Impact of MR11 Execution

Against a Purchase Order created in 2010 Goods receipt was made in 2011 and Invoice received in 2012. As a best practice we have cleared all GR/IR balance for the year 2011 during year end through MR11. By March 2012 the vendor has sent the invoice.  Since the entry was cleared from GR/IR, we were not sure on how to make the payment to the vendor.

Whenever a goods receipt is done GR/IR account is hit, and if the process runs smoothly i.e. Goods receipt  = Invoice Receipt, GR/IR gets cleared automatically.
But entries will be left out in GR/IR if (Practical Scenarios we came across);
1) Invoice  received is Greater than Goods Received (More number of Goods Invoiced).
2) Invoice  received is Greater than Goods Received (GR =I R goods receipt, Invoice  contains Freight Charges, transportation charges and any other charges)
3) Goods Received is Greater than Invoice Received.
4) Invoice Received and Goods not received
5) Goods Received, Invoice Received but invoice cleared not against the PO
6) Goods Received, Invoice Not Received

Scenario 1: Goods Received is Less than Invoice Received (More number of Goods Invoiced)
Purchase Order Quantity = 15 No’s
GL Entries during Goods Receipt = 10 No’s

	Debit	Credit
Stock of Material	10
GR / IR		10

  After Invoice receipt Quantity = 15 No’s

	Debit	Credit
GR / IR	15
Vendor Account		15

Assuming if the remaining 5 No’s will be received latter

	Debit	Credit
Stock of Material	5
GR / IR		5

In our example we imagine that extra Quantity 5 No’s is not delivered. So in order to clear GR/IR we have to run MR11.
After executing MR11

	Debit	Credit
Stock of Material	5
GR / IR		5

In this case the MAP of the material will be;
Inventory details Before Goods Receipt

Material	Quantity	Amount	MAP
material X	10	100	10

  After Goods receipt

Material	Quantity	Amount	MAP
material X	20 (10 + 10)	200 (100 + 100)	10

After Executing MR11

Material	Quantity	Amount	MAP
material X	25 (10 + 10 + 5)	300 (100 + 100 + 50)	10

Note: No Change in MAP of the material

Scenario 2: Invoice  received is Greater than Goods Received (GR =I R goods receipt, Invoice  contains Freight Charges, transportation charges and any other charges)
Purchase Order Quantity = 15 No’s +Freight Charge + Air Charge
GL Entries during Goods Receipt = 15 No’s +Freight Charge + Air Charge

	Debit	Credit
Stock of Material	25
Material GR / IR		15
Freight GR / IR		7
Air Faire GR / IR		3

After Invoice receipt Quantity 15 No’s

	Debit	Credit
Material GR / IR	15
Vendor Account		15

After MR11 Execution

	Debit	Credit
Freight GR / IR	7
Stock of Material		7
Air Faire GR / IR	3
Stock of Material		3

In this case the MAP of the material will be;
Inventory details Before Goods Receipt

Material	Quantity	Amount	MAP
material X	10	100	10

After Goods Receipt

Material	Quantity	Amount	MAP
material X	25 (10 + 15)	350 (100 + 150 + 70 + 30)	14

After Executing MR11

Material	Quantity	Amount	MAP
material X	25 (10 + 15)	150 (100 + 150 - 70 - 30)	6

Scenario 3: Goods Received is Greater than Invoice Received
Purchase Order Quantity = 15 No’s
GL Entries during Goods Receipt = 15 No’s

	Debit	Credit
Stock of Material	15
GR / IR		15

After Invoice receipt Quantity = 10 No’s

	Debit	Credit
GR / IR	10
Vendor Account		10

Assuming if the remaining 5 No’s Invoice will be received latter

	Debit	Credit
GR / IR	5
Vendor Account		5

Example we imagine that extra Quantity 5 No’s Invoice is not received. So in order to clear GR/IR we have to run MR11.
After executing MR11

	Debit	Credit
GR / IR	5
Stock of Material		5

In this case the MAP of the material will be;
Inventory details Before Goods Receipt

Material	Quantity	Amount	MAP
material X	10	100	10

After Goods receipt

Material	Quantity	Amount	MAP
material X	25 (10 + 15)	250 (100 + 150)	10

After Executing MR11 (Only Value of the material will be hit, quantity remains same)

Material	Quantity	Amount	MAP
material X	25 (10 + 10 + 5)	200 (100 + 150 - 50)	8

Scenario 4: Goods Received, Invoice Received but invoice cleared not against the Scenario 5: PO Goods Received, Invoice not Received
Purchase Order Quantity = 15 No’s
GL Entries during Goods Receipt = 15 No’s

	Debit	Credit
Stock of Material	15
GR / IR		15

After executing MR11

	Debit	Credit
GR / IR	15
Stock of Material		15

In this case the MAP of the material will be hit;
Inventory details Before Goods Receipt

Material	Quantity	Amount	MAP
material X	10	100	10

After Goods receipt

Material	Quantity	Amount	MAP
material X	25 (10 + 15)	250 (100 + 150)	10

After Executing MR11 (Only Value of the material will be hit, quantity remains same)

Material	Quantity	Amount	MAP
material X	25 (10 + 15)	100 (100 + 150 - 150)	4

All the Scenario explained above is when the Material Stock is equal to the Quantity to be Cleared.
If material Stock is not equal to Quantity to be cleared the actual stock quantity is debited or credited proportionally. The remaining amount is posted to a price difference account.
Ideally MR11 should be executed once in a year or twice after getting clearance from MM team and the FI team.
Executing MR11 can either over estimate or under estimate the stock value.