How do you reconcile the GR/IR clearing account in SAP FICO?
You reconcile the GR/IR clearing account in SAP FICO by matching the goods receipt(GR) with the invoice receipt(IR) and clearing the open items.
GR/IR Clearing
It is a normal business practice for goods to be delivered before the associated invoice arrives. This type of transaction is referred to in SAP R/3 as “Delivered but not yet invoiced.” It is also possible for an invoice to arrive earlier and the goods be delivered later. This is referred to in SAP R/3 as “Invoiced but goods not yet delivered.”
To account for movement of invoice and goods in the system, Provisional Accounts (clearing accounts) are defined for off-setting postings when goods are delivered but invoice not yet received and vice versa to account for timing differences between invoice receipt and goods delivery.
For example, when an invoice is received and the goods have not yet been delivered or vice versa, you define adjustment accounts and targets accounts for automatic posting of Goods Receipt/Invoice Receipt (GR/IR) for off-setting postings.
For the system to reflect invoice receipt of which goods are not yet delivered or goods delivered and invoice not yet received, transfer postings are made at the balance sheet date. The system analyzes the transactions in the GR/IR clearing accounts and posts outstanding balances to adjustment accounts and subsequently posts differences to offsetting accounts for goods receipt with pending invoices and vice versa.
Quantity differences between goods delivered and invoice receipt results in a debit balance in the GR/IR clearing account. When you receive an invoice for part of a delivery, the invoice amount is posted to the inventory account and the GR/clearing account based on your settings on the balance sheet key date. Transfer postings are performed to identify the part of goods delivered but not yet invoiced to the relevant adjustment account. The program then posts the offsetting entry to the goods delivered but not yet invoiced adjustment account (i.e., target account).
After the financial statement has been generated at a given key date, these postings are reversed.
We have illustrated this transaction with account postings in Figure 8-1. For example, goods worth 1500 are delivered, but a part invoice of 1000 was received.
The 1500 of goods receipt is posted as a debit item in the inventory account and the corresponding credit posting is carried out by the system to the GR/IR clearing account.
The balance of 500 (i.e., the goods delivered of 1500 less the part delivery invoice of 500) arising from the goods delivery and the part delivery invoice is posted to the credit side of the vendor’s account and a corresponding debit balance is posted to the GR/IR account.
The system will then post the 500 quantity differences between goods delivered and invoice receipt to GR/IR Adjustment Account and post an Offsetting entry to Receive but not invoice account. Upon the creation of financial statements, these postings are reversed at a balance sheet key date.
Let’s take a further look at some double entry examples of how GR/IR transactions are posted in the system.
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Note Before you proceed with this activity, it is important that you create the G/L accounts for reconciliation account, adjustment account, and target account. Pplease refer to tables 8-1 and 8-2 to see the G/L accounts we used in this activity
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The next section presents the steps involved in customizing the GR/IR clearing accounts when an invoice is received but goods have not yet been delivered
Invoiced But Not Yet Delivered
When an invoice is received and goods not yet delivered, the inventory account is credited, and the GR/IR Clearing Account is debited.
You will define the following clearing accounts for off-setting posting in this activity for this to happen:
•Reconciliation accounts,
•Adjustment accounts, and
•Target accounts
Problem: You have been asked to define clearing accounts for offsetting goods that have been invoiced but not yet delivered. This is when an invoice has been received but the goods have not been delivered. When the invoice is posted in the system, the inventory account is credited and the GR/IR clearing account is debited.
To define the clearing account for offsetting a posting in the system, use this menu path to go to the screen where you will perform the setting for the GR/IR clearing account in the system: IMG: Financial Accounting ➤ General Ledger Accounting ➤ Periodic Processing ➤ Reclassify ➤ Define Adjustment Accounts for GR/IR Clearing. The Configuration Accounting Maintain: Automatic Posts – Procedures screen is displayed (Figure 8-2).
Since we are maintaining settings for goods invoiced but not yet delivered, select Invoiced but not yet delivered from the list of procedures on the screen by double clicking it. The Enter Chart of Accounts screen pops up. Enter your chart of accounts in the Chart of Accounts field. In this activity we used CA10 as our chart of account. Click Continue at the bottom right of the screen to go to the Continue Accounting Maintain: Automatic Posts – Accounts screen (Figure 8-3). Define reconciliation accounts, adjustment accounts, and targets accounts for automatic posting of Goods Receipt/Invoice Receipt (GR/IR) for off-setting posting by assigning the GL accounts in Table 8-1.
You will assign the reconciliation accounts, adjustment accounts, and target accounts for automatic posting of GR/IR in the Account assignment section of the screen by using the G/L accounts in Table 8-1.
Table 8-1. List of G/L Accounts for GR/IR Clearing for Goods Invoiced But Not Yet Delivered
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GL accounts
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Reconciliation 191000 – GR/IR clearing – own production
191100 – GR/IR clearing – external procurement
Adjustment 191099 – GR/IR clearing – own production (adjustments)
191199 – GR/IR clearing – own production (adjustments)
Target 191101 – GR/IR – Goods/services not yet delivered
191101 – GR/IR – Goods/services not yet delivered
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After updating the screen save your work
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Note If you have not created the appropriate G/ accounts yet, the system will notify you in the status bar at the bottom of the screen that the account is not created in chart of accounts. You can force the system to accept your G/L accounts temporarily, until you create your G/L accounts, by hitting the enter button on your keyboard.
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Delivered but not yet invoiced
When goods are received but not yet invoiced, the inventory account is debited, and the GR/IR Clearing Account is credited.
You define the following clearing accounts for off-setting posting for this to happen:
•Reconciliation accounts,
•Adjustment accounts, and
•Target accounts
Problem: Define clearing accounts for off-setting posting for Goods Delivered but not yet Invoiced.
In order for the system to carry out automatic postings to various accounts that are affected by this transaction, you must assign appropriate accounts to your GR/IR clearing. You need to go to the screen where you will carry out accounts assignment for GR/IR clearing for offsetting postings. Follow this menu path: IMG: Financial Accounting ➤ General Ledger Accounting ➤ Periodic Processing ➤ Reclassify ➤ Define Adjustment Accounts for GR/IR Clearing. The Configuration Accounting Maintain: Automatic Posts – Procedures screen is displayed (Figure 8-2).
Since we are maintaining settings for goods delivered but not yet invoiced, select Delivered but not yet invoiced from the list of procedures on the screen by double clicking it. The Enter Chart of Accounts screen pops up. Enter your chart of accounts in the Chart of Accounts field. In this activity we used CA10 as our chart of account. Click Continue at the bottom right of the screen to go to the Continue Accounting Maintain: Automatic Posts – Accounts screen (Figure 8-4). Define reconciliation accounts, adjustment accounts, and targets accounts for automatic posting of Goods Receipt/Invoice Receipt (GR/IR) for off-setting posting by assigning the GL accounts in Table 8-2.
You will assign the reconciliation accounts, adjustment accounts, and target accounts for automatic posting of GR/IR in the Account assignment section of the screen by using the G/L accounts in Table 8-2.
Table 8-2. List of G/L Accounts for GR/IR Clearing for Goods Delivered But Not Yet Invoiced
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GL accounts
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Reconciliation 191000 – GR/IR clearing – own production
191100 – GR/IR clearing – external procurement
Adjustment 191099 – GR/IR clearing – own production (adjustments)
191199 – GR/IR clearing – own production (adjustments)
Target 191101 – GR/IR – Goods/services not yet delivered
191101 – GR/IR – Goods/services not yet delivered
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After updating the screen save your work
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Note If you have not created the appropriate G/ accounts yet, the system will notify you in the status bar at the bottom of the screen that the account is not created in chart of accounts. You can force the system to accept your G/L accounts temporarily, until you create your G/L accounts, by hitting the enter button on your keyboard.
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Summary
When accounting for invoices and movement of goods in the system, you must define provisional accounts (clearing accounts) that offset postings when goods and invoices are not simultaneously delivered and paid. This chapter illustrated how GR/IR clearings are posted in the system using the double entry principle. We then learned how to define adjustment accounts, reconciliation accounts, and target accounts for automatic posting for GR/IR clearing in SAP S4 HANA.
We also explored how to assign G/L accounts to GR/IR clearing and learned how this works in SAP S4 HANA during posting of transactions whereby goods are received, and the invoice is not yet delivered, and whereby the invoice is received, and goods are not yet delivered.
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