open item management - offsetting entry

[Former Member]

hi all,

i do not understand the sentence below of the word offsetting entry.

can have the double entry example of what does it mean by offsetting entry.

thanks

set up accounts with open item management if offsetting entries are to be assigned to the postings made to these accounts. postings to these accounts represent incomplete transactions.

set up accounts without open item management if no offsetting entry is to be made against a posting to this account.

[Former Member · Accepted solution]

Hi

There are certain entries , that have offsetting entry, ie - for evry debit there is a credit and vice-versa.These accounts are maintained on open item basis.One example will make u clear

GR/IR clearing account is an account that is maintained on Opem item basis.

when u received the goods against PO the entry is

Dr - Inventory account

Cr - GR/IR clearing account

Now this GR/IR clearing account need to be offset othetwise it will be shown in books of accounts unless and untill it is offset by a offsetting entr (here Dr entry as it is already credited)

After doing the invoice verification the entry wud be-

Dr - GR/IR clearing account

Cr - Vendor account

Now the account is offset and cleared.It will not come to the ooks of account if it is totally cleared

Similarly bank sub accounts(clearing accounts) are also treated in same way

If there is no offsetting entry for that, then there is no ned to maintain the account on open ietm basis

Hope it will make u clear

Regards

Anup

Points are welcome

[Former Member]

Hi,

Adding to what Anup had said "Any transaction which is not 100% complete is called open item". So to make the open item clear there must be off-setting entry.This off-setting entry may be either posting subsequent credit to debit or vice versa or posting the transaction that makes the debit and credi balances equal

Thanks

Shravan