SAP Material Management
What is
GR/IR Clearing ?
created at Goods Receipt
When learning MM, sometimes it is especially difficult for persons without Financial background to appreciate the G/L account posting result of MIGO or MIRO.
In this presentation, we discuss about the GR/IR clearing account that is likely generated at
MIGO with reference to PO and
at MIRO against a PO.
A PO of
M100-V 100pc @$12 Total $1200
M100-S 100pc @22
Total $2200
Perform MIGO to receive a full qty for both line items in the PO
GR posted with material document
Display Materail Document
Double-click to show Accounting Document
Choose Layout
Select
/Z-MATERIAL
layout
Notice item 2 and item 4 shows GR/IR Clearing Account of same amount as item 1 and item 3 respectively.
The GR/IR Clearing account is a temporary account (also called a Provision Account) to record the amount in Provision before the Vendor Invoice is entered.
Debit Stock Account
Credit GR/IR Clearing Account
(both are Balance Sheet Accounts)
STOCK Account
GR/IR Clearing Account
Price difference Account
M100-V $1200
M100-S $2000
M100-V $1200
M100-V $2200
M100-S $200
The GR/IR is the amount possibly billed by the vendor according to the PO price, we expect vendor invoice to be this amount and therefore we have to make a Provision for account records (called Accrual) before the supplier invoice arrive.
STOCK Account
GR/IR Clearing Account
Price difference Account
M100-V $1200
M100-S $2000
M100-V $1200
M100-V $2200
M100-S $200
For Standard Price material, we have to use Standard Price to post to the Stock, hence $20 x 100 = $2000
But since we likely to pay $22 x 10 = $2200. (the difference is a LOSS posted to the Price difference Account in P&L) (P&L is Profit and Loss Statement)
Amount suggested to match the supplier invoice is the GR/IR TOTALs for each item
Amount from the Supplier INVOICE
Display INVOICE
Double-click
Debit GR/IR Clearing Accounts
Credit Vendor
STOCK Account
GR/IR Clearing Account
Price difference Account
M100-V $1200
M100-S $2000
M100-V $1200
M100-V $2200
M100-S $200
M100-V $1200
M100-V $2200
VENDOR Account
M100-V $1200
M100-V $2200
Debit GR/IR Clearing Account
Credit Vendor Account
STOCK Account
GR/IR Clearing Account
Price difference Account
M100-V $1200
M100-S $2000
M100-V $1200
M100-V $2200
M100-S $200
M100-V $1200
M100-V $2200
VENDOR Account
M100-V $1200
M100-V $2200
Credit Vendor Account
Debit GR/IR Clearing Account
When invoice arrive, the GR/IR account is cancelled off
by DEBIT action. It’s no longer a PROVISION, it’s now in the Vendors Account and we have to PAY soon.
STOCK Account
GR/IR Clearing Account
Price difference Account
M100-V $1200
M100-S $2000
M100-V $1200
M100-V $2200
M100-S $200
M100-V $1200
M100-V $2200
VENDOR Account
M100-V $1200
M100-V $2200
Credit Vendor Account
Debit GR/IR Clearing Account
Therefore, the GR/IR Account is only a TEMPORARY ACCOUNT waiting for the INVOICE entry.
We take another example:
The supplier sends us the goods.
So
Debit Stock Account
Credit GR/IR Clearing Account
What if supplier BANKGRUpted and no longer in business and so they FAIL to INVOICE us
What happens to the GR/IR Cleariing Account ?
So, in this PO,
the Goods Receipt was done…
BUT supplier no longer in business, so no INVOICE will come.
STOCK Account
GR/IR Clearing Account
M100-V $1200
M100-V $1200
Debit STOCK
Credit GR/IR Clearing
STOCK Account
GR/IR Clearing Account
M100-V $1200
M100-V $1200
Bare in mind that the GR/IR Clearing Account is only a TEMPORARY Account, it will be there forever if NO INVOICE is entered !!!!
In this case, if we are VERY SURE we will not be INVOICED anymore for this PO, we will need to clear it from the Balance Sheet.
This transaction in MM-LIV is to perform GR/IR Clearing
Maintenance
Select GR/IR clearing
Date Range
A grace period is required before picking up those PO with balance GR/IR to be cleared, this is to avoid in case the supplier is back in business and invoice us again !!! anyway its an Accounting Policy of when to perform this task and the timing for selecting POs for this step !
POST
Also note that, this kind of process is likely
done by the Accounting Department.
However, the list is usually also to be approved by the Purchasing department before the GR/IR clearing accounts are finally cleared.
(The Purchasing people are likely the persons who have knowledge of if the supplier is still active.)
Note Document
Display the Document posted
Here, you do a REVERSAL.. in case cleared wrongly or supplier came back to business and invoice us again !!!!
Double-click to Check the Accounting
Note for MAP Material, the system Credit the Stock Account in VALUE
for Std Price Material, the system will Credit Price difference account (GAIN)
Stock value reduce,
Stock qty same
MAP increase
For STD Price Control material, since the clearing process Do NOT impact the STOCK account, it will post to the P&L (Profit and Loss Statement) registered as GAIN (credit in P&L is GAIN)
Note for MAP, the system Credit the Stock Account in VALUE
for MAP, the system will Credit Price difference account (GAIN)
For MAP material, the CLEARING process will IMPACT the MAP price of the material INCREASING the stock value !!!
(QTY don’t change) We don’t have to pay for the material we buy, so, the Value of Stock INCREASE,
MAP also increase.