In Tally Prime, Ledgers and Groups are two essential components of accounting and financial management. Here's a detailed explanation of both:
๐งพ 1. What are Ledgers?
A Ledger is an individual account used to record transactions related to a specific item, person, or type of expense or income. It is the primary tool for tracking financial information in Tally Prime.
Purpose of Ledgers:
Track specific accounts: For example, a Sales Ledger for sales-related transactions or a Bank Ledger for bank transactions.
Store transaction details: Each ledger stores all the transactions related to its category (like sales, purchases, payments, receipts, etc.).
Categorize financial transactions: Ledgers categorize income, expenses, assets, liabilities, etc.
Types of Ledgers:
Personal Ledger: This is used for maintaining accounts of individuals or entities, such as Debtors (customers), Creditors (suppliers), and employees.
Impersonal Ledger: This ledger is used for different types of expenses and incomes like Sales, Purchase, Income, Expenses, Assets, Liabilities.
Bank Ledger: To track transactions related to different bank accounts (e.g., ICICI Bank Account, HDFC Bank Account).
GST Ledger: To maintain ledgers related to GST, like GST Output, GST Input, and GST Payable.
Stock Item Ledger: For tracking inventories of specific goods or services.
Creating a Ledger in Tally:
Go to Gateway of Tally > Accounts Info > Ledgers > Create.
Choose a Group for the ledger (more on this below).
Provide Ledger Name, Under Group, and other relevant details like GST settings (if applicable), and Opening Balance.
๐ง๐ผ 2. What are Groups?
A Group in Tally Prime is a classification or categorization of similar ledgers. Groups are used to organize ledgers for better financial reporting and analysis. For example, all income-related ledgers can be grouped under an "Income" group, and all expense-related ledgers under an "Expense" group.
Purpose of Groups:
Organize Ledgers: Groups help to categorize similar types of ledgers (e.g., all expenses under "Expenses").
Summarize Data: Groups summarize the data of all ledgers under them. For example, the Sales group will summarize all the sales-related transactions.
Financial Reporting: They help in generating accurate and meaningful reports such as Profit & Loss Statement and Balance Sheet.
Types of Groups in Tally:
Tally Prime offers Predefined Groups, which are commonly used in accounting. Some of the key predefined groups are:
Primary Groups:
Assets: To track resources owned by the company (e.g., Cash, Bank, Fixed Assets).
Liabilities: To track amounts owed by the company (e.g., Sundry Creditors, Loans).
Income: To track all income-related ledgers (e.g., Sales, Service Income).
Expenses: To track various types of expenses (e.g., Rent, Salaries, Utilities).
Sub-Groups:
Current Assets: Cash, Bank accounts, Receivables, etc.
Fixed Assets: Buildings, Machinery, Equipment.
Current Liabilities: Short-term debts, payable accounts, etc.
Indirect Expenses: General expenses not directly related to production (e.g., Advertising, Marketing).
GST-Related Groups:
Output GST: Tax collected from customers.
Input GST: Tax paid on purchases.
Group Hierarchy in Tally:
You can create groups under primary groups or customize them according to your business needs. For example, under Income, you could create Sales Income, Interest Income, and so on.
๐ท️ Relationship Between Ledgers and Groups
Ledgers belong to Groups: When you create a ledger, you must associate it with a group. For example, a Sales Ledger would belong to the Sales group.
Groups summarize Ledgers: Groups summarize the financial transactions of all the ledgers under them, giving you a broader view of business financials.
๐ Example:
Let’s say your company sells products and you want to track both the sales and related expenses:
Create a Sales Ledger:
Ledger Name: Sales
Group: Sales (under Income group)
Create an Expense Ledger:
Ledger Name: Rent Expense
Group: Rent (under Expenses group)
Reports:
Profit and Loss Statement: This will show total income from the Sales ledger and total expenses from the Rent Expense ledger.
๐ Key Points to Remember:
Ledgers represent individual accounts (e.g., cash, sales, customers, vendors).
Groups organize ledgers into categories for easier tracking and reporting.
You can create custom groups for better categorization or use predefined ones in Tally.