Groups and Ledgers — Building the Chart of Accounts

Prerequisites: Module 6 — Computerised Accounts

Learning Objectives

By the end of this module, you will be able to:

• Explain the group-ledger hierarchy in Tally
• Identify which group any ledger belongs to
• Create ledgers correctly in Tally Prime
• Build the complete chart of accounts for Sunrise Retail

What Is a Chart of Accounts?

A Chart of Accounts (CoA) is the complete list of all accounts used by a business, organised in a structured hierarchy. Think of it as the master menu of every account that can appear in your books.

In Tally, this hierarchy has two levels:

• Groups — Categories (like folders)
• Ledgers — Individual accounts (like files inside folders)

Every ledger belongs to a group, and every group belongs to a parent group (ultimately tracing back to one of 28 pre-defined groups in Tally).

Groups — The Folder Structure

A Group in Tally is a collection of ledgers with similar characteristics. Groups do not hold transactions directly — only ledgers do. But groups determine how ledgers appear in reports.

Groups have a parent-child structure:

Capital Account (Primary Group)
    └── Kiran Sharma's Capital (Ledger)
    └── Sneha Reddy's Capital (if partnership)

Sundry Creditors (Primary Group)
    └── TechWorld Distributors (Ledger)
    └── Galaxy Electronics (Ledger)
    └── Sparsh Tech Solutions (Ledger)

Why Groups Matter

The group you assign a ledger to determines:

1. Where it appears in reports — Balance Sheet, P&L, or neither
2. Its accounting behaviour — Is it an asset? A liability? Income? Expense?
3. GST treatment — Tally uses the group to identify ledger type for GST calculations

Ledgers — The Individual Accounts

A Ledger in Tally is the equivalent of an individual account in manual accounting. Every journal entry (voucher) uses ledgers — not groups.

A ledger stores:

• Name (account name)
• Group (parent category)
• Opening balance (if any)
• All transactions that affect this account

Creating a Ledger:

Gateway of Tally → Masters → Accounts → Ledgers → Create (or Alt+C while in a voucher)

Key fields when creating a ledger:

Sunrise Retail — Case Study Application

Sunrise Retail Pvt Ltd — Complete Chart of Accounts

Let's build the full ledger structure for Sunrise Retail. For each ledger, we identify the parent group and any opening balance from the April 1, 2025 balance sheet (total assets/liabilities: ₹18,80,000 each side).

Assets — Balance Sheet (Left Side)

Bank Accounts Group:

Cash-in-Hand Group:

Stock-in-Hand Group:

Note: In Accounts with Inventory mode, stock is tracked via stock items — this ledger is only used in Accounts Only mode.

Fixed Assets Group:

Loans & Advances (Asset) Group:

Duties & Taxes (for GST Input Credits):

Liabilities — Balance Sheet (Right Side)

Capital Account Group:

Sundry Creditors Group:

Duties & Taxes (for GST Output):

Current Liabilities Group:

Income — Profit & Loss

Sales Accounts Group:

Indirect Income Group:

Expenses — Profit & Loss

Purchase Accounts Group:

Direct Expenses Group:

Indirect Expenses Group:

Customer Ledgers (Sundry Debtors)

Note: Digital Hub and Tech Park are intrastate (Telangana → Telangana) → CGST+SGST. CloudStore is interstate (Telangana → Karnataka) → IGST.

Creating Ledgers in Tally — Step by Step

Let's create the "TechWorld Distributors Pvt Ltd" ledger as an example:

Gateway of Tally → Masters → Accounts → Ledgers → Create

Press Ctrl+A to save.

Key point: When creating a supplier or customer ledger, always enter their GSTIN and state. This is what Tally uses to determine CGST/SGST vs IGST on invoices. Missing GSTIN = missing on GSTR-1 data.

T-Account Posting — Tracing April 5 Purchase Through the Ledgers

Every journal voucher in Tally posts simultaneously to two or more ledgers. Let's trace the April 5 TechWorld purchase (100 phones, ₹14,16,000 total invoice) through each account it touches:

┌─────────────────────────────────────────────────────────────────────┐
│  April 5 — Purchase from TechWorld (100 phones on credit)            │
├───────────────────────┬─────────────────────────────────────────────┤
│  PURCHASES A/C        │  IGST INPUT CREDIT A/C                       │
│  (Indirect Expenses)  │  (Duties & Taxes)                            │
├──────────┬────────────┼──────────────┬──────────────────────────────┤
│  Dr      │  Cr        │  Dr          │  Cr                          │
├──────────┼────────────┼──────────────┼──────────────────────────────┤
│12,00,000 │            │  2,16,000    │                              │
│ (goods   │            │  (18% IGST   │                              │
│  cost)   │            │  on ₹12 L)   │                              │
└──────────┴────────────┴──────────────┴──────────────────────────────┘

┌───────────────────────────────────────────────────────────────────┐
│  TECHWORLD DISTRIBUTORS A/C  (Sundry Creditors)                    │
├──────────────────────────────┬────────────────────────────────────┤
│  Dr                          │  Cr                                │
├──────────────────────────────┼────────────────────────────────────┤
│                              │  14,16,000                         │
│                              │  (₹12,00,000 base + ₹2,16,000 GST)│
└──────────────────────────────┴────────────────────────────────────┘

Debit total: ₹12,00,000 + ₹2,16,000 = ₹14,16,000
Credit total: ₹14,16,000 ✓ — both sides balance

Running Ledger Balance — TechWorld Distributors

Watch how TechWorld's balance changes through April as Sunrise Retail transacts with them:

┌──────────────────────────────────────────────────────────────────────┐
│  TECHWORLD DISTRIBUTORS — Ledger (Sundry Creditors)                   │
├───────────┬──────────────────────────┬────────────┬─────────────────┤
│  Date     │  Particulars              │  Dr (₹)    │  Cr (₹)         │
├───────────┼──────────────────────────┼────────────┼─────────────────┤
│  Apr 1    │  Opening Balance          │            │  1,80,000       │
│  Apr 5    │  Purchase — 100 phones   │            │  14,16,000      │
│  Apr 20   │  Payment by NEFT          │  5,00,000  │                 │
│  Apr 22   │  Purchase return — 5 ph  │  70,800    │                 │
├───────────┼──────────────────────────┼────────────┼─────────────────┤
│  Apr 30   │  Closing Balance          │            │  10,25,200      │
├───────────┼──────────────────────────┼────────────┼─────────────────┤
│  TOTAL    │                           │  15,96,000 │  15,96,000 ✓    │
└───────────┴──────────────────────────┴────────────┴─────────────────┘

Check: ₹1,80,000 + ₹14,16,000 − ₹5,00,000 − ₹70,800 = ₹10,25,200 ✓

April 2025 — Complete Ledger Balance Summary

After posting all April vouchers, here is the closing balance across every major ledger:

These closing balances feed directly into the Trial Balance, then into Final Accounts — Module 25.

Practice Exercise

Exercise 1: Create the ledger entry details for "Digital Hub Retail" — Sunrise Retail's intrastate customer. State all the fields you would fill, including the correct group, state, and GST information.

Exercise 2: For each of the following accounts, identify the correct Tally group:

1. Outstanding Rent Payable (rent due but unpaid)
2. CloudStore Online — a customer
3. Advance paid to TechWorld for upcoming order
4. Interest on late payment to supplier
5. Commission Received from a referral

Key Terms

Module Summary

• In Tally, Groups are categories (folders) and Ledgers are individual accounts (files)
• The group assigned to a ledger determines where it appears in reports and how it behaves in GST
• Sunrise Retail's chart of accounts includes: bank (₹8,00,000), cash (₹50,000), stock (₹6,00,000), fixed assets, customers, suppliers, GST accounts, income, and expense ledgers
• Party ledgers (customers and suppliers) must have GSTIN and state entered correctly — Tally uses this to calculate CGST/SGST vs IGST
• Always enter opening balances when creating ledgers for an existing business

Quick Quiz

Test yourself before moving on:

1. TechWorld Distributors supplies goods to Sunrise Retail on credit. TechWorld's ledger should be created under:

• a) Sundry Debtors
• b) Sundry Creditors
• c) Bank Accounts
• d) Current Liabilities

2. Which group should "IGST Input Credit" be placed under?

• a) Current Assets
• b) Indirect Income
• c) Duties & Taxes
• d) Current Liabilities

3. Digital Hub Retail is in Secunderabad (Telangana) and Sunrise Retail is in Hyderabad (Telangana). What GST type applies?

• a) IGST — interstate
• b) CGST + SGST
• c) Exempt from GST
• d) Zero-rated

4. In Tally, which of these holds actual transaction entries?

• a) Groups
• b) Ledgers
• c) Stock Groups
• d) Cost Categories

Next: Module 8 — Predefined Groups — All 28 pre-defined groups in Tally Prime explained with a complete mapping of every Sunrise Retail ledger to its correct group.