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Section: Billing
SAP AG 1999
Double-Entry Accounting
Balance sheet accounts
P&L accounts
SD Example
MM Example
SAP AG 1999
Account name
Debit Credit
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.
Property accounts
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.
Revenue accounts
Expense accounts
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SAP AG 1999
100 100
120 120
Receivables Bank
Incoming payment: (Assets) (Assets)
120 120
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Vendor
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Stock
Goods receipt: (Assets) GR/IR clearing account
100 100
Creditors
Invoice: Payable GR/IR clearing account
100 100
Creditors Bank
Payment: Payable (Assets)
100 100
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.