Groups and Ledgers in Tally - PART 2

Groups and Ledgers in Tally - PART II

Explanation of Groups

Capital Account: Capital Accounts may be directly placed under Capital Group or a sub-group may be created for them. Common example of Ledger Accounts under Capital Account group is Share Capital, Partners’ Capital Accounts, and Proprietors Capital Account. Separate Ledgers may be opened for Equity Capital, Preference Capital A/c etc.

Reserves & Surplus (Retained Earnings): The Group Reserves & Surplus is a sub-group to Capital Account. All Reserve accounts (recognized as Retained Earnings) are placed under this group. Common examples are: General Reserve, Capital Reserve, Investment Allowance Reserve, Share Premium Account etc.

Loans (Liabilities): All loans taken should be placed under this group.
Reserved sub-groups under this Primary Group: Bank Overdraft & Cash Credit (Bank OD), Secured loans and unsecured loans.

Bank OD Accounts (Bank OCC A/c): Normally a business house has two types of bank accounts: Current account and Bank Loan Account (overdraft). While Current A/c should be placed under current Assets the Bank Overdraft and Cash/Credit Accounts availed under Hypothecation, Bill Discounting etc. which are operated on a day-to-day basis should be placed here. Although these are a type of secured loan (loan obtained by furnishing security), they must be placed under the group Bank OCC to allow transactions in payment, receipt and contra vouchers and reflect in Cash Flow statements etc. like normal Bank Accounts. Except that they appear under Loans (Liabilities) head, they are treated similar to normal Bank Accounts under Current Assets. Bank Book is printed for accounts placed under this Group and does not form part of Ledger.

Secured Loans: Term loans and other Medium/Long term Secured Loans, should be put under Secured Loans. Loans taken from Banks, Financial Institutes etc. upon furnishing security, against which normal day to day transaction is not permitted should be placed here. Debentures should also be placed under this sub-Group.

Unsecured Loans: This group normally constitutes a large number of Ledger Accounts and sub-groups. To standardize the management reporting, this primary group has further been subdivided into 3 reserved sub-groups namely,

  • Duties and Taxes
  • Provisions
  • Sundry Creditors

Duties and Taxes: This is for all Excises, Sales and other trade taxes. This head normally constitutes all the duties and taxes that you collect or pay through Sales & Purchase transactions and whose balance will appear in Balance Sheet. Examples: Local Sales Tax

We must distinguish between Duties & Taxes falling under this group and those under Revenue account. Accounts falling under Duties & Taxes Group constitute your Balance Sheet and they are not part of your Sales & Purchase value. For example, Sales Tax, Excise Duty if forming part of Sales or Purchase value should not be placed here. We cite and example to clarify it further:

You sold a computer at Rs. 20000 and charged VAT @ 10% amounting to Rs.2000 making the total of Bill for Rs. 22000. So the Bill,

1 Computer Rs.20000
Vat @ 10% Rs. 2000

Total: Rs.22000

Now you can account for the above entry in 2 ways:

If you credit Rs.20000 to your sales Account and Rs. 2000 to VAT then VAT ledger will be placed under Duties & Taxes Group

If you credit entire Bill Amount Rs.20000 to your sales account, then VAT becomes your expense and the ledger should not be placed under Duties & Taxes Group, instead be placed under Direct Expenses.

Provisions: It is a place for all provisions. Common examples are Provision for Income Tax, Provision for Bad Debts. Place similar Provisions as applicable in your case.

Sundry Creditors: All Trade creditors of the company. i.e. all the parties accounts, with whom transactions are entered through Purchase Vouchers

Fixed Assets: This constitutes all the Fixed assets, Immovable Properties, Patents, Trade Rights etc. Create separate sub-group for Work-in-progress for Capital Projects etc., under this group.

Fixed Assets may have several sub-groups for each type of assets if you wish to have separate Ledger Accounts for Individual asset.

Investment: Place here accounts related to Investments in shares, bonds, Govt. Securities and investment in other companies. Create sub-groups under this primary group, if necessary.

Current Assets: It constitutes of 6 sub-groups as under

  • Stock-in-hand
  • Deposits (Assets)
  • Loans & Advances (Assets)
  • Cash-in-hand
  • Bank Accounts
  • Sundry Debtors

You should place individual ledger accounts under the appropriate sub-groups and try to avoid placing any ledger directly under main Current Assets Group.

Stock-in-hand: It’s a special group and needs careful study & understanding as it is differently treated than normal ledger accounts.

Normally, you should create sub-groups or ledger accounts for Raw Materials, Work-in-process and Finished Goods as required.

Accounts falling under Stock-in-hand group are not permitted any transaction. So you cannot include them in any kind of voucher. In case of non-integrated Accounts, you may enter the value of stock for any date. This figure constitutes the pseudo transaction for closing stock entry and is reflected in the respective reports. Since no transaction through voucher can be passed, these are the only accounts for which the Closing Balance can be entered from Ledger Accounts or by from Balance Sheet or Profit & Loss A/c. For Integrated Accounts & Inventory, these figures are carried from the Inventory Value.

The opening Balance of these accounts give the opening stock of the company, while the closing Balance gives the closing Stock. The Closing Balance under these accounts appears only in the P/L Statement and Balance Sheet.

Deposits (Assets): Place all the deposits (assets) like Fixed Deposits, Security Deposits, Deposits in other companies, Rental Deposits etc.

Loans and Advances (Assets): Place all advances of non-trading nature. Example of advances which should be placed under this group are: Advances against salaries, Loans to Employees etc. Even Advance for work-contracts or supply of fixed assets may be placed here. Loans given by the company should also be placed and you may create separate sub-group for loans, if needed.

Sundry Debtors: Placing all the parties’ accounts who are normally your customers. For recording transactions, the system does not make any distinction between sundry Debtors or Creditors. They are interchangeable at any time allowing you to make purchase and sales transactions through same account. If you are selling and make purchase from same party, you need not open two separate accounts; you can place the Ledger either under Sundry Debtors or Sundry Creditors Group.

Cash-in-Hand: A Cash Ledger account is created by the Tally software by default and placed under this group when you create a company. You can open any number of additional cash accounts or place sub-groups under this.

Bank Accounts: All the Bank Accounts like Current Accounts, Savings Accounts and other Bank Accounts should be placed here (except overdraft account)

Branch / Divisions: This Group may be used for convenience by multi-branch companies for Inter branch reconciliation and consolidation. Create ledgers for all companies which may be Branches, Divisions, Affiliates, Sister concerns, subsidiaries etc. Tally 9 will permit Sales / Purchase transactions with these accounts.

Misc. Expenses (Asset): Preliminary, Pre-operative and similar expenses that have been capitalized should fall under this group. Though the accumulated loss of a company should also fall in this category, Tally 9 treats it as negative profit and carries to Profit & Loss A/c.

Suspense Account: This is a primary Group that appears in Balance Sheet. If you create any Suspense Ledger to record monies paid or received temporarily or who’s nature of transaction if not yet know. For example Advance paid for Traveling Expenses etc. details fro which will be known upon submission of TA bills may be recorded in such ledger. As far as practicable, try to avoid this account and do not be tempted to record anything as it may upset your accounts.

Sales: This is a primary Group, all sorts of Sales should constitute this group. The examples for ledger accounts are

  • Product lines
  • Geographical area
  • Nature
  • Sales tax nature

The classification depends on the type of information you emphasis upon for your day to day work.

Purchase: Similarly, all sorts of trade Purchases should constitute this Group. You may have multiple purchases Account for Purchases according to:

Product line
Nature (Cash, credit card, credit)
Sales Tax (@ 4%, @ 10% etc)

Direct Income (Income Direct): This primary Group is the place to hold all such Ledger Accounts for Income which will be considered for computation of Gross Profit.

Indirect Income (Income Indirect): Normally, all non-major revenues like receipts on account of Rent, Interest, Commission, Dividend etc should be placed here. These are not considered for computation of Gross Profit but are considered for computation of Net Profit only.

Direct Expenses (Expenses Direct): This primary group holds all Ledger accounts of Direct Expenses. In case of Traders, normally Carriage Inwards should be placed under this group. All expenses which are considered for computing Gross Profit/Loss are to be placed here.

Indirect Expenses (Expenses Indirect): All expenses considered for computation of Net Profit/Loss only should be placed here. For example: Depreciation Account.


Tally Sales said...

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