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
a)Reserves and Surplus [Retained Earnings]
2) Current Assets
d)Loans & Advances (Asset)
3) Current Liabilities
a) Duties and Taxes
c) Sundry Creditors
d) Fixed Assets
5) Loans (Liability)
a) Bank OD Accounts [Bank OCC Accounts]
b) Secured Loans
c) Unsecured Loans
6) Suspense Account
7) Miscellaneous Expenses (Asset)
9) Sales Account
11)Direct Income [Income Direct]
12)Indirect Income [Income Indirect]
13)Direct Expenses [Expenses Direct]
14)Indirect Expenses [Expenses Indirect]