Jan 1, 2009

Classification of Account-heads

Tally follows the 'Single Ledger' concept of accounting, which is the modern way of managing accounts. This is in direct contrast to Subsidiary Ledger Accounting. Thus, all financial entries are performed using ledgers or account heads. Ledger account heads are created to identify transactions.

The single ledger concept does away with the need for sub-ledgers and corresponding control accounts in General Ledger. Ledger balances by themselves do not convey much without some form of classification. Tally, therefore, gives you a powerful way to group ledger information, which is meaningful in reports and compliant with laws. Groups, in Tally, serve to both classify and identify account heads according to their nature and enable presentation of summarised information.

Traditionally, grouping of accounts is a post-accounting activity that is done only when reports are needed. This has an inherent drawback of delayed reports that are not available at hand when required. Tally gives you great flexibility in setting up your chart of accounts.

It allows you to group your ledger accounts right at time of creating your accounts chart. Your reports and statements will reflect the desired classification at all times. Further, Tally permits you to re-group your ledgers anytime (with some minimal restrictions), should re-classification be necessary. We acknowledge that re-grouping is always possible and would, in practice, be resorted to, when there are changes in the nature of information. However, re-grouping can be done only by a user account that has requisite authority under the access control list.

At the highest level of grouping, accounts are classified into capital or revenue - more specifically into assets, liabilities, income and expenditure. Based on mercantile accounting principles, Tally provides a set of reserved groups and allows you to modify their names or create sub-groups.

The concept of sub-groups
Groups have a hierarchical organisation. At the top of the hierarchy are Primary Groups. These are the main asset, liability, income or expenditure groups of accounts that determine the entire accounting and their presentation, i.e., whether a ledger affects Profit & Loss Account (as a revenue item) or goes into the Balance Sheet. The Reserved Primary Groups and subgroups (shown indented) are:

Aliases for the groups are given in square brackets [ ].

1)Primary Groups of capital nature
Capital Account

a)Reserves and Surplus [Retained Earnings]

2) Current Assets

a)Bank Accounts

b)Cash-in hand

c)Deposits (Asset)

d)Loans & Advances (Asset)

e)Stock-in-hand

f)Sundry Debtors

3) Current Liabilities

a) Duties and Taxes

b) Provisions

c) Sundry Creditors

d) Fixed Assets

4) Investments

5) Loans (Liability)

a) Bank OD Accounts [Bank OCC Accounts]

b) Secured Loans

c) Unsecured Loans

6) Suspense Account

7) Miscellaneous Expenses (Asset)

8) Branch/Divisions

9) Sales Account

10)Purchase Account

11)Direct Income [Income Direct]

12)Indirect Income [Income Indirect]

13)Direct Expenses [Expenses Direct]

14)Indirect Expenses [Expenses Indirect]

11 comments:

B. Chhetri said...

I want to know under which head should I put EPF and ESIC account. Also note that EPF and ESIC is deducted from the staff salary and deposited into bank. Then the employer also contributes a part of the EFP and ESIC and deposit into the bank. So in which group or head should I put these expenses? or is it rather an income for the employee??

Sunil Lalge said...

This is income for employee But for Employer it is expenses. so If you are employer than account both EPF & ESIC under expenses.
If you are employee than EPF is under investment as it is (refundable) and ESIC under expenses as it is not refundable only you can get free service.

dponline said...

Hi Sunil
How should I create a CC loan account and set limits for that. Can I get sample group of account including sub groups for a small candle manufacturing unit? Pls. help sunil.

Unknown said...

Hi
i was attended a interview ago a week for the post of accountant and interviewer asked a question to me that how many heads are available in tally ?
i was confused that is under groups or heads are same ,,,,, at that time i said sorry sir i don't know ,,

So please sir give me some satisfied answer . is groups or heads are same ? and how many types of heads available in tally ?

bikash said...

what is reserve surplus ?

bikash said...

I want to know which head should I put service tax ?

Anonymous said...

I need to use numeric COA as a country requirment. Can I do it in Tally? Will block repeated codes?

TAPAN GHATA said...

Life insurance policy surrender & money received from insurance co.how i can i treat this?

Anonymous said...

Hi sir, My question is there are 12 counselor in a company, each of them has some target to make the student to join the Academy. so I need to make entry in tally that how many student are there under each counselor and the amount paid by the student.
The student use to make payment 50% on the spot and 50% after few days.
Please let me know under which group the counselor and the student will be???
and let me know how to find the outstanding payment of each student. Pls tell me as soon as possible.

Tally Training said...

This is really useful to every one who are interested to learn Tally ERP 9. Great Help to all and me

Accounts & Finance said...

This is great blog keep it up. Thanks for sharing.