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

[NathanGenez]

ummmm... I personally don't mind silly questions so long as the person shows a willingness to learn, versus someone who is just lazy.

but could you have not gone to google and figured this out? Why ask here?

[former_member221515]

This message was moderated.

[former_member221515]

One more thing. Do not think any questions as silly. All questions are equally important for understanding.

[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