How to Set Credit Limits in Tally.ERP9?

Credit Limit refers to the monetary limit agreed upon mutually by the seller and the buyer for trading purposes. Credit Limits can be specified for any Ledger account falling under the groups Sundry Debtors and Sundry Creditors. Ledger Accounts created under Sundry Creditors are also allowed for defining Credit Limits for the reason that there may be two-way trade between the parties i.e., you may sell to a Sundry Creditor and buy from a Sundry Debtor Accounts.

Setting Credit Limit

You can set credit limits for ledgers accounts grouped under Sundry Debtors and Sundry Creditors at the time of ledger creation or from the alteration screen or also at the time of invoicing. To activate Credit Limits feature in Tally.ERP 9,

Go to F11 Features > Accounting Features > Set Maintain Budgets and Controls to Yes

To set Credit Limits for Single Ledger Account, follow the steps given below:

Go to Gateway of Tally > Accounts Info > Ledgers > Create / Alter (under Single Ledger). Select the required party ledger from the List of ledgers to set credit terms. The single Ledger Alteration screen is displayed. You can set credit limits for both amount and period here.

To set credit limits for multiple ledgers: Go to Gateway of Tally > Accounts Info > Ledgers > Credit Limits (under Multiple Ledgers)

Select the required group of ledgers from the List of Groups to set credit terms. The Multi Ledger Limit Alteration screen is displayed. The list of ledger accounts under the selected group is displayed. You can now set credit limits for both amounts and periods here.

Credit Limit

Specify the amount of credit limit against the ledger account in this field. You can set the amount limits in foreign currency if required, for ledgers involving forex transactions.

Credit Period

Credit period can be either specified in No. of days or the due date (for eg., 31.10.09) and are calculated from the Voucher date or Invoice date or the effective date, as applicable i.e., if only Voucher Date exists, it is considered as the effective date for calculation for Credit Days otherwise if effective date is specified in the Voucher, it is considered for calculation for due date.

Exceeding Credit Limits

During invoice or order entry, if the credit amount limit is exceeded, at the accepting the voucher, Tally.ERP 9 prompts an error message displaying the amount exceeding the credit limit specified. You can however,

1. Enter a lower value (within the prescribed credit limit) to complete the entry ; or
2. Abandon the current entry and obtain authorization to increase the credit amount limit in the Multi Ledger Limit Alteration screen.

This feature helps in restricting Invoicing for the customers or parties exceeding the prescribed credit limits and thereby facilitating better and effective control of the outstandings.

Significance of Setting Credit Limits

The significance of setting credit limits is that during voucher entry (or invoicing), the credit terms are automatically defaulted based on the configuration made in the ledger master. The current balance and the credit limit of the Ledger accounts are displayed in the Order and Invoice entry vouchers to ascertain the amount permitted or acceptable.

Its done!!!