Which voucher do I use for depreciation in Tally?

Journal (F7). There is no cash or bank movement involved in depreciation, so Contra (F4) and Payment (F5) do not apply.

Which voucher is used for month-end adjustments in Tally?

Journal (F7) is used for all non-cash month-end adjustments, including accumulated depreciation, prepaid expense amortisation, accrued income, and outstanding expenses.

Home›Blog›Accumulated Depreciation Entry in Tally: Journal vs Contra

Tally Prime Vouchers⏱️ 8 Min Read📅 Updated September 2026

By CSH Technical Team • Official Tally Partner Dubai

Accumulated Depreciation Entry in Tally: When to Use Journal and When to Use Contra

📌 The One Question That Clears Up Voucher Confusion

“Is money actually moving from one of your own cash or bank accounts to another?”

If YES → Contra Voucher (F4): Cash deposits, petty cash withdrawals, and internal bank-to-bank transfers between your own company accounts.
If NO → Journal Voucher (F7): Non-cash month-end adjustments — including accumulated depreciation entry in Tally, prepaid expense amortisation, accrued income, and outstanding liabilities.
External Outflows → Payment Voucher (F5): The moment money leaves your business to pay a supplier, landlord, or employee, it is a Payment, never a Contra.

📑Table of Contents10 Sections

Quick Navigation • Journal vs Contra Guide

01Contra & Journal in Plain Words→02Accumulated Depreciation Entry→03How to Record It in TallyPrime→04Cash Deposit & Withdrawal Contra→05Bank-to-Bank Contra vs Payment→06Prepaid Expense Journal Entry→07Accrued Income & Outstandings→08Month-End Adjustment Voucher→095 Mistakes Seen All the Time→10Frequently Asked Questions→

Ask any accountant who has been using Tally for a while, and they will tell you the same thing: when posting an accumulated depreciation entry in Tally or reconciling month-end books, the tricky part is rarely the debit and credit. It is figuring out which voucher the entry belongs in.

Cash deposit? Bank transfer? Depreciation? Prepaid rent? They all touch your accounts in some way, so it is easy to see why people mix them up. Plenty of company books have half their bank entries thrown into Contra simply because the word “bank” was involved.

The good news is that you don’t need to memorise a long list. One question clears up almost all of the confusion: Is money actually moving from one of your own cash or bank accounts to another? If it is, you are looking at a Contra voucher (F4). If nothing is physically moving and you are setting the books right at month-end, that is a Journal voucher (F7).

1. Contra and Journal in Plain Words

A contra entry in Tally is simply you moving your own money around. You take cash from the drawer and deposit it in the bank. You pull cash out for petty expenses. You shift funds from one of your business bank accounts to another. No income is earned, and no expense is incurred — the money simply sits in a different internal account.

A journal entry in Tally is completely different. Nothing changes hands. You are recording something that has already happened in accounting terms, such as a fixed asset losing value over time or an expense accumulating that you haven’t paid yet.

Feature	Contra Voucher (`F4`)	Journal Voucher (`F7`)
Core Purpose	Internal movement of company cash/bank funds	Non-cash accounting adjustments & accruals
Accounts Involved	Only Cash-in-Hand and Bank Accounts	Expenses, Assets, Liabilities, Provisions, Income
Does Total Cash Change?	No — money moves from one internal pocket to another	No cash or bank movement takes place
Typical Examples	Cash deposit, petty cash withdrawal, inter-bank transfer	Accumulated depreciation, prepaid expense amortisation, unpaid salaries, accrued FD interest

2. Accumulated Depreciation Entry in Tally

Depreciation is the clearest place to start because it is unmistakably not about cash. You aren’t paying anyone. You are formally recognising that your fixed asset is worth less than it was last year due to wear, tear, and usage.

Since no cash or bank account moves, the accumulated depreciation entry in Tally always goes through a Journal voucher (F7).

Worked Example — Delivery Van Depreciation:
Suppose you purchased a delivery van for 8,00,000 (or AED 80,000), and your annual depreciation works out to 1,20,000 (or AED 12,000). At year-end:

Depreciation – Vehicle A/c — Dr 1,20,000
To Accumulated Depreciation – Vehicle A/c — Cr 1,20,000

Here is how Tally handles both sides of this entry:

The 1,20,000 debit appears as an operating expense in your Profit & Loss account.
Meanwhile, the Accumulated Depreciation credit quietly sits against the van on your Balance Sheet and pulls its net book value down to 6,80,000, while the original purchase cost of 8,00,000 stays intact in the vehicle ledger.

3. How to Record It in TallyPrime (Step-by-Step)

STEP 1: CREATE LEDGERS

Set Up the Two Depreciation Ledgers

From Gateway of Tally > Create > Ledger:
1. Name the first ledger Depreciation – Vehicle and place it under Indirect Expenses.
2. Name the second ledger Accumulated Depreciation – Vehicle and place it under Fixed Assets.

STEP 2: POST F7 JOURNAL

Pass the Journal Voucher Entry

Go to Gateway of Tally > Vouchers and press F7 (Journal). Debit Depreciation – Vehicle with 1,20,000, credit Accumulated Depreciation – Vehicle with 1,20,000, and enter a clear narration such as “Depreciation on delivery van for FY 2025-26”. Press Ctrl + A to save.

💡 Can You Skip the Accumulated Depreciation Ledger?
You can — many small businesses credit the asset account directly (Depreciation – Vehicle Dr to Vehicle A/c Cr). It is not wrong, but it has one major downside: after three or four years, you will struggle to see what you originally paid for the van without digging through old invoices. Keeping a separate Accumulated Depreciation ledger preserves the historical cost for auditors and tax schedules.

4. Cash Deposit & Cash Withdrawal Contra Entries (F4)

Cash Deposit Contra Entry in Tally

Suppose your retail counter collected 75,000 in cash during the week, and on Saturday you deposited it into your corporate bank account. You record this using Contra (F4):

Bank A/c — Dr 75,000
To Cash A/c — Cr 75,000

Notice there is no sales entry here. You already recorded those sales when they happened. The deposit is simply the same money changing address — from your cash drawer to your current account.

Withdrawing Cash from the Bank for Petty Cash

Now flip it around: you withdraw 25,000 from the bank to top up office petty cash. Still Contra (F4):

Cash A/c — Dr 25,000
To Bank A/c — Cr 25,000

⚠️ Common Trap: Many beginners see money leaving the bank and book a cash withdrawal as an expense straight away. But you haven’t spent a single unit of currency yet — the money is just sitting in your petty cash box. The expense gets recorded later via F5 Payment when you actually pay for courier charges, printer toner, or office refreshments.

5. Bank-to-Bank Contra Entry vs Supplier Payment

Suppose you transfer 2,50,000 from one company bank account (e.g., SBI / Emirates NBD) to another company bank account (e.g., Axis Bank / ADCB) because several vendor cheques are coming up for clearance.

Scenario	Accounting Entry	Correct Voucher	Why?
Transfer Between Your Own Two Bank Accounts (2,50,000)	`Receiving Bank A/c Dr 2,50,000` `To Sending Bank A/c Cr 2,50,000`	Contra (`F4`)	Both accounts belong to your business; funds remain internal.
Transfer of 2,50,000 to a Supplier	`Supplier A/c Dr 2,50,000` `To Bank A/c Cr 2,50,000`	Payment (`F5`)	Money has left your business completely to settle a creditor.

Same bank, same amount, completely different voucher. That is why “it involves the bank” is never enough to decide.

6. Prepaid Expense Journal Entry in Tally

Prepaid expenses are items you pay for upfront in advance but consume gradually over time — such as annual commercial insurance, office rent paid quarterly/annually, or 12-month software subscriptions.

Let’s take a 12-month software subscription paid upfront for 90,000 (which equals 7,500 per month):

Step A — When You Pay Upfront (Payment Voucher F5):
Prepaid Subscription A/c (Current Asset) — Dr 90,000
To Bank A/c — Cr 90,000

Step B — At the End of Every Month (Journal Voucher F7):
Software Subscription Expense A/c — Dr 7,500
To Prepaid Subscription A/c — Cr 7,500

After Month 1, 82,500 remains sitting on your Balance Sheet as a prepaid asset. After Month 2, it drops to 75,000, and so on, until it is smoothly amortised to zero at the end of the 12-month period.

7. Recording Accrued Income & Outstanding Expenses

Accrued Income (Earned Input Not Yet Received)

Accrued income is revenue you have earned during the period but haven’t received in the bank yet. For example, by 31st March your Fixed Deposit has earned 12,400 in interest, but the bank won’t credit it until April. To keep the income in the right financial year, pass a Journal voucher (F7) on 31st March:

Accrued Interest A/c (Current Asset) — Dr 12,400
To Interest Income A/c — Cr 12,400

Outstanding Expenses (Incurred But Not Yet Paid)

This is accrued income’s opposite twin: you have used a service or incurred staff costs in March, but will pay them in April. Suppose March salaries total 65,000, paid on 5th April:

1. On 31st March — Book the Expense & Liability (Journal Voucher F7):
Salary Expense A/c — Dr 65,000
To Salary Payable A/c (Current Liability) — Cr 65,000

2. On 5th April — Clear the Liability When Paid (Payment Voucher F5):
Salary Payable A/c — Dr 65,000
To Bank A/c — Cr 65,000

Crucial Watch-Out: Do not debit the Salary Expense A/c again in April! You already booked the expense in March. The April Payment entry is solely there to clear the Salary Payable liability.

8. Month-End Adjustment Voucher Checklist in Tally

Every business has a handful of adjustments to pass before closing the monthly books. Every single month-end adjustment voucher in Tally goes through Journal (F7):

Fixed Asset Depreciation: Debit Depreciation Expense, Credit Accumulated Depreciation.
Prepaid Expense Amortisation: Debit Monthly Expense head, Credit Prepaid Asset account for the month’s consumed share.
Outstanding Bills & Salaries: Debit Expense account, Credit Payable/Provision account for unpaid month-end bills.
Accrued Revenue / Interest: Debit Accrued Income asset, Credit Income account for revenue earned but unbilled/unreceived.

Running through this 5-minute checklist at the end of each month saves you from a stressful multi-day cleanup at financial year-end.

9. Five Mistakes Accountants See All the Time

1. Recording Supplier Payments in Contra (F4)

Contra is strictly for moving money between your own cash and bank accounts. The moment money goes to a vendor or outside party, it must be recorded in Payment (F5).

2. Booking Cash Withdrawals Directly as Expenses

Pulling cash from the ATM or bank counter isn’t spending it. Record the withdrawal in Contra (F4) first, then book expenses as petty cash is actually spent.

3. Trying to Pass Depreciation in Contra or Payment

There is zero cash or bank movement in depreciation. Always use Journal (F7).

4. Expensing a Full Annual Prepaid Bill in Month One

If you pay for a 12-month policy or license upfront, only one month’s share belongs in this month’s P&L. Keep the unconsumed balance under Prepaid Assets and release it monthly via F7.

5. Ignoring Month-End Accruals

Skipping accrued income or unpaid expenses makes one month look artificially profitable while making the next month look far worse than reality.

10. Frequently Asked Questions (FAQ)

What is the accumulated depreciation entry in Tally?

Debit the Depreciation account (under Indirect Expenses) and credit the Accumulated Depreciation account (under Fixed Assets). Record it through a Journal voucher (F7).

Which voucher do I use for depreciation?

Journal (F7). There’s no cash or bank movement, so Contra and Payment don’t fit.

What is a Contra entry in Tally?

It’s used when money moves between your own cash and bank accounts. Deposits, withdrawals, and transfers between your business bank accounts are the usual examples.

What is the cash deposit Contra entry in Tally?

Debit Bank, credit Cash, and use Contra (F4).

Is every bank transfer a Contra entry?

No. Only transfers between your own accounts count. If money goes to a supplier, an employee, or anyone else outside the business, it’s a Payment (F5).

What is the prepaid expense journal entry in Tally?

Each month, debit the relevant expense and credit the Prepaid Expense account for the portion used. Use Journal (F7).

Which voucher is used for month-end adjustments?

Journal (F7), whether it’s depreciation, prepaid expenses, accrued income, or outstanding expenses.

📒 OFFICIAL TALLY MASTER PARTNER DUBAI & UAE

Streamline Your Month-End Closing & Audit Readiness in Tally

Need expert help setting up fixed asset depreciation schedules, cleaning up misclassified Contra/Journal entries, or training your finance team in TallyPrime? Connect with our certified Dubai specialists today.

Annual Support Contracts (AMC) →Request Tally Support Chat on WhatsApp

⭐ 4.9/5 Rating on Google•✓ 100% FTA Compliance•⚡ Instant Support in Dubai & UAE

Accumulated Depreciation Entry in Tally: When to Use Journal and When to Use Contra

📌 The One Question That Clears Up Voucher Confusion

1. Contra and Journal in Plain Words

2. Accumulated Depreciation Entry in Tally