Chart of Accounts in Tally- Advanced features
Chart of Accounts is the organised hierarchical structured list of Accounts Masters records. Every enterprise would organise Masters under respective parent group, as per desired structure in their own way
Chart of Accounts in Tally
The concept of Chart of Accounts (organization of Accounts Groups & Ledgers) and the pre-created Accounts Groups & Accounts Ledgers (called Reserved Groups & Ledgers) have been explained earlier. Here, we explain the nature & properties of these pre created Accounts Master Groups to better organise the Accounts Groups & Ledger Accounts
Account Groups of Balance Sheet in Tally
The Balance Sheet shows the Account Balances of Liabilities & Assets.
Reserved Account Groups of Liabilities in Tally
Reserved Account Groups of Assets in Tally
Account Groups of Profit & Loss Accounts in Tally
The Nominal Accounts of Income & Expenses (apart from Sales & Purchase) are classified as Direct Income & Direct Expenses (considered for Gross Profit computation) and Indirect Income & Indirect Expenses (considered for Net Profit computation).
Direct Income & Direct Expenses are relevant only when you wish to prepare separate Trading and Profit & Loss Account to get the figures of Gross Profit & Net Profit separately.
Tally places all nominal Accounts in Profit & Loss Statement under following Reserved Groups for Income & Expenses Accounts .
Reserved Account Groups of Income in Tally
Reserved Accounts Groups of Expenses in Tally
Capital Account Group in Tally
Capital Account Share Capital
Equity Shares
- Equity Shares – paid up
Preference Share
- 11% Redeemable Pref Share
Reserves & Surplus (Retained Earnings)
- Capital Redemption Reserve
- Capital Reserve
- General Reserve
- Investment Allowance Reserve
- Revaluation Reserve
- Share Premium
Sample list of Groups / Ledgers Accounts under Capital Group in Tally
Capital Group in Tally is a Reserved Primary Group containing the Capital and Reserves & Surplus groups of the Company .
- Capital Account: Ledger Accounts for Owners Capital may be placed under Capital Group (or its sub-group). Common example of Ledger Accounts under Capital Account group is Share (or Equity) Capital, Partners’ Capital Accounts, Proprietors Capital Account. Members Capital A/c etc. Separate Ledgers may be created for Equity Capital, Preference Capital A/c etc.
- Reserves & Surplus [Retained Earnings]: It’s a sub group to Capital Account. All Reserve Accounts (referred as Retained Earnings) are placed under this group. Common examples are: General Reserve, Capital Reserve, Investment Allowance Reserve, Share Premium Account etc.
In case of Companies limited by shares (Limited & Private Limited Companies), though normally Credit Balance of P & L Account should go into Reserves & Surplus and Debit Balance should be shown under Misc Expenses (Assets), Tally shows places Profit & Loss account as separate Reserved Ledger (not under Reserves & Surplus Group).
Loans (Borrowings)Account Group in Tally
All Borrowings by Company should be placed under this Group. Tally creates 3 reserved sub-groups
- Bank OD Accounts [Bank OCC A/c]: While Current Bank A/c should be placed under Current Assets, Bank Overdraft and Cash/Credit Accounts availed under Hypothecation, Bill Discounting etc. operated on a day-to-day basis should be placed under this group.
Placing the Bank Account under this group will allow transactions in Payment, Receipt and Contra Vouchers like normal Bank Accounts (although as per accounting practice, these should be placed under Secured Loan).
The ledger accounts under this group participate in the Vouchers in same manner like ledgers placed under Bank Accounts (under Current Assets)
- Secured Loans: Debentures, Term Loans (Medium/Long term), Secured Loans taken from Banks, Financial Institutes etc. against security (like mortgage/ hypothecation, pledge etc) should be placed under this group.
Bank ledger accounts placed under this group cannot participate in the Vouchers in same manner like ledgers placed under Bank Accounts (under Current Assets or Bank OCC)
- Unsecured Loans: Loans taken (without any collateral security) from outside Parties, Directors, Friends and Relatives, Deposits etc, should be placed under this group.
Loans (Liabilities)
- Bank OD Accounts
- Overdraft A/c
- SBI OD A/c
- Cash Credit Account
- Bank of India C/C A/c
- Bank of India Bill Discounting A/c
- Secured Loans
- Mid Term Loan
- ICICI Term Loan
- Debentures
- 11% Redeemable Debentures
- 9.5% Convertible Debentures
- Unsecured Loans
- Public Deposits
- Personal Loans
- Mahesh Kumar
- Brijmohan Shaw
Example of Groups & Ledgers of Borrowings, under Loans (Liabilities) Group
Current Liabilities Account Group in Tally
Current Liabilities group normally constitutes a large number of Ledger Accounts and Sub Groups and is subdivided into 3 Reserved sub groups: Duties & Taxes, Provisions and Sundry Creditors .
- Duties and Taxes: This sub-group is for all Excise, Sales and other Trade Taxes. This head normally constitutes all the Duties & Taxes that you collect or pay through Sales & Purchase transactions, whose balance will appear in Balance Sheet, for preparation of proper Statutory Returns, like Sales Tax (e.g., VAT, CST, Excise Duty,
Taxes collected through other means (other than Invoice) like Marketing Fee, Purchase Tax and amount collected through Payroll (like TDS, PF, ESI, P Tax etc are not placed under this. Such accounts should be placed under Current Liabilities.
Though, as per Accounting practice, such accounts are part of Current Liabilities, Tally places these accounts under Duties & Taxes Groups to facilitate its own internal processing and reporting of Tax Accounts, to comply statutory requirements under the respective rules.
- Provisions: It is a place for all sorts of Provisions (like Provision for Bad Debts etc). Place similar Provisions as applicable (e. Provision for Bad & Doubtful Debts, Deferred Payment Liabilities etc). However Depreciation Provided should go under Fixed Assets (because Depreciation provided is Diminution in Book Value of Fixed Assets).
- Sundry Creditors: Place the ledger accounts of all Trade Creditors / suppliers (even if any ledger account has Debit Balance at some point of time due to advance payment etc). If you sell to or purchase from same party, create only one ledger account and place under Sundry Debtors or Sundry Creditors Group (as convenient).
- Current Liabilities: Place all other liability accounts (which are not candidates of any the above 3 groups), like Liabilities for Expenses, Employees contribution for ESI/PF realized from Employees, etc.
Current Liabilities
Duties & Taxes
- CST
- Excise Duty
- VAT
Provision
- Provision for Bad & Doubtful Debts
Sundry Creditors
Suppliers- Raw Materials
- A Bose & Co
Suppliers – Other Materials
- S Kumar Bros
- Premier Engg Co
Current Liabilities
- General Expenses
- Government Dues
- License Fees
- P F Payable
- Excise Duty Payable
- Interest Payable Accrued
- Liabilities for Expenses
- Salary & Bonus Payable
Example of Account Groups & ledgers under Current Liabilities
Fixed Assets Account Group in Tally
Fixed Asset Account Group constitute all sorts of Fixed assets used to run the business, like immovable properties like Land & Building, movable properties like Plant & Machineries, vehicles etc, intangible assets like patents, trade marks, work-in-progress of Capital Projects, etc
You may have separate Groups / Ledger Accounts for Original Cost & Accumulated Depreciation provided, for Fixed Assets.
Fixed Assets
Leasehold Assets
- Leasehold Land
Free Hold Assets
- Land
- Buildings
- Vehicles
- Office Equipments
- Computers
- Air Conditioners
- Misc Office Equipments
Example of Ledger Accounts & Groups of Fixed Asset
Investments Account Group in Tally
Under Investments Accounts Group, place all ledger accounts in respect of Investments in Government securities, bonds, Investment in other companies, etc.
Equity Shares Quoted
Equity Shares UnQuoted
Mutual Funds
Government Securities
- National Savings Certificates
- RBI Gold Bonds
Example of Ledger Accounts & Groups of Investments
Current Assets Account Group in Tally
Current Assets Accounts Group constitutes 6 Reserved Sub Groups: Stock-in-hand, Deposits (Assets), Loans & Advances (Assets), Cash-in-hand, Bank Accounts, Sundry Debtors.
You should place individual Ledger Account under the appropriate subgroups and avoid placing any Ledger directly under primary group, i.e., Current Assets.
- Stock-in-hand: Create all Ledger Accounts for Closing Stock under this group. Normally, you should create separate Ledger Accounts for Raw Materials, Work-in-process and Finished Goods, as required.
- Deposits (Assets): Place all the Deposits made by the Company (Deposits received by the Company should be placed under Unsecured Loans) like Fixed Deposits, Security Deposits, Deposits with Electricity, Telephone dept, Deposits in other companies, Rental Deposits etc. under this Group.
- Loans and Advances (Assets): Place all Loans & Advances of non-trading nature given (Advances to Suppliers should be debited to the respective Supplier Ledger Account). Examples are: Advances against Salary, Loans to Employees, Advances to Fixed Assets Suppliers etc.
- undry Debtors: Place all the Trade Customer Ledger Accounts (even if Opening Balance is Credit). If you sell to or purchase from same party, create only one ledger account and place under Sundry Debtors or Sundry Creditors Group. Advances received from Customers also should also be Credited to the Customer’s ledger under Sundry Debtors group. If the number of Debtors are more, you may create subgroups as per Region, Product Lines, Registered / Unregistered, etc, as per convenience in practical working & Debtors Control.
- Cash-in-Hand: Tally creates a Cash Ledger Account (Cash-in-Hand) and places under this group. You may create more Cash accounts (e.g., Petty Cash, Cash-at-Branch, Cash-in-Transit etc) and place under this group.
- Bank Accounts: All the Bank Accounts like Current Accounts, Savings Accounts etc. (except Cash Credit, Overdraft or Loan Accounts) should be placed here.
| Stock-in-hand Stock of Raw MaterialsStock of Stores & Spares Work-in ProcessStock of Packing MaterialsStock of Finished Goods Deposits (Assets) Deposit with CESCDeposit with Sales TaxDeposit with Excise DepttDeposit with Office Landowner Loans and Advances (Assets) Loan to Employees Loan to Others B K MehraS Samaddar | Sundry Debtors Customers – Kolkata B K StoresM M Enterprises Customers – Outside Radha Govind StoresKrishna Stores Cash-in-Hand Main CashPetty Cash Bank Accounts SBI Current AccountBank of India Current Account |
| Example of Ledger Accounts & Groups of Current Assets | |
Branch / Divisions Account Group in Tally
Branch Accounts Group contains Ledgers for Branch, Division, Affiliate, Sister Concern, Subsidiary etc. It may help Inter branch reconciliation & consolidation. Tally permits Sales/Purchase transactions also (like Party Accounts) for Ledger Accounts under Branch Accounts Group.
Branch / Division
- Bangalore Branch
- Vishakhapatnam Warehouse
Example of Ledger Accounts & Groups of Current Assets
Misc. Expenses (Asset) Account Group in Tally
Misc Expenses (Asset) Accounts Group contains Preliminary, Pre-operative and similar expenses (to the extent not written off to Profit & Loss A/cs) for Companies. Though the accumulated Loss of a Company should also fall in this category, Tally treats it as negative Profit (Nett Loss) and carries to Profit & Loss a/c.
Misc Expenses (Asset)
- Preliminary Expenses
- Profit & Loss A/c
Example of Ledger Accounts & Groups of Current Assets
Suspense Account Group in Tally
Suspense Account Group appears in Balance Sheet under Asset Side. It may contain Balances of Suspense ledger Accounts for money paid/received whose details are not yet known. Later on, such transaction is posted to the appropriate account. Example: Advance paid for Travelling Expenses, an entry in Bank Statement details for which is not yet known, may be recorded in such ledger. As far as practicable, avoid using such Account.
Ultimately all the amounts of Suspense Account will be transferred to respective accounts and the Balance of Suspense Account would be NIL.
Sales Accounts Group in Tally
Sales Account Group contains all sorts of Sales Accounts. You may create separate accounts for Sales and Sales Returns or club up Sales and Sales Returns in one Account – the net effect in Accounts however remains same. You may create different Ledgers for Sales according to Tax Liability (e.g for VAT, CST etc) or Products or other criterion as per your reporting requirement.
Professionals or Servicing companies who do not have Sales income but have Income from Professional Fees & Services, may alter name of the Sales group to Service Income (or some suitable name) or place the Professional Service Charges or Servicing Charges under Direct Income (explained next).
Sales
- Sales of Finished Goods
- Sales of Scrap
- Sales Returns
- Discount Allowed on Sales
Example of Ledger Accounts & Groups of Sales
Direct Income Account Group in Tally
Direct Income Account Group holds Ledger Accounts for Income considered for computation of Gross Profit, like Professional Service Charges or Servicing Charges etc.
Direct Income
- Audit Fees
- Consultancy Fees
- Certification fees
- Retainership Fees
- Other Service Income
Example of Ledger Accounts & Groups of Direct Income
Indirect Income Account Group in Tally
Indirect Income Account Group contains all non-major revenues like receipts on account of Rent, Interest, Commission, Dividend etc. which are are excluded for computation of Gross Profit but are considered for computation of Net Profit only.
Indirect Income
- Rent Received
- Interest Received
- Dividend Received
- Profit on Sale of Fixed Asset
Example of Ledger Accounts & Groups of Indirect Income
Purchase Account Group in Tally
Purchase Account Group holds all trade Purchases Accounts.
You may create separate Accounts for Purchases and Purchases Return or club up Purchases and Purchases Returns in one account – although net effect in accounts remains same.
Purchase
- Raw Materials Purchase
- Stores Purchase
- Packing Materials Purchase
Example of Ledger Accounts & Groups of Purchase Group
Direct Expenses Account Group in Tally
Direct Expenses Account Group consist of Direct Expenses considered for computing Gross Profit/Loss, Example: Carriage Inwards, Wages etc
- Power & Fuel
- Wages
- Freight Inwards
- Packing Charges
Example of Ledger Accounts & Groups of Direct Expenses Group
Indirect Expenses Account Group in Tally
All Indirect Expenses considered for computation of Net Profit/Loss only (and not considered for computation of Gross Profit) should be placed under Indirect Expenses Account Group
| Office Electricity General Office Expenses Repairs & maintenance Building RepairsElectricity RepairsComputer Repairs License Fees & Local Taxes Office Administration Expenses Stationery & Postage StationeryPostageComputer Consumables Internet Charges Telephone & Mobile Expenses Conveyance Expenses Travelling Expenses Advertisement Expenses | Depreciation Depreciation on BuildingDepreciation on MachineryDepreciation on Vehicles Interest Paid Interest on Unsecured LoanInterest on Public DepositsInterest to Bank / FI Employee Expenses Staff salaryBonus to StaffLeave SalaryIncentive SalaryEmployer Contribution to PF / FPFEmployer Contribution to ESIStaff Welfare |
| Example of Ledger Accounts & Groups of Indirect Expenses | |
Miscellaneous Expenses (Asset) is not an Expense Account – its a fictitious Asset which appears under Balance Sheet and not in Profit & Loss Account.
Reserved Ledger Accounts in Tally
Tally auto creates two Reserved Ledger Accounts:
- Cash (under Cash-in-Hand Group)
- Profit & Loss Account (Direct Primary Account)
Besides these 2 Ledgers, you have to create all other Ledger Accounts and place them under appropriate Group as explained above.
Note : Profit & Loss Account (ledger) can be transacted through Journal voucher only. Such voucher should contain transaction with Capital (Capital / Reserve) Account. Never make a Journal voucher to adjust the Revenue Accounts with P & L Account as Tally automatically computes Net Profit/Loss and reflects it in the Profit & Loss account.
Organisation of Account Groups & Ledgers in Tally
In the above examples, we have shown how Accounts Groups & Ledgers may be organised in hierarchical way. There is no limit on depth of nesting, number of Group/sub Groups and number of Ledger Accounts that can be placed under a Group/sub-group.
The benefit of organisation of Accounts in several levels of Account Groups are that you get organised reports with control totals at each Group level.
Only Ledger Accounts are transacted in Vouchers. Account Groups do not participate in any voucher (they are used to organise the Ledger Accounts). You Debit or Credit a Ledger (but not any Group), in any Voucher. So, you should be plan how to treat an Account as Account Group and create Ledgers under the Account Group, to have detailed break up as per Account Ledgers, or you will create a Ledger only.
For example, a small organization will create a ledger account INTEREST PAID (under Indirect Expenses).
Indirect Expenses
- Interest Paid
A large organisation who have taken loan from different sources may create several Interest accounts and place them under a Group Interest Paid.
Interest Paid
- Interest on Unsecured Loan
- Interest on Debentures
- Interest to Banks
- Interest to Financial Institutions
Click here to see PDF
