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58 CHAPTER 3 Introduction to Accounting

Demo 3.2: Review general ledger accounts

KEY CONCEPTS

Before we turn our attention to the processes involved in fi nancial accounting,
we need to explain two key fi nancial accounting concepts: accounting docu-
ments and parallel accounting. We also need to introduce a few key concepts
related to management accounting. You must become familiar with these con-
cepts to understand the processes we discuss later in this chapter and in other
chapters.

ACCOUNTING DOCUMENTS
We introduced the concepts of documents in Chapter 2. In this chapter we
elaborate on fi nancial accounting documents. A financial accounting docu-
ment (FI document) records the impact (fi nancial data) of a transaction step
on fi nancial accounting. As Figure 3-8 illustrates, an FI document consists of
a header section and a detail or line item section. The header includes data
that apply to the entire document, such as document number, document type,
various dates, company code, currency used, and a reference number. A docu-
ment type is a two-character code that identifi es the specifi c business process
step that generated the document. Commonly used document types include
customer invoice (DR), customer payment (DZ), goods issue (WA), and goods
receipt (WE). A document type determines the document number range and
the account type (explained below) associated with the posting.

Figure 3-8: Structure of an FI document

The detail section typically consists of two line items: a debit item and
a credit item. Each line item includes the account number from the general
ledger, a description of the account, an indication of whether the account is
debited or credited, and the amount. The debit or credit is indicated by a post-
ing key, which is a two-digit code that determines how a line item is posted.
Specifi cally it identifi es the account type, indicates whether the line item is a
debit or credit posting, and specifi es the fi eld status of additional data needed
to post the item. Examples of account types are customer (D), vendor (K), asset
(A), material (M), and general ledger accounts (S). Examples of additional
data are cost centers and business areas. Figure 3-9 includes several examples

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