Section: Billing
 SAP AG 1999
(C) SAP AG
TASD41
5-1
Basic Accounting Principles
 Double-Entry Accounting
 Balance sheet accounts
 P&L accounts
 SD Example
 MM Example
 SAP AG 1999
(C) SAP AG
TASD41
5-2
Double-Entry Accounting
Account name
Debit
Credit
• Each business transaction is posted to at least two different accounts
• Debit postings always appear on the left hand side of a T account
• Credit postings always appear on the right hand side of a T account
• Total debit postings = Total credit postings
 SAP AG 1999

The basic principle of double-entry accounting is that every business transaction is posted to at least
two different accounts, and is therefore posted at least twice. In the most simple cases, only two
accounts are affected.

The most important thing to remember in this context is Debit to Credit.

This means that you should post a transaction to the debit side in one account, but to the credit side
in another.

Basic principle:
The total for debit postings is always the same as the total for credit postings, regardless of the
number of accounts affected.
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Account Types - Balance Sheet Accounts
Property accounts
 Additions are entered on the debit side
 Disposals are entered on the credit side
 Examples: Stock, cash, bank, receivables
Capital and debtor accounts
 Additions are entered on the credit side
 Disposals are entered on the debit side
 Examples: Payables
 SAP AG 1999

Business transactions are posted to accounts (= invoices kept on two sides, in which movements are
registered).

In a double entry accounting system it is possible to separate the accounts into different types of
basic accounts, which themselves are divided into two partial accounts:
 Balance sheet accounts (property accounts and capital and debtor accounts), to which stocks and
changes to these stocks are posted.
 P&L accounts (expense/cost accounts and revenue/sales accounts), to which transactions affecting
net income are posted.

The following basic equation applies to the structure of all accounts:
Opening balance + addition - disposal = closing balance

However, the basic accounts above differ in which side the opening balance, addition, disposal and
closing balance are posted to.
(C) SAP AG
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Account Types - P&L Accounts
Revenue accounts
 Additions are entered on the credit side
 Disposals are entered on the debit side
 Example: Sales revenue
Expense accounts
 Additions are entered on the debit side
 Disposals are entered on the credit side
 Example: Cost of materials, price difference
 SAP AG 1999
(C) SAP AG
TASD41
5-5
SD Example
 Sales order
10 pieces at $ 12 per piece
 Goods issue:
10 pieces delivered, standard price $ 10 per piece
 Invoice:
10 pieces at $ 12 per piece
 Incoming payment: $ 120
 SAP AG 1999
(C) SAP AG
TASD41
5-6
SD Example: Postings
Goods issue:
Material usage
(Expenses)
Stock
(Assets)
100
Invoice:
100
Receivables
(Assets)
Sales revenue
(Revenues)
120
Incoming payment:
120
Receivables
(Assets)
120
Bank
(Assets)
120
 SAP AG 1999

In the example of an SD business transaction, an accounting document is created at the point of
goods issue and/or invoice creation.

At the point of goods issue, the goods physically leave the warehouse. This results in a stock-related
and value-related posting. This means that the stock is reduced and the materials used increased. The
posting is therefore called "Materials used to stock".

At the point of billing, receivables are accumulated by the customer, and additions are posted to sales
revenues (posting record: Receivables to sales revenues).

If the incoming payment is made in FI, the receivables are reduced again and the amount of the cash
inflow is posted to a bank account (posting record: Bank to receivables).

Posting output tax has been ignored for the purposes of this simplified example.
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5-7
MM Example
Vendor
 Purchase order:
10 pieces at $ 10 per piece
 Goods receipt:
10 pieces received, standard price $ 10 per piece
 Invoice:
10 pieces at $ 10 per piece
 Payment:
$ 100
 SAP AG 1999
(C) SAP AG
TASD41
5-8
MM Example: Postings
Goods receipt:
Stock
(Assets)
GR/IR clearing account
100
Invoice:
100
Creditors
Payable
100
Payment:
Creditors
Payable
100
GR/IR clearing account
100
Bank
(Assets)
100
 SAP AG 1999

In the example of an MM business transaction, an addition to stock occurs at the point of goods
receipt. The clearing entry is made against a special goods receipt/invoice receipt clearing account
(stock to GR/IR clearing account).

Provided that standard prices are used for valuation, it may be necessary to post to a price difference
account the amount of the difference between costs for purchasing and valuation.

At the point of invoice creation, the GR/IR account is credited and payables accumulated by the
relevant creditor (GR/IR clearing account to creditors).

The payables are reconciled in the payment run, and a disposal is is entered in the bank account
(payables to bank).

Posting the tax due has been ignored for the purposes of this simplified example.
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