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_member182098]

Hello,

It is not easy to explain the debit and credit if you do not have basic Finance background.

However, the whole accounting runs on three principles.

Personal Accounts:

Debit the receiver

Credit the Giver

Nominal Account:

Debit all expenses and losses

Credit all gains and incomes

Real Account:

Debit what comes in

Credit what goes out

There is a correction need in question. 1st point should be PO. But not invoice.

When PO raised, no accounting entry happens in SAP.

When Goods received.

Stock A/c Dr

To GRIR Account

When Invoice Received

GRIR Account Dr

To Vendor Account.

Hope this informative and let me know if you need further explanation.

Regards,

Ravi

[Former Member]

Hi Ravi,

Thank You for your reply.

Could you please tell me what Personal Accounts,Nominal Account and Real Account mean?

Thank You

Kumar

[Former Member]

These are the thress types accounts, any accounting transaction will fall under one of these types.

For example :

Your Invoice received :

GR/IR clearing debit -

vendor a/c credit - personal ac

Invoice paid :

Vendor account debit - personal ac

bank ac credit - real ac

May be you can do more reasearch on this, then you can differentiate between them

uma

[former_member182098]

Hello,

Personal Accounts are associated with persons not only human beings but also legal persons.

Example: Ram, Rahim, Robert, State Bank of India, Bank of America and ABC Limited.

Capital and Drawings accounts are also personal accounts.

Note: Any prefix or suffix added to nominal accounts such as "Rent Received in Advanced", Rent paid in advance, insurance paid in advance, salaries accrued accounts are considered personal accounts.

Nominal Accounts examples are:

Rent, Insurance, Salaries, Stationery and Interest etc. (Dr)

Rent (received), Dividends, Income (received) (Cr)

Real Accounts Examples are:

Cash Account, Sales Account, Purchases Account, Stock Account, Machinery Account, Sales Returns Account, Purchases Returns Account.

Hope this give you some idea.

I would suggest you go through basic accounting books to develop further in this area.

Regards,

Ravi