GR/IR Clearing

Overview
GR/IR (goods receipt/invoice receipt) clearing is a function that you execute in order
to clear the Purchases in Transit and Unbilled Payables accounts when both the
goods received and the associated invoices have been recorded in the system. This
determines any differences between the values of the goods receipts and the
invoices.

Purchases of goods and services involve the following events:

 Receipt of the goods or services

 Receipt of the invoice

 Payment

Since the final cost is not usually known until the invoice has been received and
paid, GR/IR clearing is necessary in order to value each of these events as
accurately as possible.

You execute GR/IR clearing as a run in the Inventory Accounting work

center, GR/IR Clearing view.

Note
For more information on how accounts are posted with cash discounts, see the
following documents:

 GR/IR Clearing Runs

 Price Differences, Exchange Rate Differences, and Cash Discounts

To enable each purchasing transaction to be valued at actual cost, the transactions

entered at different times must be matched up and, if necessary, revalued.

The following cases are possible:

 The goods or services are received before the invoice.

 The invoice is verified and entered before the goods or services are received.
To correctly handle each case, the system uses clearing accounts in addition to the
inventory and expense accounts:

 Unbilled Payables: Goods or services that have been received but not
invoiced

 Purchases in Transit: Goods or services that have been invoiced but not
received

If the prerequisites below are met, the two clearing accounts are posted each time
goods or an invoice is received, regardless of whether the counterpart event has
occurred. This maintains a consistent accounting process for similar business
transactions (goods receipt or invoice receipt).

Once both the goods and the invoice have been recorded in the system, the clearing
accounts must be cleared against each other by means of a GR/IR (goods
receipt/invoice receipt) clearing run.

Prerequisites
 You have entered purchase orders in Supplier Relationship Management
(SRM) during the procurement process.

 You have entered third-party purchase orders in Supply Chain Management.

 You have entered all transactions (receipt of goods/services and invoices)

that result in postings on the GR/IR clearing accounts with reference to a
purchase order item. This enables the transactions to be matched up.

 The goods receipt is valued with a nonzero value.

 The following checkboxes are selected in each purchase order item:

 Goods and Services Receipt Expected

 Invoice Expected

 Evaluated Receipt Settlement

Account Movements
The following account movements (disregarding tax postings) take place when you
enter the receipt of the goods or the supplier invoice:
 Goods Receipt

The inventory or expense account is debited with the provisional value of the
delivery (purchase order price x quantity delivered). With material inventories,
the valuation can differ. Accounts from the following groups can be used,
depending on the transaction:

 Material Stock

 Fixed Asset Inventory

 Material Consumption

 Expenses for External Services

 Deferred Costs

The GR/IR clearing account Unbilled Payables is credited with this value.

When purchases are for immediate storage in stock, you can value the
material with two different cost methods: Standard or Moving Average. With
the Standard cost method, the difference between the inventory value and
the purchase order value is posted to the valuation differences account.

 Invoice Receipt

The supplier account is credited with the value of the invoice.

The GR/IR clearing account Purchases in Transit is debited with the value of
the invoice.

The clearing run can be started once both the receipt of the goods for a
purchase order item and the receipt of the invoice have been confirmed in the
system. You can set up a clearing run depending on your own requirements
and also set its frequency as you require. The run first compares quantities to
determine the quantity for which both a goods receipt and an invoice have
been confirmed. Based on this quantity, the system determines the values to
be cleared.

The clearing run:

  Values the common goods receipt/invoice receipt quantity with the
invoice value per unit of measure and clears the Purchases in
Transit account with the resulting amount

 Values the common goods receipt/invoice receipt quantity with the

value per unit from the goods or services receipt (purchase order price)
and clears the Unbilled Payables account with the resulting amount

 Allocates price differences caused by valuation differences to the

original account of the goods or services receipt (exception: standard
price)

 Posts exchange rate differences to a separate exchange rate

difference account and not to the original account used for the goods
or services receipt

 Allocates any differences that arise when materials are purchased for
immediate storage in stock to the Price Differences account instead of
the material stock account

The following balance sheet accounts are required when stock materials are
purchased:

Assets:

 Inventories

 Purchases in Transit

Liabilities:

 Trade Payables

 Unbilled Payables

Note

These accounts are included in the standard charts of accounts.

Posting Example
Goods Receipt
Your supplier delivers 10 pieces of an item for a total value of EUR
500 (Standard cost method).

The system posts this goods receipt to the relevant asset account for materials. The
offsetting account is Unbilled Payables.

Invoice Receipt
The supplier sends an invoice for 10 pieces with a total value of EUR 550.

The system posts this invoice to the Payables account. The offsetting posting is
to Purchases in Transit.

To value the goods receipt with the actual procurement costs, and therefore account
for any value differences between the goods receipt and the invoice, you start the
clearing run.

The clearing run performs the following calculations and postings:

1. Calculates the average price per piece based on the goods receipt and the
invoice

2. Determines the quantity that applies to both the goods receipt and the invoice

3. Multiplies this quantity by the previously calculated average price

4. Debits or credits the clearing accounts with these values

5. Compares the valued goods receipt with the valued invoice

Since you selected the Standard cost method for the material, the difference is
posted to a separate price differences account.

Postings
In this example, the GR/IR clearing run generates the following postings:

1. Goods receipt:

Debit Material, credit Unbilled Payables EUR 500 (10 ea.)

2. Invoice receipt:
 Debit Purchases in Transit, credit Payables EUR 550 (10 ea.)

3. GR/IR clearing:

Debit Unbilled Payables EUR 500 (10 ea.) + Price Differences EUR 50 (10
ea.), credit Purchases in Transit EUR 550 (10 ea.)