What is GR/IR account? Why do you maintain that? Explain the
importance of GR/IR clearing account.
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Answer Posted / joe sherwod
Firstly, what does the acronym GR/IR stand for, as this
answer is instructive as to the purpose of this account ?
GR/IR = Goods Received/Invoice Receipt
This account is used as an interlocking account, to
reconcile the accounting values between the 2 processes of
receiving goods ordered from a supplier and receiving the
supplier’s invoice for those goods. These 2 processes can
occur in either order i.e. invoice arrives first, goods
arrive later, or, conversely. The total value of the goods
received (unit price * unit cost) should be the same as
reflected on the invoice, in which case this interlocking
account will net-out to zero.
Thus, assuming goods receipt occurs first, the following
accounting entries would be effected :
Goods received :
Dr. Inventory
Cr. GR/IR account
Invoice received :
Dr. GR/IR account
Cr. Accounts Payable
Therefore, as an interlocking account between these 2
processes, the GR/IR account should net to zero, (Dr. =
Cr.) and, in doing so, prove that the value of the goods
received = the value of the goods invoiced. If these 2
amounts don’t reconcile, then we need to investigate the
reason(s) for this variance, e.g. shortfall in supply.
Actually, I believe that if would be more helpful to
reverse the account name to the IR/GR account, as this
helps to remember that the offset account posting from the
invoice is debited to the IR/GR account (debit being on the
left-side) and the offset posting from the goods receipt is
credited to this account (i.e. right-hand side of the
account). Thus, IR on the left, GR on the right.
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