Accounting (FICO) Journal of MM Goods Receipt (GR) and Invoice Receipt (IR) Transactions

GR for initial entry for stock balance (movement type: 561).
 
T-Code used: MIGO or MB1C.

We must carry out an initial entry of stock balances when implementing the MM module of SAP R/3 System in order to transfer physical warehouse stocks or book inventories from an existing inventory accounting software into the SAP R/3 System as book inventories.

“Typically, a traditional accounting software program usually has an inventory sub module which records the inventories values in the balance sheet. But it’s not an online accounting software which record the inventory movement transaction in real-time basis like SAP does. Usually, this accounting software records the material movements transaction once in a certain period, e.g. once a month after get the information from other department.”

In the GR for initial entry for stock balance transaction, no physical movements actually take place.
The the typical accounting journal is:

Inventory account			Initial inventory clearing account
1000				1000

The initial inventory clearing account then will be cleared against other appropriate accounts by FI module.
GR for Purchase Order (PO) (movement type: 101).
T-Code used: MIGO or MB1C.
In a PO, the field that determines the accounting journal is “account assignment category” field. The account assignment in a PO is usually adopted from Purchase Requisition (PR).
The account assignment category determines:

• The nature of the account assignment (cost center, sales order, and so on) .
• Which accounts are to be charged when the incoming invoice or goods receipt is posted.
• Which account assignment data you must provide.

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The most used Account Assignment Categories (AAC).

AAC	Description	Required account assignment data
“A”	Asset	Main asset number and sub-number
“K”	Cost center	Cost center and G/L account number
“ ”	Inventory	Material number

For PO with account assignment “A” (Fixed Asset) the typical accounting journal is:

Fixed asset account			GR/IR Clearing Account
6000				6000

The first journal will increase the Asset and the second journal will increase the Liabilities (GR/IR is a liabilities account), and the Balance sheet stays balance (Asset = Liabilities + Equity).

The goods receipt/invoice receipt (GR/IR) clearing account is posted to whenever you receive goods that have not been invoiced yet or whenever you receive invoices for goods that have not been delivered yet.

For PO with account assignment “K” the typical accounting journal is:

Expense account			GR/IR Clearing Account
10				10

The first journal will decrease the Current year net profit (so it will decrease Equity) and the second journal will increase the Liabilities (GR/IR is a liabilities account), and the Balance sheet stays balance, since decrease in equity is balanced by increase in liabilities and asset stays the same (Asset = Liabilities + Equity).

For PO with account assignment “ ”(blank) the accounting journal depends on price control procedure of the material received. (see material valuation for detail on price control procedure).

• If price control is “S” (standard price), the typical accounting journal is:

Inventory account				GR/IR Clearing Account
550					500
assumption:				Revenue from price differences account
standard price= 550					50

The first journal will increase the Asset by 550 and the second journal will increase the Liabilities (GR/IR is a liabilities account) by 500. The third journal will increase the net profit (so it will increase Equity) by 50, and the Balance sheet stays balance (Asset = Liabilities + Equity).

• If price control is “V” (moving average price), the typical accounting journal is:
  

  Inventory account			GR/IR Clearing Account
  500				500

  The first journal will increase the Asset and the second journal will increase the Liabilities (GR/IR is a liabilities account), and the Balance sheet stays balance (Asset = Liabilities + Equity).

See material valuation to understand the effect of material’s price control procedure to the accounting journal on Goods Receipt transaction.

In the end, the accounting journal for price control procedure “S” and “V” will result the same to the Balance Sheet and Profit & Loss Statement. It is because as long as the business operation of the company runs, the material that received by this PO will be used, either for consumption or for sales. Let’s assume that there is no other transaction for this material.

The typical accounting journal for consumption for price control “S” is:

Inventory account			Material consumption expense account
	550		550

The first journal will decrease the Fixed Asset by 550 (same amount with the increase of the Asset when GR is done, so it will result 0 in Inventory account). The second journal will decrease the current year profit, so it will decrease Equity, by 550. It will result -550+50(from “revenue from price differences account” when GR is done) =-500 (decrease in Equity).

The typical accounting journal for consumption for price control “V” is:

Inventory account			Material consumption expense account
	500		500

The first journal will decrease the Asset by 500 (same amount with the increase of the Asset when GR is done, so it will result 0 in Inventory account). The second journal will decrease the current year profit, so it will decrease Equity, by 500.

GR Subcontract PO.
T-Code used: MIGO or MB1C.

In subcontract order processing, the vendor receives materials (components) with which it produces the finished-product. The following are involved:

• We order the finished-product using a subcontract order (subcontract PO). The components that the vendor needs to manufacture the finished-product are specified in the purchase order, and we provide them to vendor.
• When we send the component to vendor, in Inventory Management, we transfer those components from unrestricted-stock to special stock (“stock of material provided to vendor”). These special stocks are still shown as our stock in MMBE (T-code for stock overview). This transaction will not post the accounting journal.
• The vendor performs its service and delivers the ordered material (the finished-product). GR is done for the finished-product, and automatically the consumption of the components is posted.

The typical accounting journal when GR is done is:

Inventory account (fin.-product)						Inventory account (comp. mat)
1000							800
	GR/IR clearing account
			200

Assumption: The vendor’s fee (PO value) =200; the component value=800.

The first journal will increase the Asset by 1000, and the second journal will decrease the Asset by 800. The third journal will increase the Liabilities (GR/IR is a liabilities account) by 200, so the Balance sheet stays balance, Asset (1000-800) = Liabilities (200) + Equity (0).

Invoice Receipt (IR)
T-Code used: MIRO or MIR6 and MIR7.
The typical invoice accounting journal is:

GR/IR Clearing account			Vendor account (Account Payable)
1000				1000

The goods receipt/invoice receipt (GR/IR) clearing account is posted to whenever you receive goods that have not been invoiced yet or whenever you receive invoices for goods that have not been delivered yet.

See material valuation to understand the effect of material’s price control procedure to the accounting journal on Invoice Receipt transaction.

The vendor account (account payable) will be followed up by finance department using FI module to payment processing. The typical accounting journal of the payment processing is:

Vendor account (Account Payable)			Cash / Bank account
1000				1000

GR other/without PO (movement type: 501)
T-Code used: MIGO or MB1C.
The the typical accounting journal is:

Inventory account			Other revenue account
1000				1000