Accounting for an Invoice When the Goods Haven’t Been Received

As accountants, we spend a large amount of time working out which items need to be accrued for at the end of a period. In the majority of cases the reason for an accrual is because goods/services have been received but we have not yet received an invoice. Therefore, we put an accrual in place which allows us to recognise the expense and also the eventual liability on the balance sheet which will become a trade creditor when the invoice comes in.

However, what if on the flip side, we have an invoice come in but have not yet received the goods/services. This is, of course, quite unlikely but this situation can occur and can leave us wondering how to account for this invoice if it falls around a month/year end.

So what is the correct treatment?

The absolute correct answer for this IN THEORY is that you should do nothing. If the goods have not yet been received then you should not account for them within the current period (the receipt of the invoice is irrelevant).

However, this method can present some problems in practice:

• If the invoice was received around the year end and not entered into the system then there is a chance that the invoice could be forgotten about by the accounting team and issues may arise further down the line.
• If the invoice is not entered into the system on time we could end up falling behind on payments and run into issues with the supplier regarding payment disputes.

What are the other options?

In order to get around these problems, there are a couple of solutions you can take. Since this invoice should not actually affect the accounts, we need to ensure it has a nil impact on the balance sheet.

The best option is to post the following journal:

Debit Goods Received Not Invoiced (GRNI)

Credit Trade creditors

This is the most commonsense option as it ensures the invoice gets recognised as a creditor. When the goods come in simply credit goods received not invoices and debit purchases/stock.

By adding a debit to the GRNI account we are simply ensuring that we net off the effect of crediting the creditors account for that balance sheet period. In essence we are recognising an “invoice received not goods” debit account on the balance sheet.

There are other double entry options you can take however I stay away from these as they are not as “appropriate” as the method above.

As long as you credit trade creditors and debit some form of accrual account, you will be fine.

The main point to take away here is that in theory the invoice should be ignored until the goods have been received.

If you need more guidance on the accruals concept, this website has a good explanation: Accruals Explained -Accountingtools.com