STARTING POINT 
Living room is one of the most versatile rooms in the house. Decide on the style of the room: will it be formal or casual? Find a focal point of the room-a fireplace, a large window or any interesting feature that attracts the eye. If the room does not have a focal point, then create one by placing a large piece of furniture, say, a sofa, against the longest wall. Accent it with some large cushions in complementary or contrasting color, and maybe accessorize it with some artwork. 

ARRANGEMENT 
Place the large pieces first, then work around them. If there is a fireplace, it often works to place the sofa along the opposite wall, and a common arrangement is a sofa or loveseat grouped with two upholstered chairs. Or for a large grouping, two sofas facing one another with pair of chairs at either end. And be sure to make a coffee table or end tables part of the seating arrangement. 
Large rooms usually require two conversation areas. Anything upholstered and backless, e.g. a daybed or chaise, can be used to divide the room.

FORMAL 
For a formal setting, choose a symmetrical furniture arrangement and use antiques or reproductions that feature classic details. Smooth glass, mirrors and polished wood work well in this kind of room, as do striped wallpaper, oriental rugs, and mixed floral upholstery. Use traditional draperies, with floor-to-ceiling panels topped by valances and elegant trims.

CASUAL
For casual look, arrange furniture asymmetrically instead of facing it off formally by the fire. Don't be afraid to mix furniture styles, and consider a wooden coffee table. Asymmetrically arranged artwork, especially folk art, goes well with a casual setting. Rough textures, for furniture and wallpaper, have a casual feel. You can use a luxurious handmade carpet instead of cotton rugs and still get the casual effect.

COLOR 
Color plays an important role in the overall mood of the room. People tend to go for neutrals as they are easy to match with most furniture, and are therefore very safe. Rugs are usually the best place to start. Select colors from your rugs for your upholstery, draperies and accessories, with the idea of repeating colors throughout the room.