SAP Knowledge Database

“What is GR/IR in MM Module in SAP System?”

Hello World! “What is GR/IR process in SAP System?” This is an interesting topic that I would like to expound in this article. 

SAP System

Case one:

In MM module of an SAP system, GR/IR stands for Goods Receipt/Invoice Receipt process. When the receiving department of the company receives the goods from a supplier, the said goods received and accepted should be posted in SAP even if the supplier’s invoice have not yet received. The entry that will be created and automatically posted in Financial Accounting is:

Dr. Inventory                           xxxx

     Cr. GR/IR Clearing Account                 xxxx

Case 2:

In other cases, when supplier’s invoice receives first than the goods the said invoice should be posted also in the system. Then entry entry that will be created and automatically posted in Financial Accounting is:

Dr. GR/IR Clearing Account        xxxx

     Cr. Vendor’s Payable                      xxxx

Please do note that the GR/IR clearing accounts are automatically cleared during the invoice verification process which is upon received of the supplier’s invoice (in case 1) and goods/inventories (in case 2). In case 1, the GR/IR clearing account is debited and the vendor’s payable account is credited. In case 2, the GR/IR clearing account is credited and Inventory account is debited.

Why is there a need to do separately the processes above? Here’s the explanation based in accounting point of view.

ACCOUNTING POINT OF VIEW

The process of GR/IR clearing has already an impact in Financial Accounting. It already created an entry that is directly posted in the books of the company. There is a principle in accounting that “Ownership of the good purchase is determined who has the risk and rewards of ownership over the goods”. What does that mean.

Risk - Who shoulder the risk of losing the goods?

Reward - Who benefit from selling the goods?

The risk and reward should go hand in hand. If risk and rewards over the goods have already transferred to the buyer, then the buyer should record the goods in it’s book. In both case 1 and 2 above, it is assumed that the risk and rewards is with the buyer.  So the buyer is mandated to record an asset and a liability for the transaction. The two cases demonstrate a usual business scenario that an SAP consultant and user should very well understand.

In case 1, since the good is already received then the inventory should be updated. The corresponding entry of liability is the GR/IR clearing account since an invoice has not yet recevied.

In case 2, the invoice have received first. So, a liability to vendor should be recorded. The corresponding entry of asset is the GR/IR clearing account since the inventory have not yet received.

You might be confuse why in case 1, the GR/IR clearing account is a liability; whereas in case 2, it is an asset. It’s very simple, during month-end processing you need to run a transaction for GR/IR clearing to temporarily classify as “Good received but not yet invoiced - LIABILITY” (case 1) and “Invoiced received but goods have not yet received - ASSET” (case 2). The G/L accounts assignment should be configured in the system.

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SAP History

This article is taken from http://www.sap.com.

From Start-Up Software Vendor to Global Market Leader

Over the course of three decades, SAP has evolved from a small, regional enterprise into a world-class international company. Today, SAP is the global market leader in collaborative, inter-enterprise business solutions. The company now employs more than 51,800 people, whose commitment and innovative spirit pace our future success.

The 1970s: A Real-Time Vision

In 1972, five former IBM employees – Dietmar Hopp, Hans-Werner Hector, Hasso Plattner, Klaus Tschira, and Claus Wellenreuther – launch a company called Systems Applications and Products in Data Processing in Mannheim, Germany. Their vision: to develop standard application software for real-time business processing.

One year later, the first financial accounting software is complete, forming the basis for the continuous development of other software components in what later came to be known as the “R/1 system.” “R” stands for real-time data processing.

By the end of the decade, intensive examination of SAP’s IBM database and dialog control system leads to the birth of SAP R/2.

The 1980s: Rapid Growth

SAP moves into the company’s first building on Max-Planck-Strasse in an industrial park in Walldorf, near Heidelberg. Our software development area and its 50 terminals are all now under one roof. Fifty of the 100 largest German industrial firms are already SAP customers.

The SAP R/2 system attains the high level of stability of the previous generation of programs. Keeping in mind its multinational customers, SAP designs SAP R/2 to handle different languages and currencies. With this and other innovations in SAP R/2, SAP sees rapid growth.

By the middle of the decade, SAP founds its first sales organization outside Germany, in Austria. The company makes its first appearance at the CeBIT computer fair in Hanover, Germany. Revenues reach DM 100 million (around $52 million), earlier than expected.

In August 1988, SAP GmbH becomes SAP AG. Starting on November 4, 1.2 million shares are listed on the Frankfurt and Stuttgart stock exchanges.

Germany’s renowned business journal, manager magazine, names SAP its Company of the Year – a distinction we would receive twice more in the next few years.

With the founding of subsidiaries in Denmark, Sweden, Italy, and the United States, SAP’s international expansion takes a leap forward.

The 1990s: A New Approach to Software and Solutions

SAP R/3 is unleashed on the market. The client-server concept, uniform appearance of graphical interfaces, consistent use of relational databases, and the ability to run on computers from different vendors meets with overwhelming approval. With SAP R/3, SAP ushers in a new generation of enterprise software – from mainframe computing to the three-tier architecture of database, application, and user interface. To this day, the client-server architecture is the standard in business software.

A growing number of subsidiaries are managed out of Walldorf. The new Sales and Development Center in Walldorf officially opens it doors. It symbolizes the global success of the company. In our twentieth year, our business outside Germany exceeds 50 percent of total sales for the first time.

By 1996, the company has earned 1,089 new SAP R/3 customers. At the end of the year, SAP R/3 has been installed in more than 9,000 systems worldwide.

SAP celebrates its twenty-fifth anniversary in 1997 and now employs approximately 12,900 people. We continue to strengthen our industry focus and build more and more industry-specific solutions. Henning Kagermann becomes Co-Chairman and CEO of SAP AG with Hasso Plattner. On August 3, 1998, the letters S-A-P appear for the first time on the Big Board at the New York Stock Exchange (NYSE), the largest stock exchange in the world.

As the decade draws to a close, Hasso Plattner, Co-Founder, Co-Chairman, and CEO announces the mySAP.com strategy, heralding the beginning of a new direction for the company and our product portfolio. mySAP.com links e-commerce solutions to existing ERP applications, using state-of-the-art Web technology.

The 2000s: Innovation for the New Millennium

With the Internet, the user becomes the focus of software applications. SAP develops SAP Workplace and paves the way for the idea of an enterprise portal and role-specific access to information.

Currently, more than 12 million users work each day with SAP solutions. There are now 121,000 installations worldwide, more than 1,500 SAP partners, over 25 industry-specific business solutions, and more than 75,000 customers in 120 countries. SAP is the world’s third-largest independent software vendor.

With service-oriented architecture and the underlying integration and application platform SAP NetWeaver, SAP is providing our customers with solutions for end-to-end business processes. With SAP NetWeaver, your company can integrate people, information, and processes within the company and beyond.

To further demonstrate our commitment for ongoing innovation, growth, and market leadership, SAP acquired Business Objects in 2008. Together, SAP and Business Objects, an SAP company, offers the industry’s most comprehensive portfolio of business performance and optimization solutions for companies of all sizes.

Source: http://www.sap.com

SAP Histotry

Advances to Vendor with Reference to Purchase Order

How do you treat advances/downpayment Vendor?

In Accounting point of view, Advances to vendors are treated in Accounting as Asset. The same treatment should be configured in SAP system. A special GL should be created for the said transactions with Vendors.

The standard SAP transaction that you use to post advances to vendor is F-48. Do remember that when you post advances to vendor, it should always be charged to a vendor. Now you have the option to charge the advances against PO or not. If it’s a transaction originating from PO, I suggest the advances should be reference to the PO. Whe you display the PO using transaction ME23 or ME23N, you can see the downpayment/advances for the PO.

However, if it’s non-PO transaction then you don’t need to charge against PO. It’s still considered as advances to Vendor but not reference to a specific PO.