Learn TallyLesson 3 of 20
Groups and ledgers: which ledger goes under which group
A ledger is an account. A group is the shelf it sits on. Put a ledger on the wrong shelf and it turns up in the wrong place in the balance sheet.
Ledger and group
In Tally every account is called a ledger: Cash, State Bank of India, Rent, Sales, Ramesh & Sons. Every ledger must be placed under a group, and the group tells Tally what kind of account it is: asset, liability, income or expense, and where it appears in the final statements. This is how Tally knows, without being told each time, that rent belongs in the Profit and Loss Account and furniture in the Balance Sheet.
The 28 predefined groups
Tally comes with 28 ready groups: 15 primary groups and 13 sub-groups that sit under some of them. You can create more of your own under these, but you rarely need to at first.
| Primary group | Nature | Sub-groups under it |
|---|---|---|
| Capital Account | Liability | Reserves & Surplus |
| Loans (Liability) | Liability | Bank OD A/c, Secured Loans, Unsecured Loans |
| Current Liabilities | Liability | Duties & Taxes, Provisions, Sundry Creditors |
| Fixed Assets | Asset | |
| Investments | Asset | |
| Current Assets | Asset | Bank Accounts, Cash-in-Hand, Deposits (Asset), Loans & Advances (Asset), Stock-in-Hand, Sundry Debtors |
| Misc. Expenses (Asset) | Asset | |
| Suspense A/c | Asset or liability | |
| Branch / Divisions | Asset or liability | |
| Sales Accounts | Income (trading) | |
| Purchase Accounts | Expense (trading) | |
| Direct Incomes | Income (trading) | |
| Direct Expenses | Expense (trading) | |
| Indirect Incomes | Income (profit and loss) | |
| Indirect Expenses | Expense (profit and loss) |
Two ledgers also exist from the start: Cash (under Cash-in-Hand) and Profit & Loss A/c. You never create these.
Which ledger under which group
| Ledger | Group |
|---|---|
| Cash | Cash-in-Hand |
| Petty Cash | Cash-in-Hand |
| State Bank of India (current account) | Bank Accounts |
| Canara Bank (savings or current account) | Bank Accounts |
| Bank overdraft or cash credit account | Bank OD A/c |
| Capital A/c | Capital Account |
| Drawings | Capital Account |
| Partner's capital | Capital Account |
| General Reserve | Reserves & Surplus |
| Customer (party who buys on credit) | Sundry Debtors |
| Supplier (party who sells on credit) | Sundry Creditors |
| Purchase A/c | Purchase Accounts |
| Purchase Returns | Purchase Accounts |
| Sales A/c | Sales Accounts |
| Sales Returns | Sales Accounts |
| Furniture | Fixed Assets |
| Computer | Fixed Assets |
| Machinery | Fixed Assets |
| Building | Fixed Assets |
| Vehicle | Fixed Assets |
| Land | Fixed Assets |
| Fixed deposit with bank | Deposits (Asset) |
| Security deposit (rent, electricity) | Deposits (Asset) |
| Shares and mutual funds held | Investments |
| Advance to staff | Loans & Advances (Asset) |
| Prepaid insurance | Loans & Advances (Asset) |
| Loan given to a friend | Loans & Advances (Asset) |
| TDS receivable | Loans & Advances (Asset) |
| Closing stock | Stock-in-Hand |
| Bank loan against property | Secured Loans |
| Vehicle loan | Secured Loans |
| Loan from a relative | Unsecured Loans |
| CGST, SGST, IGST | Duties & Taxes |
| TDS payable | Duties & Taxes |
| Provision for tax | Provisions |
| Salaries payable | Current Liabilities |
| Rent payable | Current Liabilities |
| Advance from customer | Current Liabilities |
| Carriage inward | Direct Expenses |
| Freight on purchases | Direct Expenses |
| Wages (production) | Direct Expenses |
| Factory power and fuel | Direct Expenses |
| Loading and unloading on purchases | Direct Expenses |
| Salaries | Indirect Expenses |
| Shop or office rent | Indirect Expenses |
| Electricity charges | Indirect Expenses |
| Telephone and internet | Indirect Expenses |
| Printing and stationery | Indirect Expenses |
| Advertisement | Indirect Expenses |
| Bank charges | Indirect Expenses |
| Interest on loan | Indirect Expenses |
| Depreciation | Indirect Expenses |
| Carriage outward | Indirect Expenses |
| Discount allowed | Indirect Expenses |
| Bad debts | Indirect Expenses |
| Insurance | Indirect Expenses |
| Repairs and maintenance | Indirect Expenses |
| Audit fees | Indirect Expenses |
| Travelling expenses | Indirect Expenses |
| Round off | Indirect Expenses |
| Interest received | Indirect Incomes |
| Commission received | Indirect Incomes |
| Discount received | Indirect Incomes |
| Rent received | Indirect Incomes |
| Job work charges received | Direct Incomes |
| Preliminary expenses (not yet written off) | Misc. Expenses (Asset) |
| Unidentified bank credit | Suspense A/c |
No ledger in our list matches. Think about its nature: is it something owned, something owed, an income or an expense? Then pick the group of that nature.
How to decide for a ledger not in the list
- Is it a person or firm you trade with? A customer goes under Sundry Debtors; a supplier under Sundry Creditors.
- Is it something the business owns? For long use: Fixed Assets. Money, stock or amounts receivable soon: a sub-group of Current Assets.
- Is it something the business owes? To the owner: Capital Account. A loan: Loans (Liability). Bills and dues payable soon: Current Liabilities.
- Is it an expense? If it is spent on buying the goods or making them ready for sale (freight inward, wages of production, power for the factory): Direct Expenses. Everything else (office, selling, finance): Indirect Expenses.
- Is it an income? From selling goods: Sales Accounts. Other income connected with trading: Direct Incomes. Interest, commission, discount received: Indirect Incomes.
Why direct and indirect matter
Ledgers under Purchase Accounts, Sales Accounts, Direct Expenses and Direct Incomes are used to work out gross profit. Ledgers under Indirect Expenses and Indirect Incomes come after that, to give net profit. Putting carriage inward under Indirect Expenses does not change the net profit, but it gives a wrong gross profit, and a careful owner or auditor will notice.
Creating your own groups
When a business wants finer reporting, groups can be created under the predefined ones: for example "Debtors - North" and "Debtors - South" under Sundry Debtors, or "Administrative Expenses" and "Selling Expenses" under Indirect Expenses. The path is Gateway of Tally > Create > Group. Do this only when there is a clear need; too many groups make the reports harder to read.
Test yourself
The group quiz shows a ledger name and asks you to pick its group. Ten minutes on it fixes this lesson better than re-reading. Then go on to creating ledgers.
Questions learners ask
How many groups are there in Tally?
TallyPrime has 28 predefined groups: 15 primary groups and 13 sub-groups. You can create more under them.
Under which group does a bank account go?
Under Bank Accounts, a sub-group of Current Assets. A bank overdraft or cash credit account goes under Bank OD A/c.
What is the difference between direct and indirect expenses in Tally?
Direct expenses relate to buying or producing goods and affect gross profit. Indirect expenses are office, selling and finance costs and affect net profit.
All lessons
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