What is a Ledger? How to create Ledger in Tally ERP 9 | Tally Solutions

Creating Ledger in Tally.ERP 9

  • 1. What is a Ledger and why is it defined as principle book of accounts?
  • 2. Utility of a ledger
  • 3. Creating ledger in Tally.ERP 9
  • 4. Which is the best method to create ledger in Tally.ERP 9 ?
  • 5. Why is grouping so much important while ledger creation in Tally.ERP 9 ?

1. What is a Ledger and Why is it Defined as Principle Book of Accounts?

Journal is a memorandum book to record transactions date wise. On a particular date what are total purchases, total sales, debtors, creditors, incomes, expenses may not be known as journal. And to get information about the above, the entries passed in journal are classified on the basis of their nature in another book which is known as ledger.

An account represents a detailed record of changes that have occurred in a particular asset, liability, expense, loss, gain or capital during the accounting period. All these separate accounts are kept in a loose leaf binder, and the entire group of accounts is called a ledger.

2. Utility of a Ledger

  • The ledger is a master record of all the accounts of a business unit.
  • It is a principal book of double entry system of accounting which provides all important information.
  • Separate accounts are maintained on the basis of their nature, so all information relating to transactions may be obtained through ledgers, such as to whom what is payable’, from whom what is receivable, what are the position of asset and liabilities of the business.
  • Ledger helps us preparing the trial balance to ensure the arithmetical accuracy of the account.
  • Moreover, ledger assist us in preparing trading, profit and loss account and Balance sheet.

3. Creating Ledger in Tally.ERP 9

How many ways to create ? There are total 2 major ways to create a ledger in Tally.
  • One way is to create a Single Ledger and another way is
  • to create it with Multiple Ledgers.
  • To create ledger from voucher screen by pressing ALT + C
Explanation : When we need to create 1 or 2 ledgers, we can create it with the help of Single Ledger option. On the other hand, when we need to create more ledgers, we can create it easily with help of an option called Multiple Ledgers.
Method 1 : Single Ledger Creation in Tally

Step 1 : From Gateway of Tally, go to Accounts Info.

Step 2 : Go to Ledger

Step 3 : Under single ledger, Select the option Create

Step 4 : Fill the particulars in the Ledger Creation Screen displayed :

  • Name : The first box is the Name of the ledger. Enter the name of the ledger, for example, Furniture A/c ; Party ledger account (sales)
  •  
  • Under : Every ledger requires a group to operate in. For example, Furniture A/c will be under Fixed Assets group and party ledger account (sales) under Sundry debtors as they are receivables which the company will realise on future point of time.
  • [Rule : The rule is very simple we just have to select the group that is required as per the nature of the ledger.]
  • Inventory values are affected : This needs to be set to yes if we have stock to be maintained.
  •  
  • Mailing details : Details like Name, Address, Country and Bank Details for the ledger has to be filed [ Note : It is for the ledgers such as debtors and creditors which require these kind of details.]
  •  
  • Tax Registration Details : Tax registration details include :
  • PAN/IT No.                :           ________

    Registration Type      :           ________

    GSTIN/UIN.               :           ________

    Set/Alter GST details :          ________

    [Note : Similar to mailing details, these details are also of people and not for ledgers like furniture, building etc.]      
  • Opening balance : This is the opening balance of the ledger if any. Any balance of the ledger which is being carried forward from the previous year will have to be entered as the opening balance.
Method 2 : Multiple Ledger Creation in Tally The process is almost same as single ledger method. Only one step is different.

Step 1 : From Gateway of Tally, go to Accounts Info.

Step 2 : Go to Ledger

Step 3 : Under Multiple ledger, Select the option Create

Step 4 : Fill the particulars in the Ledger Creation Screen :

 
  • Under Group :  This option is similar to the Under option under Single Ledger Method.   For example, Furniture A/c, Electrical and Fittings will be under Fixed Assets group, Investment in shares, Investment in Fixed deposit account under Investment group etc.,   This works well if we create ledgers under only one group. This type of ledger creation is also not useful for creating Sundry debtors ledger and sundry creditors ledger as we have to also fill up GST details of individual creditors and debtors while creating ledger account for them.

4. Which is the Best Method to Create Ledger in Tally.ERP 9 ?

It is totally upto to the decision of users to create ledgers using single ledger or multiple ledger method because that totally depends on the requirements.

Only one important thing which is here to note is that we get more details while creating ledgers under Single Ledger Method as compared to Multiple Ledger Method. Because in Multiple Ledger Method, there are no options such as:

  • Inventory values are affected
  • Mailing Details
  • Tax Registration Details

For this we have to edit the ledger individually while passing the accounting entries or we can go to each ledger and edit them. In short, choose the method wisely to save your time and money.

5. Why is Grouping so much Important While Ledger Creation in Tally.ERP 9 ?

Groups or heading in Tally helps Tally to determine type of ledger (whether the ledger is account affecting income side or is it in nature of expense or is it the item which will give benefits or returns to business such as Assets or an item is such which creates liability for business which business has to settle using it’s current assets.

So it becomes necessary to put the ledger in correct head or group so that Tally can account it properly.

For Example : To pass an entry for expense say machinery repair expense.

Step 1 : Creating ledger We have to create two ledgers here :
  • Machinery maintenance (Expense Ledger)
  • Party Ledger ( To credit with the expense amount)
Step 2 : Deciding on the Grouping
  • Machinery maintenance is in nature of expense and so it will have to be grouped under Indirect expenses
  • Party ledger under Sundry creditors (Liability) as business has to repay creditors after the credit period lapses.
Step 3 : Passing a Journal entry From Gateway of Tally we need to navigate to Accounting vouchers and select “F – 7” Journal to pass the entry. Entry will be like :
  • Debiting Expense Account (Machinery repairs)
  • Crediting Party Ledger Account


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