Tally Group determines where the balance of a particular ledger to be represented in financial reports and also to group similar nature ledgers under single accounting head. 

Tally creates financial reports based on groups only.  So, we should create ledgers under a group in order to correctly represent the balance of ledger in financial reports.

There are 28 pre-defined Groups in Tally out of which 15 are Primary and 13 are sub-groups derived under some primary group.  Out of 15 primary groups, 9 groups (capital nature) are represent in Balance sheet, 6 groups(Revenue nature) are in P&L account.  We can  create, modify, rename and delete pre-defined or user-defined groups but should not done for primary groups.

The 15 pre-defined Primary Groups:

1. Branch/Divisions: Capital nature. Used to create branch accounts. Eg: Vizag Branch a/c
2. Capital Account: Capital nature. Used to create all types of capital such as Share Capital, Partner’s Capital and also drawings.
3. Current Assets: Capital nature. Used to create accounts of assets that can be liquefied within short term and also prepaid expenses, receivable income.
4. Current Liabilities: Capital nature. Used to create short term liabilities. Used to create liabilities accounts that are to be paid within short time and also pre received income, payable expenses etc.
5. Direct Expenses: Revenue Nature. Used to create all expense a/cs that are considered as manufacturing or trading related. Eg: Wages a/c, Unloading charges, carriage inwards, foremen salary, freight etc.
6. Direct Incomes: Revenue nature. Used to create ledgers that appear like income sources but not to be considered as income from main business activity. Eg: sales of scarp, sale of empty barrels, sale of gunny bags, sale of by-products, Factory Insurance claim recovery
7. Fixed Assets : Capital nature. Used to create all type of asset a/cs that are purchased for business and can provide service for a long time.
8. Indirect Expenses: Revenue nature. Used to create all expenses related to sale of products or office expenses.
9. Indirect Incomes: Revenue nature. Used to create all incomes related to office
10. Investments: Capital nature. Used to create asset accounts like below:
11. asset that can be resold in the market at any point of time
12. asset should generate income by way of interest or dividends

Eg: equity shares, NSC bonds

11. Loans (Liability): Capital nature. Used to create any type of loan account borrowed by company.
12. Misc. Expenses (Asset): Capital nature. Used to create all expense accounts that are not written off to P&L a/c the same year in which they are incurred. Such an expense is written off proportionally over a number of years.  Eg: preliminary expenses lump sum amount paid for obtaining copy right.
13. Purchase Accounts: Revenue nature. Used to create any type of purchase accounts along with purchase returns account. Eg: credit purchases a/c, cash purchases a/c, purchases @ 12.5% VAT, InterState Purchase A/c
14. Sales Accounts: Revenue nature. Same as Purchase accounts but for Sales.
15. Suspense Account: Capital nature. Used to create all accounts where the actual amount involved in the transaction or the particular ledger a/c involved is not known temporarily. Eg: Travelling advance a/c, Interest suspense a/c

Travelling advance a/c Dr

            To cash a/c

(when advance paid)

Travelling Expenses a/c

            To Travelling Advance a/c

(Adjustment is done when bill is submitted)

The 13 Pre-defined Derived Groups

1. Bank Accounts : derived under Current Assets. Used to create current, savings Bank accounts of the firm
2. Bank OD: Derived under Loans (liability). Create all loan a/c borrowed by the company for the purpose of working capital.
3. Cash in Hand : derived under Current Assets. Cash a/c ledger will be automatically created by Tally for each company.  If necessary we can create petty cash a/c etc under this group.
4. Deposits (Assets): Derived under Current Assets. Used to create deposits of organization in other firms. Eg: telephone deposit, Electricity deposit etc.
5. Duties & Taxes: derived under Current Liabilities. All types of tax ledgers to be created under this group. Tax ledgers have the amount collected from customers and to be remitted to Government.
6. Loans & Advances (Asset): Derived under current assets. Used to create all types of loans and advances that are given by the company to staff members or outsiders. Eg: Loan to accountant, loan to salesman
7. Provisions: derived under current liabilities. Used to create all provisions set aside from profits to meet any unpaid expenditure of the current year or unforeseen losses of future. Eg: provision for sales tax, provision for bad debts
8. Retained Earnings: derived under capital account. Used to create all reserve accounts set aside from profits for future development of business. Eg: Capital reserve, General Reserve, Reserve for Depreciation etc
9. Secured Loans: derived under loans (liability). Used to create all Loan a/cs borrowed by the company against primary or collateral or both types of securities. Eg: Term Loan from SBI a/c, Truck Loan from Apple Finance Corp.
10. Stock-in-Hand: derived current assets. When the company was created to maintain Accounts with Inventory there is no need to create Stock a/c since Tally automatically take care of it. In the case of Company created with Accounts Only but has physical stock in the business than Stock a/c to be created under this group and Opening and Closing balances to be entered manually.
11. Sundry Creditors: derived under current liabilities. Used to create all suppliers or vendor accounts to which the company owes.
12. Sundry Debtors: derived under current assets. Used to create all customer accounts which are owe to company.
13. Unsecured Loans: derived under loans (liability). Used to create all loan a/cs borrowed by the company without any security. Eg: Loan from friend or father etc

Additional pre-defined Groups that are alias for other Groups:

1. Expenses (Direct) : Alternate name for Direct Expenses
2. Expenses (Indirect): Alternate name for Indirect Expenses
3. Income (Direct): Alternate name for Direct Income
4. Income (Indirect): Alternate name for Indirect Income
5. Reserves & Surplus: Alternate name for Retained Earnings
6. Bank OCC: Alternate name for Bank OD