• Registered: 11/15/2010
  • Posts: 10

Topic: GRN transaction not created journal entry

Helo,

I try to make a transaction of good received (GRn).
Logically when the good are received, the asset side (inventory) would be increase and liability account would be increase also (let say we use AP-not yet invoiced item account).

Sometimes there any time leg between good received and invoices received, so at the cutt off date the asset and liability account could be in correct condition.

It seems that in FA, the liability just recognized after the invoices for that good received were posted (AP just posted after this invoices entry), it could be give different meaning if the invoice are posted after the cutt off date (end of the month, or a year), the asset would be understated and the liability also understated.

It should be any journal creation when the good are received:
  Inventory (Dr) ; AP-not yet invoiced item (Cr)
When the invoice are received, the journal are created:
  AP-not yet invoiced item (Dr) ; Account Payable (Cr).

How FA could handle that above transaction ?.

Thank you for your help.

Ken Surya.

  • joe
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Re: GRN transaction not created journal entry

The GRN doesn't create any GL transactions in FA. The temporary Purchase Price is adjusted when the supplier invoice arrives. And the inventory/purchase (depending of stock/non stock item) account is debited at that time.

/Joe

  • Registered: 11/15/2010
  • Posts: 10

Re: GRN transaction not created journal entry

Dear Jo,

Thanks for your reply, what I mentions is that non creating journal entries when the goods are received is not match with the common accounting treatment. Generally the timing of transaction recognition of the purchase transaction is when the significant risk of the good already transfered from seller to buyer, it means that when we make a purchase, and the good are received (wheater invoice is not received yet), the risk of the transaction are already taken by the buyer, so we have to recognized liabiity at that time.

If we take a look at your Sales/AR module, FA already implement this kind of treatment, why you not implement this concept to Account Payable/purchasing module ?.

I think this concept is very important to the accounting practice, because related to the inventory/AP that could be impact to the overall financial report.

Thank you.
Ken Surya.

  • joe
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Re: GRN transaction not created journal entry

Yes, I follow you. I have been implemented various models here. As a whole, you are using a temporary asset account and debit the Inventory and credit the temporary asset account. This is in my humble meaning a zero posting. When you get the supp invoice you debit the temporaty booking and make eventually adjustments. These are different approaches. You will still have almost the same balance sheet, right?

/Joe

  • Registered: 11/15/2010
  • Posts: 10

Re: GRN transaction not created journal entry

Hello Jo,

Thanks again for your quick response.
I still confusing with your latest reply, could you give me a sample transaction so easy for me (and for others) to understand your explanations ?.

KS.

  • joe
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Re: GRN transaction not created journal entry

Well, I will try to point things out.
Some COAs use this temporary account in the asset section (on the credit side). And in those cases it really doens't matter. You suggested this account being in the AP section maybe close to the Accounts Payable account. In this case I can understand you better. Not many of the COAs have this account listed.
Let us try to get some input from the community about this.
This will require another default account in the System and GL Setup. I am not sure if we can optain this in current 2.3 release.

/Joe

  • From: USA, OH, Cleveland
  • Registered: 12/07/2010
  • Posts: 21

Re: GRN transaction not created journal entry

Although it seems like a minor temporary entry, it is critical for the proper balance of assets on a company's books when the received items are inventory.  It is not uncommon for items to be received before the end of a month and the vendor doesn't get the invoice out until the beginning of the next month.

I hate to mention those icky big box accounting packages, but I've had experience with both MAS90 and Microsoft Dynamics SL (which I hate with a passion), and they both have a "secondary payable" account commonly called PURCHASES CLEARING that is used for the credit side of the purchase receipt that is then debited when the invoice is received.

We have lots of issues with timing and inventory is a critical part of our business so this process would be critical.

8 Reply by jori (edited by jori 12/18/2010 07:34:10 pm)

  • jori
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  • From: Georgia, Tblisi
  • Registered: 12/12/2010
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Re: GRN transaction not created journal entry

this "secondary payable" account is called accruals. When goods are received close to the year end and invoice is not expected until after the year end, accruals are credited to recognize liability for the goods payment and inventory account debited. After the year and accruals is reversed and accounts payable account credited. So zero posting treatment is not correct. This is treatment according IFRSs.

  • joe
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Re: GRN transaction not created journal entry

I follow you guys. I guess we should establish a GRN clearing account for this operation.
When goods are received without an invoice, the goods are debited Inventory Account and credited GRN clearing account. Later when the Invoice are entered the GRN clearing account is debited and the Accounts Payable is credit. Eventually any price diff between GRN and invoice are regulated.

What do you say to this approach?

/Joe

  • Registered: 11/15/2010
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Re: GRN transaction not created journal entry

Hello Jo,

Your last reply is correct, we have to make a temporary account to accomodate such kind of transaction.
This kind of system also implemented by other ERP like SAP (They used GRIR account).

Thanks.

  • joe
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Re: GRN transaction not created journal entry

I can make you happy that this has been implemented in 2.3.0 CVS and ready to go in 2.3.1 (or you can download the latest CVS).
There is now an option to use a GRN Clearing Account.

/Joe

  • From: USA, OH, Cleveland
  • Registered: 12/07/2010
  • Posts: 21

Re: GRN transaction not created journal entry

This is fabulous!  Thank you so much for being so responsive to all of us crazy accountants!