Q.Explain the concept of 'Grouping' of accounts under a Computerised Accounting System, with examples.

Every ledger in a computerised system must first be placed under a category before it can be used, and this categorisation is what makes automatic reporting possible.

In a Computerised Accounting System, every ledger account is classified under a Group — a category that brings together ledgers of a similar nature, so that the software can automatically prepare the Balance Sheet and Trading/Profit and Loss Account in the correct classification, without a person having to manually sort each ledger balance into the right place.

Typical groups include: Capital Account; Loans (Liability); Current Liabilities (e.g., Sundry Creditors, Outstanding Expenses); Fixed Assets (e.g., Land and Building, Furniture, Machinery); Investments; Current Assets (e.g., Sundry Debtors, Cash-in-hand, Bank Accounts, Stock-in-hand); Sales Accounts; Purchase Accounts; and Direct/Indirect Expenses and Incomes. A group can itself contain further sub-groups — for instance, 'Sundry Debtors' is a group under which each individual customer's own ledger account is separately opened. …

Confusing a Group with a Ledger — a Group is the category, a Ledger is the individual …