Build a Strong Foundation

These 10 accounting concepts are the backbone of financial management and are deeply integrated into TallyPrime. Mastering them ensures you understand not just “how” to record entries — but also “why” they matter.

Once you’re confident with these basics, you’re ready to start learning Tally and applying these concepts practically.