diff --git a/app/modules/accounting/__init__.py b/app/modules/accounting/__init__.py
new file mode 100644
index 0000000..5d1b92a
--- /dev/null
+++ b/app/modules/accounting/__init__.py
@@ -0,0 +1,18 @@
+"""Accounting Phase 1 foundation.
+
+This package is intentionally additive.  Phase 1 provides client-scoped .act
+SQLite storage plus read-only local TallyPrime discovery.  ERP UI/tunnel
+registration is wired only after matching the current production router/agent
+source so existing features are not disturbed.
+"""
+
+from .act_store import AccountingActStore, AccountingActStoreError
+from .tally_connector import TallyCompany, TallyConnectionError, TallyLiveConnector
+
+__all__ = [
+    "AccountingActStore",
+    "AccountingActStoreError",
+    "TallyCompany",
+    "TallyConnectionError",
+    "TallyLiveConnector",
+]
diff --git a/app/modules/accounting/act_store.py b/app/modules/accounting/act_store.py
new file mode 100644
index 0000000..ed892df
--- /dev/null
+++ b/app/modules/accounting/act_store.py
@@ -0,0 +1,248 @@
+from __future__ import annotations
+
+from contextlib import contextmanager
+from datetime import datetime, timezone
+from pathlib import Path
+import json
+import os
+import sqlite3
+from typing import Iterator, Sequence
+
+ACT_SCHEMA_VERSION = 1
+
+
+class AccountingActStoreError(RuntimeError):
+    pass
+
+
+def _utc_now_iso() -> str:
+    return datetime.now(timezone.utc).replace(microsecond=0).isoformat()
+
+
+def _safe_client_id(client_id: int) -> int:
+    value = int(client_id)
+    if value <= 0:
+        raise AccountingActStoreError("client_id must be a positive integer")
+    return value
+
+
+class AccountingActStore:
+    """Client-scoped SQLite storage for ERP accounting data.
+
+    The `.act` extension is intentional; the underlying file format is SQLite.
+    Phase 1 stores metadata, discovered Tally companies, connection history and
+    sync-run control records only.  Transaction/master tables arrive in later
+    phases.
+    """
+
+    def __init__(self, root: str | Path) -> None:
+        self.root = Path(root).expanduser().resolve()
+
+    def client_dir(self, client_id: int) -> Path:
+        cid = _safe_client_id(client_id)
+        return self.root / "Accounting" / f"client_{cid:08d}"
+
+    def db_path(self, client_id: int) -> Path:
+        cid = _safe_client_id(client_id)
+        return self.client_dir(cid) / f"client_{cid:08d}.act"
+
+    @contextmanager
+    def connect(self, client_id: int) -> Iterator[sqlite3.Connection]:
+        path = self.db_path(client_id)
+        path.parent.mkdir(parents=True, exist_ok=True)
+        connection = sqlite3.connect(path, timeout=30)
+        connection.row_factory = sqlite3.Row
+        try:
+            connection.execute("PRAGMA foreign_keys = ON")
+            connection.execute("PRAGMA journal_mode = WAL")
+            connection.execute("PRAGMA synchronous = NORMAL")
+            yield connection
+            connection.commit()
+        except Exception:
+            connection.rollback()
+            raise
+        finally:
+            connection.close()
+
+    def initialize(
+        self,
+        client_id: int,
+        *,
+        tenant_id: int | None = None,
+        client_name: str = "",
+        created_by_user_id: int | None = None,
+    ) -> Path:
+        path = self.db_path(client_id)
+        with self.connect(client_id) as db:
+            db.executescript(
+                """
+                CREATE TABLE IF NOT EXISTS act_meta (
+                    key TEXT PRIMARY KEY,
+                    value TEXT NOT NULL,
+                    updated_at_utc TEXT NOT NULL
+                );
+
+                CREATE TABLE IF NOT EXISTS tally_companies (
+                    id INTEGER PRIMARY KEY AUTOINCREMENT,
+                    tally_guid TEXT NOT NULL DEFAULT '',
+                    company_name TEXT NOT NULL,
+                    gstin TEXT NOT NULL DEFAULT '',
+                    first_seen_at_utc TEXT NOT NULL,
+                    last_seen_at_utc TEXT NOT NULL,
+                    is_currently_loaded INTEGER NOT NULL DEFAULT 1,
+                    UNIQUE(tally_guid, company_name)
+                );
+
+                CREATE TABLE IF NOT EXISTS tally_company_mapping (
+                    id INTEGER PRIMARY KEY AUTOINCREMENT,
+                    client_id INTEGER NOT NULL,
+                    registration_id INTEGER,
+                    tally_guid TEXT NOT NULL DEFAULT '',
+                    company_name TEXT NOT NULL DEFAULT '',
+                    gstin TEXT NOT NULL DEFAULT '',
+                    is_active INTEGER NOT NULL DEFAULT 1,
+                    mapped_at_utc TEXT NOT NULL,
+                    mapped_by_user_id INTEGER
+                );
+
+                CREATE TABLE IF NOT EXISTS tally_connection_history (
+                    id INTEGER PRIMARY KEY AUTOINCREMENT,
+                    checked_at_utc TEXT NOT NULL,
+                    connected INTEGER NOT NULL,
+                    tally_url TEXT NOT NULL DEFAULT '',
+                    company_count INTEGER NOT NULL DEFAULT 0,
+                    error_message TEXT,
+                    payload_json TEXT NOT NULL DEFAULT '{}'
+                );
+
+                CREATE TABLE IF NOT EXISTS tally_sync_runs (
+                    id INTEGER PRIMARY KEY AUTOINCREMENT,
+                    sync_type TEXT NOT NULL,
+                    status TEXT NOT NULL,
+                    started_at_utc TEXT NOT NULL,
+                    completed_at_utc TEXT,
+                    requested_by_user_id INTEGER,
+                    records_received INTEGER NOT NULL DEFAULT 0,
+                    error_message TEXT,
+                    details_json TEXT NOT NULL DEFAULT '{}'
+                );
+
+                CREATE INDEX IF NOT EXISTS ix_tally_companies_last_seen
+                    ON tally_companies(last_seen_at_utc);
+                CREATE INDEX IF NOT EXISTS ix_tally_connection_history_checked
+                    ON tally_connection_history(checked_at_utc);
+                CREATE INDEX IF NOT EXISTS ix_tally_sync_runs_started
+                    ON tally_sync_runs(started_at_utc);
+                """
+            )
+            now = _utc_now_iso()
+            metadata = {
+                "schema_version": str(ACT_SCHEMA_VERSION),
+                "client_id": str(_safe_client_id(client_id)),
+                "tenant_id": "" if tenant_id is None else str(int(tenant_id)),
+                "client_name": str(client_name or ""),
+                "created_by_user_id": "" if created_by_user_id is None else str(int(created_by_user_id)),
+                "storage_kind": "ERP_ACCOUNTING_ACT_SQLITE",
+            }
+            for key, value in metadata.items():
+                db.execute(
+                    """
+                    INSERT INTO act_meta(key, value, updated_at_utc)
+                    VALUES (?, ?, ?)
+                    ON CONFLICT(key) DO UPDATE SET
+                        value=excluded.value,
+                        updated_at_utc=excluded.updated_at_utc
+                    """,
+                    (key, value, now),
+                )
+        return path
+
+    def record_tally_status(self, client_id: int, status: dict) -> None:
+        self.initialize(client_id)
+        now = _utc_now_iso()
+        companies: Sequence[dict] = status.get("companies") or []
+        with self.connect(client_id) as db:
+            db.execute("UPDATE tally_companies SET is_currently_loaded = 0")
+            for company in companies:
+                name = str(company.get("name") or "").strip()
+                if not name:
+                    continue
+                guid = str(company.get("guid") or "").strip()
+                gstin = str(company.get("gstin") or "").strip().upper()
+                existing = db.execute(
+                    """
+                    SELECT id FROM tally_companies
+                    WHERE tally_guid = ? AND company_name = ?
+                    LIMIT 1
+                    """,
+                    (guid, name),
+                ).fetchone()
+                if existing:
+                    db.execute(
+                        """
+                        UPDATE tally_companies
+                        SET gstin=?, last_seen_at_utc=?, is_currently_loaded=1
+                        WHERE id=?
+                        """,
+                        (gstin, now, int(existing["id"])),
+                    )
+                else:
+                    db.execute(
+                        """
+                        INSERT INTO tally_companies(
+                            tally_guid, company_name, gstin,
+                            first_seen_at_utc, last_seen_at_utc, is_currently_loaded
+                        ) VALUES (?, ?, ?, ?, ?, 1)
+                        """,
+                        (guid, name, gstin, now, now),
+                    )
+
+            db.execute(
+                """
+                INSERT INTO tally_connection_history(
+                    checked_at_utc, connected, tally_url, company_count,
+                    error_message, payload_json
+                ) VALUES (?, ?, ?, ?, ?, ?)
+                """,
+                (
+                    now,
+                    1 if status.get("connected") else 0,
+                    str(status.get("url") or ""),
+                    int(status.get("company_count") or 0),
+                    str(status.get("error") or "") or None,
+                    json.dumps(status, ensure_ascii=False, separators=(",", ":")),
+                ),
+            )
+
+    def snapshot(self, client_id: int) -> dict:
+        self.initialize(client_id)
+        with self.connect(client_id) as db:
+            meta_rows = db.execute("SELECT key, value FROM act_meta ORDER BY key").fetchall()
+            companies = db.execute(
+                """
+                SELECT tally_guid AS guid, company_name AS name, gstin,
+                       first_seen_at_utc, last_seen_at_utc, is_currently_loaded
+                FROM tally_companies
+                ORDER BY is_currently_loaded DESC, company_name COLLATE NOCASE
+                """
+            ).fetchall()
+            latest = db.execute(
+                """
+                SELECT checked_at_utc, connected, tally_url, company_count, error_message
+                FROM tally_connection_history
+                ORDER BY id DESC LIMIT 1
+                """
+            ).fetchone()
+        return {
+            "db_path": str(self.db_path(client_id)),
+            "metadata": {row["key"]: row["value"] for row in meta_rows},
+            "companies": [dict(row) for row in companies],
+            "latest_connection": dict(latest) if latest else None,
+        }
+
+
+def default_accounting_root() -> Path:
+    env = os.getenv("AUDIT_ACCOUNTING_STORAGE_ROOT", "").strip()
+    if env:
+        return Path(env).expanduser().resolve()
+    return Path.cwd() / "data" / "accounting"
diff --git a/app/modules/accounting/phase1_probe.py b/app/modules/accounting/phase1_probe.py
new file mode 100644
index 0000000..219b788
--- /dev/null
+++ b/app/modules/accounting/phase1_probe.py
@@ -0,0 +1,41 @@
+from __future__ import annotations
+
+import argparse
+import json
+
+from .act_store import AccountingActStore, default_accounting_root
+from .tally_connector import TallyLiveConnector
+
+
+def main() -> int:
+    parser = argparse.ArgumentParser(description="Phase 1 .act + local TallyPrime smoke test")
+    parser.add_argument("--client-id", type=int, required=True)
+    parser.add_argument("--client-name", default="")
+    parser.add_argument("--tenant-id", type=int)
+    parser.add_argument("--storage-root", default="")
+    parser.add_argument("--host", default="127.0.0.1")
+    parser.add_argument("--port", type=int, default=9000)
+    args = parser.parse_args()
+
+    root = args.storage_root or str(default_accounting_root())
+    store = AccountingActStore(root)
+    path = store.initialize(
+        args.client_id,
+        tenant_id=args.tenant_id,
+        client_name=args.client_name,
+    )
+
+    connector = TallyLiveConnector(args.host, args.port)
+    status = connector.status()
+    store.record_tally_status(args.client_id, status)
+
+    print(json.dumps({
+        "act_db": str(path),
+        "tally": status,
+        "snapshot": store.snapshot(args.client_id),
+    }, indent=2, ensure_ascii=False))
+    return 0 if status.get("connected") else 2
+
+
+if __name__ == "__main__":
+    raise SystemExit(main())
diff --git a/app/modules/accounting/tally_connector.py b/app/modules/accounting/tally_connector.py
new file mode 100644
index 0000000..49722bd
--- /dev/null
+++ b/app/modules/accounting/tally_connector.py
@@ -0,0 +1,178 @@
+from __future__ import annotations
+
+from dataclasses import asdict, dataclass
+import html
+import re
+import urllib.error
+import urllib.request
+import xml.etree.ElementTree as ET
+
+DEFAULT_TALLY_HOST = "127.0.0.1"
+DEFAULT_TALLY_PORT = 9000
+DEFAULT_TALLY_TIMEOUT_SECONDS = 8
+
+
+class TallyConnectionError(RuntimeError):
+    """Raised when the local TallyPrime XML/HTTP endpoint cannot be reached."""
+
+
+def _clean_xml_response(xml_text: str) -> str:
+    if not xml_text:
+        return ""
+    xml_text = re.sub(r"&#(0?[0-8]|1[0-9]|2[0-9]|3[01]);", "", xml_text)
+    xml_text = re.sub(r"[\x00-\x08\x0B\x0C\x0E-\x1F]", "", xml_text)
+    return xml_text
+
+
+def _child_text(element: ET.Element, tag_name: str) -> str:
+    wanted = tag_name.upper()
+    for child in list(element):
+        if str(child.tag).split("}")[-1].upper() == wanted:
+            return (child.text or "").strip()
+    return ""
+
+
+@dataclass(frozen=True)
+class TallyCompany:
+    name: str
+    guid: str = ""
+    gstin: str = ""
+
+    def as_dict(self) -> dict[str, str]:
+        return asdict(self)
+
+
+class TallyLiveConnector:
+    """Read-only connector for a running local TallyPrime instance.
+
+    Uses Tally XML-over-HTTP.  Phase 1 performs only discovery/status reads and
+    never creates, updates or deletes data in Tally.
+    """
+
+    def __init__(
+        self,
+        host: str = DEFAULT_TALLY_HOST,
+        port: int = DEFAULT_TALLY_PORT,
+        timeout: int = DEFAULT_TALLY_TIMEOUT_SECONDS,
+    ) -> None:
+        self.host = (host or DEFAULT_TALLY_HOST).strip()
+        self.port = int(port or DEFAULT_TALLY_PORT)
+        self.timeout = max(1, int(timeout or DEFAULT_TALLY_TIMEOUT_SECONDS))
+
+    @property
+    def url(self) -> str:
+        return f"http://{self.host}:{self.port}"
+
+    @staticmethod
+    def _xml_escape(value: str) -> str:
+        return html.escape(str(value or ""), quote=False)
+
+    def _post_xml(self, xml_text: str) -> str:
+        request = urllib.request.Request(
+            self.url,
+            data=xml_text.encode("utf-8"),
+            headers={"Content-Type": "application/xml; charset=utf-8"},
+            method="POST",
+        )
+        try:
+            with urllib.request.urlopen(request, timeout=self.timeout) as response:
+                return response.read().decode("utf-8", errors="replace")
+        except (urllib.error.URLError, TimeoutError, OSError) as exc:
+            raise TallyConnectionError(
+                f"Could not connect to TallyPrime at {self.url}. "
+                f"Open TallyPrime and enable its HTTP/XML server on port {self.port}. "
+                f"Details: {exc}"
+            ) from exc
+
+    def get_loaded_companies(self) -> list[TallyCompany]:
+        xml = """<ENVELOPE>
+  <HEADER>
+    <VERSION>1</VERSION>
+    <TALLYREQUEST>Export</TALLYREQUEST>
+    <TYPE>Collection</TYPE>
+    <ID>ARRRAccountingLoadedCompanies</ID>
+  </HEADER>
+  <BODY>
+    <DESC>
+      <STATICVARIABLES>
+        <SVEXPORTFORMAT>$$SysName:XML</SVEXPORTFORMAT>
+      </STATICVARIABLES>
+      <TDL>
+        <TDLMESSAGE>
+          <COLLECTION NAME="ARRRAccountingLoadedCompanies" ISMODIFY="No">
+            <TYPE>Company</TYPE>
+            <FETCH>Name,GUID,GSTRegistrationNumber</FETCH>
+          </COLLECTION>
+        </TDLMESSAGE>
+      </TDL>
+    </DESC>
+  </BODY>
+</ENVELOPE>"""
+        raw = self._post_xml(xml)
+        return self._parse_companies(raw)
+
+    def status(self) -> dict:
+        try:
+            companies = self.get_loaded_companies()
+            return {
+                "connected": True,
+                "url": self.url,
+                "host": self.host,
+                "port": self.port,
+                "company_count": len(companies),
+                "companies": [company.as_dict() for company in companies],
+                "error": None,
+            }
+        except TallyConnectionError as exc:
+            return {
+                "connected": False,
+                "url": self.url,
+                "host": self.host,
+                "port": self.port,
+                "company_count": 0,
+                "companies": [],
+                "error": str(exc),
+            }
+
+    @staticmethod
+    def _parse_companies(xml_text: str) -> list[TallyCompany]:
+        cleaned = _clean_xml_response(xml_text)
+        if not cleaned.strip():
+            return []
+
+        try:
+            root = ET.fromstring(cleaned.encode("utf-8"))
+        except Exception:
+            # Keep the same conservative fallback behaviour as the working
+            # Office Automation connector: discover names even if Tally emits
+            # malformed XML around otherwise useful response data.
+            names: list[str] = []
+            for match in re.finditer(r"<NAME[^>]*>(.*?)</NAME>", cleaned, flags=re.I | re.S):
+                value = re.sub(r"<.*?>", "", match.group(1)).strip()
+                if value and value not in names:
+                    names.append(value)
+            return [TallyCompany(name=name) for name in names]
+
+        companies: list[TallyCompany] = []
+        seen: set[str] = set()
+        for element in root.iter():
+            if str(element.tag).split("}")[-1].upper() != "COMPANY":
+                continue
+            name = (
+                element.attrib.get("NAME")
+                or element.attrib.get("name")
+                or _child_text(element, "NAME")
+                or _child_text(element, "BASICCOMPANYFORMALNAME")
+            ).strip()
+            key = name.upper()
+            if not name or key in seen:
+                continue
+            seen.add(key)
+            companies.append(
+                TallyCompany(
+                    name=name,
+                    guid=_child_text(element, "GUID"),
+                    gstin=_child_text(element, "GSTREGISTRATIONNUMBER"),
+                )
+            )
+        return companies