Sravan Kumar (Self EMployed) (28 Points)
15 June 2011Hi Folks,
I have a doubt in GR IR Clearing Account. What is the treatment of this account in the year end process. Can we show it in the balance sheet. If not, what to do if balance left in the year end.
Your answers are highly appreciated.
Thanks,
Sravan Kumar
Shruthi
(PCC Student)
(111 Points)
Replied 15 June 2011
I think GR IR clearing account should not show any balance at the end of the year. Its simply the routing account kept in SAP to route all the transactions.
For Eg., take a purchase transaction. Stores Dept Receives the Materials and Accounting Dept book for Party liability. Due to this division of work, Stores Dept is responsible only for the Material Receipt and Accounting Dept will be held responsible for the Party liability booking.
Since it is a step be step process, stores dept cant simply give material Debit as SAP asks for corresponding credit. So corresponding credit goes to GR IR A/c. Similarly, Account man cant simply credit the party account as again corresponding Debit will be asked for so Debit goes to GR IR A/c.
This is how the entry passed:
By Stores:
Material A/c Dr.
To GR IR A/c
By Account:
GR IR A/c Dr.
To Party A/c
So, the net effect is GR IR gets cancelled. this is how all the transactions are done thro GR IR. just a sample i've explained.
Sravan Kumar
(Self EMployed)
(28 Points)
Replied 16 June 2011
Hi Shruti,
Thank you for the reply. But the scenario you explained here, it is a normal scenario. The scenario that I am looking is where we received the goods on December 28 but we received the invoice in Jan 5. Their fiscal year is Jan to Dec, so balance will be left in the GR IR Clearing account. What to do with that account in this scenario.
Thanks,
Sravan Kumar Kalva
Shruthi
(PCC Student)
(111 Points)
Replied 16 June 2011
Then, Internal control is lacking is somewhere. Because we should not receive goods first before receiving invoice. Goods should come along with Invoice/D.C. It cant be a two happenings rite.
If thats an unavoidable situation, we should create a provision as on dec 31st for such material value for the future liability which you are going to book once you receive the invoice. At then(while receiving invoice) reverse this provision.
your accounting entry must be this way i think:
Dec 28: Material A/c Dr
To GR IR A/c
(For material receipt - GRN)
Dec 31: GR IR A/c Dr
To Provision A/c
(date of B/S)
Jan 5: Provision A/c Dr
To Party A/c
(While receipt of invoice)
This is just my idea. search in SAP if any appropriate name for the Provision A/c available.
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