Basic question

[Former Member]

Hi Friends,

I know this is a pretty silly question to ask. Could you please helo me understand what a Debit and Credit means in SAP accounting?

Also, what is a cost of sale? What are the accounts that are hit when we procure goods to stock and when we directly ship goods to customers from vendors.

1) An invoice is raised.

2) A goods is receipted

3) An invoice is receipted.

Appreciate if any one can help me with a link that can help me understand the basi

[Former Member · Accepted solution]

Hi Kumar,

Please read the following for more details:

I. Personal Accounts :

The accounts which relate to persons. Personal accounts include the following.

i. Natural Persons :

Accounts which relate to individuals. For example, Mohanu2019s A/c, Shyamu2019s A/c etc.

ii. Artificial persons :

Accounts which relate to a group of persons or firms or institutions. For example, HMT Ltd., Indian

Overseas Bank, Life Insurance Corporation of India, Cosmopolitan club etc.

iii. Representative Persons:

Accounts which represent a particular person or group of persons. For example, outstanding salary account, prepaid insurance account, etc.

The business concern may keep business relations with all the above personal accounts, because of buying goods from them or selling goods to them or borrowing from them or lending to them. Thus they

become either Debtors (Customers) or Creditors (Vendors).

The proprietor being an individual his capital account and his drawings account are also personal A/cs.

II. Impersonal Accounts:

All those accounts which are not personal accounts. This is further divided into two types viz. Real and Nominal accounts.

i. Real Accounts:

Accounts relating to properties and assets which are owned by the business concern. Real accounts

include tangible and intangible accounts. For example, Land, Building, Goodwill, Purchases, etc.

ii. Nominal Accounts:

These accounts do not have any existence, form or shape. They relate to incomes and expenses

and gains and losses of a business concern. For example, Salary Account, Dividend Account, etc.

Accounting Rules:

I. For Personal A/c: Debit the receiver and Credit the giver

II. For Real A/c : Debit what comes in and Credit what goes out

III. For Nominal A/c: Debit all expenses and losses and Credit all incomes and gains

The rules may be summarised as below :-

1. Increases in assets are debits and decreases in assets are credits.

2. Increases in capital are credits and decreases in capital are debits.

3. Increases in liabilities are credits and decreases in liabilities are debits.

4. Increases in incomes and gains are credits and decreases in incomes and gains are debits.

5. Increases in expenses and losses are debits and decreases in expenses and losses are credits.

Hope this is clear.

Regards,

Kannusamy S