The question “Is Goods Received Not Invoiced An Accrual” often surfaces in accounting discussions. The answer is a resounding yes. A Goods Received Not Invoiced (GRNI) entry represents an accrual, specifically an accrued expense. It signifies a liability that exists because a company has received goods or services but hasn’t yet received an invoice from the supplier. This ensures financial statements accurately reflect the company’s obligations, even when the paperwork hasn’t caught up with the actual receipt of goods.
Unpacking GRNI As An Accrual
Goods Received Not Invoiced (GRNI) is a crucial accrual entry used in accounting to accurately reflect a company’s financial position. It addresses the situation where a company has received goods or services from a supplier but hasn’t yet received the corresponding invoice. The purpose of the GRNI account is to recognize the liability for the goods or services received and the associated expense in the correct accounting period, adhering to the matching principle. Accurately recording GRNI ensures that the balance sheet reflects all outstanding obligations and the income statement captures all expenses incurred, even if invoices haven’t been processed.
Why is GRNI considered an accrual? Accruals are adjustments made to financial statements to recognize revenues and expenses in the period they are earned or incurred, regardless of when cash changes hands. GRNI perfectly fits this definition. It represents an expense that has been incurred (goods received) but not yet paid for (invoice not received). Here are key characteristics that highlight GRNI as an accrual:
- Recognizes a liability (amount owed to the supplier).
- Recognizes an expense (cost of goods or services received).
- Ensures the matching principle is followed (matching expenses with related revenues in the correct period).
The process of creating and managing GRNI entries typically involves these steps:
- Goods are received and a receiving report is generated.
- The accounting department is notified that goods have been received but no invoice has been received.
- A GRNI entry is created, estimating the cost of the goods or services based on the purchase order or other available information.
- When the invoice is received, the GRNI entry is reversed, and the actual invoice amount is recorded.
| Scenario | Impact if GRNI is NOT recorded |
|---|---|
| Goods received in December, invoice received in January | December’s expenses would be understated, and January’s expenses would be overstated. Balance sheet would not accurately represent liability as of December 31. |
To further expand your knowledge on accruals and other relevant accounting topics, please review reputable accounting resources and professional publications.