Common and Possible Errors in Grouping & Accounts Classification

Reproduced below are some very important issues pertaining to groups. 


Debtors/Creditor Classification


Placing individual party accounts under Sales or Purchase Accounts groups:


Accounts of parties with whom your company has trade relationship must be opened under any of the following groups (or sub-groups under them) only:

• Sundry Debtors
• Sundry Creditors
• Branch/Divisions

Sales and Purchase account groups are meant for revenue accounts and would be reflected in the Profit & Loss Account. If you open entry accounts under these groups. You will find it difficult to pass sales or purchase voucher transactions. For example, in a sales voucher transaction entry, you must debit an account which is a sundry debtor, branch/division or even a creditor. Moreover, other facilities like bill-wise allocation and tracking would not become available unless the accounts belong to one of these groups. 

Opening two accounts of the same party:

Tally has separately classified debtors, creditors and branch/divisions only for convenience. There is no operational distinction except for the purpose of keeping the accounts of a particular group together during displays and analysis.  Thus you can pass both sales and purchase entries for a party account placed under Sundry Debtors. We recommend that you use the classification depending on the most natural group for the party. For example, parties from whom you buy more frequently then you sell to, could be placed under Sundry Creditors, as that would be the natural place for you to look for his account.  Tally does not restrict the accounts from having obverse balances. Thus, a Sundry Debtor can have a credit balance depending on the state of his account. 

You would, therefore, note that you need not open two account of the same party - one Sundry Debtors and another under Sundry Creditors. Remember, Tally restricts you from opening two identical ledger accounts. Of course, you may decide to circumvent (to check) by marking one account as "X & Co. - S/Dr" and another "X & Co. - S/Cr". Doing this would allow you to have two accounts of the same party under two groups, but you would lose the advantage of analysing his net position in one place. I recommend that you maintain a single account to obtain best benefits. 

Placing expenditure items under a Liabilities Group, e.g. the expenditure item 'Rates & Taxes' under the group 'Duties & Taxes'. 

The group Duties & Taxes is specifically meant to handle taxation liabilities of your company. Rates & Taxes and other statutory expenses should be placed under Indirect Expenses.