Raw Material Purchase — Goods Receipt and Invoice Verification (Three-Way Match)
Recording the purchase of raw materials (commodity ingredients, packaging) upon goods receipt — with a three-way match between purchase order, goods receipt note, and supplier invoice before payment.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Raw Material Inventory (Goods Received — At Purchase Cost) | Asset (+) | 4,850,000.00 | - |
| Goods Received Not Invoiced (GRNI — Accrual at PO Price) | Liability (+) | - | 4,850,000.00 |
💡 Accountant's Note
FMCG raw material purchasing involves three main categories: (1) Agricultural commodities (cocoa, wheat, palm oil, sugar, corn, soybeans, coffee) with highly volatile spot prices, (2) Packaging materials (glass, aluminum cans, PET plastic, cardboard, labels), and (3) Chemical ingredients (flavoring agents, preservatives, colorants). The three-way match process: purchase order (price and quantity agreed in advance) → goods receipt note (physical receipt confirmed by warehouse) → supplier invoice (matched to GRN and PO before payment). The GRNI (Goods Received Not Invoiced) is a critical accrual — goods physically received but invoice not yet matched appear as an inventory asset with a corresponding liability. At period-end, all open GRNIs must be accrued at the PO price to capture all received inventory on the balance sheet.
Practitioner & Systems Framework
💻 ERP Architecture
SAP MM (Materials Management) and Oracle SCM (Supply Chain Management) automate the three-way match process. The GRNI clearing account is a key reconciliation item — it should be cleared monthly as invoices are matched against receipts. Uncleared GRNI items beyond 30 days indicate matching failures (price disputes, quantity discrepancies, quality rejections) requiring manual resolution. The commodity buyer's forward purchase contracts must be assessed for embedded derivatives (fixed-price forward commitments at above-market prices).
⚠️ Audit Flags
Auditors test the completeness and accuracy of the raw material inventory balance through: (1) physical inventory count procedures, (2) GRNI aging analysis (old unmatched GRNIs may represent double-counted inventory or vendor fraud), (3) cutoff testing (verifying that last receipt of the period is included in inventory and that first receipt of next period is not). Commodity inventory values require testing against market prices at period-end — if cost exceeds NRV, write-down is required.
📄 Required Documentation
Purchase orders (approved, with price and quantity), goods receipt notes (warehouse signature confirming physical receipt), supplier invoices (matched to PO and GRN), GRNI aging report, inventory count sheets with reconciliation, and commodity forward purchase contract register.
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