Situational Interview Questions & Answers for P2P Accounts Payable

1. You received an invoice, but there is no corresponding Purchase Order in SAP. What do you do?
Answer: I would check if it's a non-PO invoice and verify the legitimacy of the transaction. If it should be PO-based, I’ll contact
the procurement team to check if the PO was missed. If valid, I’ll request the PO to be created and process the invoice using
MIRO. If non-PO is allowed (e.g., utility bills), I’ll process it through FB60 after obtaining proper approval.

2. A vendor is following up on a delayed payment. How would you handle this?

Answer: First, I’d check the vendor’s line items in FBL1N to see the status of the invoice. If blocked, I’ll investigate via MRBR or
invoice history. If GR is missing, I’ll coordinate with the warehouse team. I would then update the vendor with a clear status
and estimated resolution time. Communication and timely updates are key in maintaining vendor relationships.

3. How do you handle an invoice that is stuck in the blocked status due to a quantity mismatch?
Answer: I will compare the PO, GR, and invoice quantities in SAP. If GR is less, I’ll reach out to the receiving department. If the
PO is incorrect, I’ll notify procurement. Once the discrepancy is resolved (either by correcting the invoice or updating PO/GR),
I’ll process it through MRBR to release the block.

4. A payment was made twice to a vendor for the same invoice. What actions will you take?
Answer: I will:

• Identify the duplicate in FBL1N

• Check the payment document (via FB03)
• Inform the vendor and initiate a recovery or credit memo
• Record the duplicate as a debit in the vendor account
• Update management and maintain a tracker to prevent recurrence
• Also, I would propose additional controls like payment block review or tolerance checks before payment runs.

5. Your automatic payment proposal (F110) skipped a few vendors. What steps do you take?
Answer: I will check:

• If invoices are due (based on payment terms)

• If payment method or bank details are missing
• If there’s a payment block
• Vendor master data and parameters in F110
• I’d correct the issues and rerun the proposal or manually process the payment if urgent.

6. How would you handle a situation where the PO was created with the wrong currency and the invoice is
in a different one?

Answer: I would:

• Identify the mismatch in the PO and invoice

• Coordinate with procurement to cancel and recreate the PO (if not yet received)
• If already received, I’ll discuss options for revaluation or adjustment with finance
• Update the invoice in SAP with the correct exchange rate if allowed, ensuring compliance with policy

7. What would you do if the invoice was posted without TDS/GST, and payment has already been made?
Answer:

• Immediately inform the tax and compliance team

• Raise a credit/debit memo if possible
• Request vendor to reissue invoice if allowed
• Record the tax correction entry manually
• Strengthen internal checks for invoice verification prior to payment

8. A goods receipt was posted but no invoice is received even after a long time. How do you follow up?
Answer:

• I’d monitor GR/IR clearing account regularly and:

• Send a follow-up to the vendor requesting invoice
• Review vendor contract for delivery and invoicing timelines
• Flag such cases to procurement to address in future negotiations

9. You discover that multiple invoices have been paid without proper approvals. What steps do you take?
Answer:

• Report the issue to the finance manager immediately

• Track and log the payments for audit trail
• Request retroactive approval and documentation
• Recommend controls like dual verification and workflow-based approval in SAP

10. What if the system crashes during payment processing in F110 and you’re unsure which payments
were processed?
Answer:

• Do not re-run F110 immediately

• Check the payment logs and proposal log in SAP
• Validate payment documents via FBL1N and FB03
• Reconcile with bank records if needed
• If incomplete, restore from backup or contact SAP Basis team

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Situational P2P Accounts Payable Q\&A for Poland Region (SAP ERP)
1. You receive a vendor invoice from a Polish supplier without a valid VAT number. What do you do?
Answer: I would validate the vendor’s NIP (Polish VAT ID) using the VIES system or with local tax validation tools. If the VAT
number is invalid or missing, I would:

• Put the invoice on hold

• Contact the vendor to reissue the invoice with the correct details
• Ensure the invoice is compliant with Polish VAT regulations before posting in MIRO

2. The vendor charged 23% VAT, but the goods were for intra-EU supply and should be reverse-charged.
How do you correct this?
Answer: According to EU VAT rules, intra-community acquisitions should be reverse-charged. I would:

• Inform the vendor to correct the invoice (remove VAT)

• Rebook the invoice in SAP using the correct VAT code for reverse charge (e.g., MWST with appropriate condition type)
• Ensure self-assessment entries are posted for both input and output VAT
3. You notice the PO was raised in PLN, but the vendor invoiced in EUR. What is your next step?
Answer: This creates a currency mismatch. I would:

• Verify if the PO currency was correct per the contract

• Contact procurement to amend the PO if necessary
• If goods receipt is already posted, inform finance to handle currency difference via exchange rate revaluation and
ensure correct forex impact posting in SAP

4. A vendor sent an invoice in PDF format, but the company policy requires structured e-invoicing
(FAKTURA in XML). How do you proceed?
Answer: For Poland, structured e-invoices are becoming mandatory. I would:

• Inform the vendor to submit the invoice through the KSeF (Krajowy System e-Faktur)
• Reject or hold the PDF invoice until a compliant one is received
• Ensure our internal system is integrated with SAP for e-invoice acceptance and validation

5. What if a vendor incorrectly applies the split payment mechanism on an invoice?

Answer: Split payment is mandatory in certain cases in Poland (e.g., B2B invoices above 15,000 PLN for specific
goods/services). If incorrectly applied:

• I would consult tax/legal team

• Communicate with the vendor and clarify if the invoice falls under split payment obligations
• If incorrectly marked, return the invoice for correction or handle payment accordingly, ensuring SAP is configured to
process split payments

6. How do you handle VAT correction notes from Polish vendors?

Answer: VAT correction notes are common in Poland for minor corrections. I would:

• Match the correction note with the original invoice in SAP

• Verify if correction affects amounts or only textual info
• Post adjustment using credit memo (MIRO or FB65) if value correction is needed, or keep it on file if informational only

7. If the invoice due date falls on a Polish national holiday, when should payment be made?
Answer: Payments should be scheduled for the previous business day to avoid late payment penalties. In SAP, I would:

• Check the local holiday calendar

• Adjust the payment run in F110 or manually process the payment to ensure it is released before the holiday

8. What actions would you take if the VAT amount on a vendor invoice does not match SAP’s calculated VAT?

Answer: I would:

• Review VAT configuration and calculation in SAP

• Check vendor VAT rate and taxable base
• If vendor is right, raise it to the SAP team to revise the tax code mapping
• If vendor is wrong, request a revised invoice before posting

9. During an audit, a discrepancy is found in vendor master data (e.g., incorrect bank account or address).
What’s your response?
Answer:

• I would flag the incorrect data in the SAP vendor master (XK03 / FK03)
• Validate updated data with vendor documentation (bank letter, invoice)
• Coordinate with the master data team to make changes via XK02 / FK02
• Notify auditors of the steps taken and maintain audit trail
 Critical P2P Accounts Payable Interview Questions – Poland Region (SAP ERP)
1. What is the Split Payment Mechanism in Poland and how is it handled in SAP?
Answer: Split payment is mandatory in Poland for certain B2B transactions (above 15,000 PLN and for specific goods/services).
Payment is split between the vendor's regular account and their VAT account. In SAP:

• Use appropriate payment method with split payment configuration

• Ensure invoice is flagged as subject to split payment
• The bank file generated must contain structured XML per Polish banking requirements

2. How do you handle invoices for intra-community acquisition in SAP with reverse charge VAT?
Answer: For intra-EU transactions:

• The invoice should be without VAT (zero-rated by vendor)

• Use a reverse charge VAT code in SAP (posts both input and output VAT entries)
• Ensure proper tax reporting for EC Sales and purchase listings (JPK\_V7M)

3. What is the process for handling structured e-invoices (FAKTURA USTRUKTURYZOWANA) under
KSeF in Poland?
Answer: Since 2024, structured e-invoices are mandatory:

• Vendors must send XML invoices via the KSeF (Krajowy System e-Faktur)
• Invoices must be validated and downloaded into SAP via integrated APIs
• SAP must be capable of reading, validating, and storing XML e-invoice data for VAT reporting
• Manual or PDF-based invoices are not accepted unless exempted

4. What is JPK (Jednolity Plik Kontrolny) and what are your responsibilities in AP related to it?

Answer: JPK (SAF-T) is a standard audit file required by Polish tax authorities. For AP:

• Ensure all vendor invoices are accurately recorded with correct tax codes, NIP numbers, and values
• Collaborate with SAP/reporting teams to extract JPK\_FA and JPK\_VAT files
• Reconcile SAP line items and tax postings before monthly submission

5. How do you handle VAT correction notes (Nota Korygująca) issued by vendors?
Answer: Correction notes adjust minor details (e.g., date, address, NIP).

• If value is not impacted, file and link with original invoice in SAP
• If value changes, post using credit/debit memo (MIRO or FB65)
• Document changes for audit purposes and update JPK files accordingly

6. What would you do if the vendor invoice includes a wrong VAT rate (e.g., 23% instead of 8%)?
Answer:

• Check if vendor used the correct tax classification

• Reject the invoice and request a corrected one
• Do not post or deduct VAT unless invoice complies with Polish tax law
• Work closely with tax team and ensure correct tax code is used in SAP (e.g., MW23 vs MW08)

7. How do you ensure vendor master data complies with Polish legal requirements?
Answer:

• Maintain valid NIP (VAT ID), address, and bank account

• Use XK03/XK02 to view/update vendor master
• Cross-check bank accounts with the White List (Biała Lista VAT)
 • Ensure vendors on the whitelist to avoid losing tax deductibility

8. How would you handle a payment proposal (F110) in SAP that fails due to local banking format errors in
Poland?
Answer:

• Validate vendor’s bank format (e.g., IBAN and SWIFT codes)

• Check the payment method and format assigned (e.g., Elixir, Sorbnet, or SEPA)
• Correct any missing or invalid bank details in vendor master data
• Coordinate with Treasury or banking team for format compliance

9. What are the key SAP reports used in Poland for VAT and AP audit readiness?

Answer:

• FBL1N – Vendor Line-Item Report

• S\_ALR\_87012357 – Tax report
• RFUMSV00 – VAT reporting
• Custom JPK extraction reports or interfaces
• ME2L/ME23N – PO and GR reporting for invoice tracking

10. A vendor has submitted an invoice in PLN, but the PO was created in EUR. How do you resolve the situation?

Answer:

• Contact procurement to confirm correct currency as per contract

• Amend PO or request a revised invoice
• Use exchange rate settings in SAP for correct valuation
• Ensure payment terms and tax impact are also correctly recalculated

P2P (Procure-to-Pay) Accounts Payable domain, integrating R2R (Record-to-Report) concepts—

particularly focusing on capitalization, journal entries, and related accounting treatments.

1. What is capitalization in accounting, and how is it relevant in P2P?

Answer: Capitalization refers to the process of recording an expense as an asset when the expense provides future economic
benefits beyond the current period. In P2P, this happens when we procure fixed assets (e.g., machinery, equipment). Instead of
booking the purchase as an expense, it is capitalized on the balance sheet and depreciated over time.

Relevance in P2P: In P2P, when we receive an invoice for a capital asset purchase, we must route it through asset accounting
for capitalization.

Journal Entry:

Dr. Asset A/c (e.g., Machinery) ₹100,000

Cr. Vendor A/c ₹100,000

2. How is capitalization linked to R2R in the P2P cycle?

Answer: In R2R, capitalization affects the fixed asset register, depreciation schedule, and monthly closing reports. Once assets
are capitalized via P2P invoices, R2R handles:

• Periodic depreciation posting

• Asset reconciliation during period close
• Ensuring compliance with accounting standards (e.g., IFRS/GAAP)
Depreciation Entry (Monthly by R2R):

Dr. Depreciation Expense A/c ₹10,000

Cr. Accumulated Depreciation A/c ₹10,000

3. What factors help determine whether an item should be capitalized or expensed?

Answer:

• Useful life > 1 year → Capitalize

• Cost above capitalization threshold (e.g., ₹5,000 or ₹10,000 based on company policy)
• Nature of purchase – if it adds future economic value or improves the asset

Examples:

• Buying office chairs worth ₹50,000 → Capitalize

• Buying stationary worth ₹500 → Expense

4. What is a WBS element and how does it relate to capitalization in SAP?

Answer: A WBS (Work Breakdown Structure) element is a component in project systems used to track expenses and budgets
for projects in SAP. When expenses are incurred for capital projects (like building construction), the cost is first posted to a WBS
element and later capitalized into a fixed asset.

Journal Entry at the time of invoice posting (P2P):

Dr. WBS Element (AUC - Asset Under Construction) ₹500,000

Cr. Vendor A/c ₹500,000

On Asset Capitalization (R2R step):

Dr. Asset (Building) ₹500,000

Cr. WBS Element (AUC) ₹500,000

5. How do you handle vendor invoices related to both capital and expense items?
Answer: Split the invoice in SAP at line-item level:

• Capital items are booked to asset accounts or AUC

• Expense items are posted to P\&L expense accounts

Example Journal Entries:

Dr. Asset A/c (Laptop) ₹70,000

Dr. Expense A/c (Software License) ₹30,000
Cr. Vendor A/c ₹100,000

6. What role does the R2R team play during month-end in relation to capital purchases?
Answer: R2R team ensures:

• Depreciation is run and posted correctly

• Capital WIP (CWIP) is reviewed and moved to asset class
• Fixed Asset Register (FAR) is reconciled with GL
• Proper asset tagging, location updates, and financial disclosure in books

7. What journal entries are involved from P2P to R2R for a capital asset purchase?
Step-by-step entries:
1. At the time of GRN (Goods Receipt)

(Not always booked in accounting unless 3-way match involved)

Dr. Inventory / Asset Clearing A/c ₹XXX

Cr. GR/IR Clearing A/c ₹XXX

2. At invoice posting (P2P responsibility)

Dr. Asset / AUC A/c ₹XXX

Cr. Vendor A/c ₹XXX

3. At asset capitalization (R2R responsibility)

Dr. Fixed Asset A/c ₹XXX

Cr. AUC / WBS Element ₹XXX

4. Monthly depreciation (R2R responsibility)

Dr. Depreciation Expense A/c ₹XXX

Cr. Accumulated Depreciation A/c ₹XXX

8. What happens if a wrongly expensed capital item is identified?

Answer: The correction process involves:

• Reversing the incorrect expense entry

• Creating an asset and transferring the cost

Reversal Entry (R2R):

Dr. Expense Reversal A/c ₹XXX

Cr. Expense A/c ₹XXX

Asset Booking:

Dr. Asset A/c ₹XXX

Cr. Expense Reversal A/c ₹XXX

9. How do you treat installation and freight costs for capital purchases?
Answer: These costs are capitalized along with the asset value if directly attributable to bringing the asset into working
condition.

Example Entry:

Dr. Asset A/c (Equipment) ₹120,000

Cr. Vendor A/c (Base Invoice) ₹100,000
Cr. Vendor A/c (Installation Freight) ₹20,000

10. What is the difference between capitalization and amortization in R2R?

Answer:

• Capitalization: Recording a long-term asset in the books

• Amortization: Gradual write-off of intangible capitalized assets (like software)
• Depreciation: Same as amortization but for tangible assets (like machines)

Amortization Entry:

Dr. Amortization Expense A/c ₹XXX

Cr. Accumulated Amortization A/c ₹XXX
P2P (Procure-to-Pay) Accounts Payable domain, integrated with R2R (Record-to-Report)
P2P–R2R Integration: Duplicate Payment – Questions & Answers with Journal Entries

Q1: What is a duplicate payment in the P2P process?

Answer: A duplicate payment occurs when a vendor invoice is paid more than once for the same goods or services. In P2P, this
typically happens due to:

• Manual posting of the same invoice twice

• Failure of SAP to block duplicate invoice numbers
• Inconsistent vendor master data (e.g., duplicate vendor codes)

Q2: What are the common causes of duplicate payments in SAP P2P?
Answer:

• Entering same invoice with different document numbers

• Disabling duplicate invoice check in SAP (transaction OMRDC)
• Not using 3-way matching (PO, GRN, Invoice)
• Urgent manual payment without proper verification
• Vendor creation with multiple vendor codes for the same entity

Q3: What are the journal entries for a duplicate payment?

Let’s say an original invoice of ₹100,000 was paid correctly and then paid again mistakenly.

1. Correct Payment Entry:

A. Dr. Expense/Asset A/c ₹100,000

Cr. Vendor A/c ₹100,000

B. Dr. Vendor A/c ₹100,000

Cr. Bank A/c ₹100,000

2. Duplicate Payment Entry:

Dr. Expense/Asset A/c (Incorrect again) ₹100,000

Cr. Vendor A/c ₹100,000

Dr. Vendor A/c ₹100,000

Cr. Bank A/c ₹100,000

Impact: Expenses or assets are overstated, and cash is understated.

Q4: How does this issue impact R2R month-end processes?

Answer:

• R2R team sees overstated expenses or asset balances

• Vendor balances mismatch during AP subledger to GL reconciliation
• Cash or bank reconciliation shows unexplained payments
• Requires reclassification and adjustments before financial closing
• R2R must identify and reverse duplicate journal entries
Q5: How is a duplicate payment corrected from both P2P and R2R standpoint?
If refund is received from vendor:

Dr. Bank A/c ₹100,000

Cr. Expense / Asset A/c ₹100,000

If vendor issues a credit note:

Dr. Vendor A/c ₹100,000

Cr. Expense / Asset A/c ₹100,000

Then reconcile vendor accounts using F-44 or F-32 (vendor clearing).

Q6: What SAP controls help prevent duplicate payments?

Answer:

• Enabling duplicate invoice check in OMRDC (by company code and vendor)
• Using three-way matching (PO-GR-Invoice)
• Requiring payment block until invoice approval
• Running duplicate invoice reports (MIR5, FBL1N, ZAP\_DUPLICATE)
• Configuring workflow approval for non-PO invoices

Q7: How does the R2R team detect duplicate payments during period close?
Answer:

• Reconciliation between vendor subledger and GL (T-code: F.13)

• Analysing bank reconciliation reports
• Reviewing aged payable reports for abnormal vendor credits
• Examining trial balances for overstated expense or asset accounts
• Comparing AP ledger with fixed asset register (FAR) if capital purchase is involved

Q8: How are duplicate payments handled in capital asset purchases?

Answer:

If a capital asset invoice is paid twice and both are capitalized:

Correction journal (reversing duplicated asset):

Dr. Accumulated Depreciation A/c ₹XXX (if already depreciated)

Dr. Bank/Vendor A/c ₹100,000
Cr. Asset A/c (reverse duplicate) ₹100,000
Cr. Depreciation Expense A/c ₹XXX

R2R updates asset master (AS03) and re-runs depreciation after correction.

Q9: What is the role of P2P and R2R teams in resolving duplicate payments?
Answer:

P2P Team R2R Team

• Detect duplicate invoices • Reconcile GL and Subledger
• Coordinate with vendor • Adjust journal entries
• Raise refund/credit request • Monitor expense or asset misstatements
• Post reversal entries if credit received • Correct depreciation if capital asset involved
• Block vendor for further payment • Ensure correct reporting in financial statements
Q10: How do you explain a duplicate payment situation to auditors or management?
Answer: “A duplicate payment was identified due to a manual posting without invoice reference check. We traced the payment
using SAP reports, confirmed the vendor balance, and initiated a refund request. Correction entries were posted to reverse
overstated expense/asset values. Controls have now been reinforced by enabling duplicate checks in OMRDC and automating
invoice workflows.”

Summary of Key Journal Entries for Duplicate Payment Correction:

Scenario Journal Entry

A. Dr. Expense / Asset A/c ₹XXX
Cr. Vendor A/c ₹XXX
Correct Payment
B. Dr. Vendor A/c ₹XXX
Cr. Bank A/c ₹XXX
A. Dr. Expense / Asset A/c ₹XXX
Cr. Vendor A/c ₹XXX
Duplicate Payment
B. Dr. Vendor A/c ₹XXX
Cr. Bank A/c ₹XXX
Refund Received A. Dr. Bank A/c ₹XXX
Cr. Expense / Asset A/c ₹XXX
Credit Note Received B. Dr. Vendor A/c ₹XXX
Cr. Expense / Asset A/c ₹XXX
C. Dr. Accum. Depreciation A/c ₹XXX
Correction for Asset Capitalization Dr. Bank / Vendor A/c ₹XXX
Cr. Asset A/c ₹XXX
Cr. Depreciation Expense A/c ₹XXX

GR/IR Function in P2P and R2R – Questions, Answers & Journal Entries
Q1: What is GR/IR in the P2P cycle?
Answer: GR/IR (Goods Receipt / Invoice Receipt) is a clearing account used in SAP to temporarily hold the difference between
goods received and invoices received until both are matched.

• When goods are received, but no invoice is yet received, the liability is temporarily posted to the GR/IR account.
• Once the invoice arrives and matches the goods receipt, the GR/IR is cleared.

Q2: What is the role of the GR/IR team in the P2P-R2R process?
Answer: The GR/IR team is responsible for:

• Monitoring unmatched GR and IR balances

• Ensuring timely invoice booking against goods received
• Investigating quantity or price variances
• Clearing GR/IR accounts before period-end close
• Coordinating with procurement, warehouse, and AP teams
• Supporting R2R with reconciliation of GR/IR suspense balances

Q3: What are the journal entries involved in the GR/IR process?

At Goods Receipt (GRN):

Dr. Inventory / Asset A/c ₹XXX

Cr. GR/IR Clearing A/c ₹XXX
At Invoice Receipt (MIRO):

Dr. GR/IR Clearing A/c ₹XXX

Cr. Vendor A/c ₹XXX

GR/IR gets cleared once both GR and IR are posted for the same PO

Q4: What happens if goods are received but the invoice is delayed?
Answer: The GR/IR account holds the liability until the invoice is received.

This can result in:

• Open GR/IR balances at period-end

• Need for R2R team to assess whether goods were billed
• Manual accruals if invoices are not expected soon

Entry already passed at GRN:

Dr. Inventory / Asset A/c ₹XXX

Cr. GR/IR Clearing A/c ₹XXX

No new entry until invoice arrives.

Q5: How does the R2R team interact with the GR/IR team during period-end close?
Answer:

• R2R ensures that the GR/IR account is reconciled

• Identifies aged GR/IR items (e.g., >30 or >90 days)
• Coordinates with P2P/GR/IR teams to clear or reverse unmatched entries
• Ensures accurate liability and inventory reporting
• Posts manual accruals if needed for unbilled goods

Q6: What are common issues in the GR/IR process and how are they resolved?

Issue Resolution
• GR without IR Follow up with vendor and AP team to process invoice
• IR without GR Check if goods are received, request warehouse confirmation
• Quantity mismatch Use SAP MRBR to review blocked invoices
• Price mismatch Work with procurement to correct PO price

Q7: What happens if an invoice is posted for more quantity than goods received?
Answer: The invoice will get blocked for payment in SAP. This is a 3-way match block triggered by mismatch in PO, GR, and IR.

• Blocked invoices are visible via MRBR (Release Blocked Invoices)

• AP/GR/IR team must correct quantity or follow up with warehouse

No journal entry is posted until GR is corrected or invoice is adjusted.

Q8: How does the GR/IR account affect R2R reporting?

Answer: The GR/IR account is a temporary clearing account on the balance sheet. At period-end, R2R must:

• Reconcile GR/IR balances

• Classify aged items as liability accruals or inventory discrepancies
• Report GR/IR aging to management
• Ensure no material misstatements in financials
Q9: How is GR/IR clearing done in SAP?
Answer: GR/IR clearing is automatic if the PO, GR, and invoice all match. If discrepancies exist:

• Use MR11 to manually adjust GR/IR

• Use MB5S to review open GR/IR balances
• Use F.13 or F110 for clearing

Q10: What is the journal entry if goods are returned after GR is posted?
Answer: When goods are returned to the vendor (return delivery):

Dr. GR/IR Clearing A/c ₹XXX

Cr. Inventory / Asset A/c ₹XXX

If invoice was already booked, a credit note must be requested from the vendor.

Q11: What happens if the GR/IR account is not cleared in time?

Answer:

• Overstated liabilities or inventories

• Misleading financials during period-end
• Requires R2R to post accruals or reversals
• Possible audit observations for control failure

Summary of GR/IR Journal Entries:

Transaction Journal Entry

Goods Receipt (GR) Dr. Inventory / Asset A/c ₹XXX
Cr. GR/IR A/c ₹XXX
Invoice Receipt (IR) Dr. GR/IR A/c ₹XXX
Cr. Vendor A/c ₹XXX
Return of Goods Dr. GR/IR A/c ₹XXX
Cr. Inventory / Asset A/c ₹XXX
Invoice before GR Blocked invoice (no entry) until GR is received
GR without invoice Open GR/IR balance – needs follow-up

Sample Interview Questions on GR/IR (P2P + R2R)

Question Answer Summary

What is GR/IR? A clearing account for temporary liability between goods receipt and
invoice posting.
How do you handle aged GR/IR balances? Investigate, match with open POs, and clear or reverse entries.
What if GR is posted but invoice is missing? Liability is held in GR/IR. R2R may accrue if invoice is overdue
How do you clear GR/IR accounts in SAP? Auto-clear with MIRO; manually via MR11 or report MB5S.
What impact does GR/IR have on R2R close? Affects inventory valuation, liabilities, and accrual accuracy.

Overpayment in P2P-R2R – Interview Questions, Answers & Journal Entries

Q1: What is an overpayment in P2P and how does it happen?
Answer: An overpayment in P2P refers to when a vendor is paid more than the invoiced or agreed amount.

This can happen due to:

• Manual errors in payment run

• Incorrect invoice amounts posted
• Duplicate payments
 • Currency conversion errors
• Incorrect tax or freight calculation

Q2: What are the journal entries in case of an overpayment to a vendor?

Let’s say a vendor invoice was ₹100,000, but payment was mistakenly made for ₹120,000.

Invoice Posting:

Dr. Expense / Asset A/c ₹100,000

Cr. Vendor A/c ₹100,000

Payment Made (Overpaid ₹20,000):

Dr. Vendor A/c ₹120,000

Cr. Bank A/c ₹120,000

This creates a debit balance of ₹20,000 in the vendor account.

Q3: How is overpayment detected and resolved in the P2P process?

Answer: Overpayment is detected through:

• Vendor reconciliation reports (T-code: FBL1N)

• Bank reconciliation showing excess payment
• Vendor informing about excess funds

Resolution Methods:

1. Refund from vendor (preferred)

2. Credit note issued by vendor
3. Adjustment against future invoices

Q4: What are the journal entries when vendor refunds the overpaid amount?
Refund Received from Vendor:

Dr. Bank A/c ₹20,000

Cr. Vendor A/c ₹20,000

If Refund Adjusted Against Future Invoice:

1. Post future invoice normally

Dr. Expense / Asset A/c ₹100,000

Cr. Vendor A/c ₹100,000

2. Apply overpaid balance

(Already exists as a debit of ₹20,000)

→ Balance payment needed: ₹80,000

Dr. Vendor A/c ₹80,000

Cr. Bank A/c ₹80,000
Q5: What is the role of the R2R team in overpayment cases?
Answer:

• Reconcile vendor subledger vs general ledger

• Identify unusual debit balances in vendor accounts
• Ensure correct accounting treatment (refund, credit note, etc.)
• Work with AP (P2P) to resolve open items
• Ensure proper reporting in financial statements
• Avoid overstatement of prepaid expenses / receivables

Q6: How does an overpayment affect the financial statements?

Answer:

• Creates a receivable from the vendor (if refund pending)

• Reduces cash or bank balances
• If not corrected, may result in misstatements of expenses, assets, or liabilities

Q7: What SAP reports help in identifying overpayments?

Answer:

• FBL1N – Vendor Line Item Display

• F.13 – Automatic Clearing
• F110 – Payment Run Log
• ZAP reports or custom reports for debit balances in vendor accounts

Q8: How does P2P team ensure prevention of overpayments?

Answer: Controls Include:

• PO-based 3-way match (PO-GR-IR)

• Blocking manual invoices without approval
• Setting payment terms and tolerances in SAP
• Using payment blocks and workflows
• Reconciliation of open items before payment run

Q9: What if the vendor refuses to refund the overpaid amount?

Answer:

• P2P team negotiates with vendor for adjustment in future invoices

• R2R team may need to book a provision for doubtful recovery if refund or adjustment is uncertain

Journal Entry for Provision:

Dr. Provision for Bad Debt / Vendor Advance Loss ₹XXX

Cr. Vendor A/c ₹XXX

Q10: What audit or compliance risks arise from overpayments?

Answer:

• Risk of financial misstatement

• Potential fraud or internal control weaknesses
• Lack of vendor reconciliation
• May lead to audit findings or compliance violations
Summary of Journal Entries for Overpayment Scenarios

Scenario Journal Entry

Vendor invoice posted Dr. Expense/Asset A/c ₹XXX
Cr. Vendor A/c ₹XXX
Overpayment made Dr. Vendor A/c ₹XXX
Cr. Bank A/c ₹XXX
Refund from vendor Dr. Bank A/c ₹XXX
Cr. Vendor A/c ₹XXX
Credit notes from vendor Dr. Vendor A/c ₹XXX
Cr. Expense/Asset A/c ₹XXX
Adjustment in future invoice Future invoice posted, bank pays balance after adjusting overpaid amount
Provision for loss Dr. Provision for Doubtful Recovery ₹XXX
Cr. Vendor A/c ₹XXX

Interview Question Set Based on Overpayment (P2P + R2R)

Question Answer Summary

What is an overpayment? Payment made exceeding the invoice value
What causes overpayment? Manual errors, duplicate invoice, system issues
How do you detect overpayment? FBL1N, vendor reconciliation, bank statement review
How do you correct it? Refund, credit note, or adjustment against future invoice
What are the journal entries? See scenarios above
What is R2R’s role in overpayments? Reconciliation, adjustments, and accurate financial reporting
How is it prevented? PO match, SAP controls, approval workflows

P2P (Procure-to-Pay) Accounts Payable, including a detailed explanation of proforma invoices:

Q1: What is a Proforma Invoice in P2P Accounts Payable?
Answer:

A proforma invoice is a preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods/services. It outlines
the details of the products, quantities, and prices, but it is not a demand for payment or an official accounting document.

It is used primarily for:

• Quotation purposes
• Customs clearance
• Budgetary approval before the actual invoice arrives

Key Point: Proforma invoices are not recorded in the accounting books and do not trigger payment.

Answer:

Proforma Invoice Commercial Invoice

Sent before goods/services are delivered Sent after delivery
Used for quotations or approvals Used for accounting and payment
Non-binding, no legal claim Binding, legal document for payment
Not used for accounting entries Used for posting journal entries

Q3: What actions do you take when you receive a proforma invoice in the P2P process?
Answer:

• Validate the contents: quantity, price, vendor info.

• Forward to the procurement team if it's for quotation or approval.
• Do not process it for payment.
 • Wait for the commercial/tax invoice to book the liability and initiate payment.

Q4: Can a payment be made based on a proforma invoice?

Answer:

Generally, no, because it is not a final invoice. However, in exceptional cases like:

• Advance payments
• Import transactions requiring upfront customs duty
• Special project procurement

Payment may be released based on internal approvals, followed by the receipt of a final invoice for accounting and
reconciliation.

Q5: In SAP or ERP, is a proforma invoice recorded?

Answer: In most ERP systems like SAP:

• Proforma invoices are not posted in FI (Financial Accounting).

• They may be stored as reference documents in MM (Materials Management) or SD (Sales & Distribution).
• No journal entries are created for a proforma invoice.

Q6: How would you handle a situation where a vendor mistakenly sends a proforma invoice expecting
payment?
Answer:

• Communicate with the vendor explaining that payment cannot be processed on a proforma invoice.
• Request a commercial invoice with proper tax and legal details.
• If urgent, escalate internally for advance payment request approval (if allowed by company policy).

P2P Accounts Payable domain, focusing on daily tasks, and their impact on R2R and O2C
Q1: What are your day-to-day responsibilities in Accounts Payable (AP)?
Answer:

My typical daily tasks in AP include:

1. Invoice Processing:

• Verifying invoice accuracy (3-way or 2-way match)

• Booking invoices into the ERP system (e.g., SAP)
• Resolving discrepancies related to PO/invoice/GR

2. Payment Processing:

• Scheduling and processing payments (weekly/monthly)

• Handling urgent or manual payment requests

3. Vendor Management:

• Responding to vendor queries (payment status, invoice issues)

• Vendor master data maintenance and validation

4. Reconciliations:

• Reconciling vendor statements

• Clearing GR/IR and unmatched entries
5. Compliance and Controls:

• Ensuring tax compliance (GST, VAT, WHT)

• Adhering to internal audit controls and documentation

6. Reporting:

• Preparing AP aging reports

• Supporting month-end closing activities with accruals and provisions

Q2: How do your AP activities impact the R2R (Record to Report) process?
Answer: AP has a direct impact on the accuracy and timeliness of the R2R process, specifically:

Month-End Accruals:

• Invoices not received but goods/services delivered must be accrued to ensure correct expense recognition.

GR/IR Clearing:

• If GR/IR balances are not cleared on time, it creates reconciliation issues in financial statements.

Accurate Liability Reporting:

• Timely and correct booking of invoices ensures liabilities are accurately reported in the balance sheet.

Expense Allocation:

• Proper coding of expenses helps in correct Profit & Loss statement reporting.

Audit Trail:

• AP documentation supports internal and external audits during financial closure.

Q3: How does the P2P process connect to O2C (Order to Cash)?
Answer: While P2P and O2C are separate cycles, they are interlinked in several ways:

Intercompany Transactions:

• When buying from another business unit (P2P) and selling to customers (O2C), both processes must align for accurate
intercompany reconciliation.

Shared Master Data:

• Vendor and customer master data often have shared attributes in global setups; consistency affects both processes.

Cash Flow Management:

• Delays in paying vendors (P2P) or collecting from customers (O2C) affect working capital, which is monitored closely by
finance in R2R.

Q4: What KPIs do you track in your AP process that affect R2R?

Answer:

• Invoice Processing Cycle Time

• On-Time Payment Rate
• Number of Blocked Invoices
• GR/IR Reconciliation Aging
• AP Aging Report
• % of Invoices on Hold
These metrics directly impact month-end reporting, balance sheet accuracy, and financial health tracked in the R2R process.

Q5: Can you give an example of how a delay in AP processing affected the R2R closing?
Answer:

Yes, in a previous month, several high-value invoices were received late from vendors and not booked before month-end. As a
result:

• Expense recognition was delayed.

• R2R had to accrue estimated amounts.
• Later, these had to be reversed and replaced, increasing workload and reconciliation issues.

From then on, we implemented a cut-off calendar and daily tracking of pending invoices to avoid such issues.

One Time Vendor

Q1: How do you deal with One-Time Vendors (OTV) in the Accounts Payable process?
Answer: Dealing with OTV vendors involves a structured and controlled process to ensure compliance and prevent errors or
fraud. Here's how I handle OTV vendors:

1. Verification and Approval:

• I first ensure there's a valid reason for using an OTV (e.g., emergency service, guest lecture).
• Required documents like invoices, ID proof, bank details, and internal approvals are collected.

2. Using Generic Vendor Master:

• In SAP, a generic OTV vendor code is used (e.g., vendor OTV123), created in the vendor master.

3. Entering Details at Invoice Posting:

• Unlike regular vendors, OTV details like name, address, bank info are entered manually during invoice posting (e.g., in
FB60).

4. One-Time Use Policy:

• I ensure the OTV vendor is used only once per payment and discourage repeated use by suggesting creation of a
permanent vendor master for repeat suppliers.

Q2: How are OTV vendor invoices posted in SAP?

Answer: In SAP, invoice posting for OTV vendors is done through:

T-code: FB60 (for non-PO invoices) or MIRO (for PO-based)

After selecting the one-time vendor code, the system prompts for vendor-specific data:

• Name
• Address
• Bank account details
• Tax ID, etc.

This data is entered at the time of invoice entry and is not stored permanently in the master data.
Q3: What is the journal entry created when posting an OTV invoice in SAP?
Answer:

For a non-PO invoice (using FB60), the typical journal entry would be:

Dr. Expense Account (e.g., Consulting Fees) ₹10,000

Cr. One-Time Vendor Account (e.g., OTV123) ₹10,000

Upon payment (using F110 or F-53):

Dr. One-Time Vendor Account (OTV123) ₹10,000

Cr. Bank/Cash Account ₹10,000

Note: Even though the same generic vendor code is used, the unique vendor information is recorded in the line item details of
the document.

Q4: What controls do you follow when processing OTV payments?

Answer:

To control OTV usage:

• Ensure approvals from procurement and finance heads

• Verify all documentation (invoice, tax details, bank account proof)
• Use checklists to avoid data entry errors
• Conduct review during audit or month-end for any suspicious or repeated OTV usage
• Recommend creation of a permanent vendor code if the same vendor is used more than once

Q5: How do you avoid duplicate payments when using OTV vendors?
Answer:

To prevent duplicates with OTV vendors:

• Thorough invoice verification before entry

• Use vendor name + invoice number check as a key control
• Maintain an OTV invoice log
• Reconcile manual payment requests against OTV postings
• Use system validations (e.g., duplicate invoice check in SAP)

P2P (Procure-to-Pay) Accounts Payable domain, covering the entire process up to payments,
including
Q1: Can you walk me through the complete P2P process up to the payment stage?
Answer: Certainly. The Procure-to-Pay process includes the following key steps:

1. Purchase Requisition (PR):

• Raised by a department needing goods/services.

2. Purchase Order (PO):

• Created by procurement after PR approval.

• Sent to the vendor.
3. Goods Receipt (GR):

• When goods/services are received, GR is posted in SAP (MIGO).

• It updates inventory and creates a liability in GR/IR.

4. Invoice Receipt (IR):

• Vendor sends invoice, which is matched against PO and GR (3-way match) using MIRO.
• Once matched and approved, the invoice is posted.

5. Payment Process:

• Payment is scheduled and made based on due dates and terms.

Q2: How is a payment proposal generated in SAP?

Answer: In SAP, payment proposals are generated using Transaction Code F110, part of the Automatic Payment Program (APP).
Here's how it works:

1. Parameters Set:

• Company code
• Payment method
• Vendor account ranges
• Posting date and payment run date

2. Proposal Run:

• SAP runs a simulation based on due invoices and selected parameters.

• The proposal lists all vendor invoices eligible for payment.

3. Review Proposal:

• Review for accuracy, blocked invoices, duplicates, and cash discounts.

• Invoices can be excluded or modified manually if needed.

4. Approval:

• Proposal is approved internally before executing payment.

No actual postings happen during the proposal phase. It’s just a simulation.

Q3: How is the actual payment executed in SAP?

Answer:

After the proposal is approved:

1. Payment Run Execution (F110):

• The actual payment documents are generated.

• This posts the payment entries and clears the vendor liabilities.

2. Payment Media Generation:

• SAP generates the payment file (e.g., XML, ACH, SWIFT) based on the payment method (e.g., bank transfer, cheque,
etc.). his file is sent to the bank.

3. Bank Confirmation

• After successful payment, bank confirmation is tracked (either manually or via EBS – Electronic Bank Statement).
Q4: What is the journal entry created during the payment process?
Answer:

Let’s say a vendor invoice of ₹10,000 was due and now being paid:

At Invoice Posting (MIRO or FB60):

Dr. Expense Account (e.g., Office Supplies) ₹10,000

Cr. Vendor Account ₹10,000
At Payment Run (F110 or F-53):

Dr. Vendor Account ₹10,000

Cr. Bank Account (Outgoing Payment) ₹10,000

This clears the open item in the vendor ledger.

Q5: What validations are performed before executing payment proposals?

Answer:

Before executing payments, I ensure:

• Vendor bank details are complete and validated.

• Invoice is approved and not blocked for payment.
• Due date is within the selected range.
• No duplicate or partial payments exist.
• Payment terms (e.g., discounts) are optimized.
• Withholding tax or TDS (if applicable) is calculated.
• Compliance checks (e.g., sanctions, blacklists) are cleared.

Q6: What happens if an invoice is blocked for payment in SAP?

Answer:

Invoices may be blocked due to:

• Price mismatch with PO

• Quantity mismatch
• Manual block by AP team for disputes

Blocked invoices do not appear in the payment proposal and are excluded from payments unless the block is released.

SAP T-codes to check and release block:

• MRBR (for automatic release based on tolerance)

• FB02 or workflow tools for manual release

Q7: How do you prioritize which vendors get paid first in a payment run?
Answer:

We prioritize based on:

• Due dates: Earliest due dates are paid first.

• Payment terms: To avail cash discounts if available.
• Critical vendors: Utilities, government, or strategic suppliers.
• Blocked status: Ensuring only cleared invoices are included.
• Cash flow considerations: Based on available funds.

These priorities are reflected in the payment proposal parameters in F110.

GR/IR (Goods Receipt/Invoice Receipt) clearing in the P2P Accounts Payable process, with specific
focus on:
• T-code F-03 (GL Clearing)
• T-code SQOI (GRNI Report)

— typically used in SAP ERP

Q1: What is the GR/IR account in P2P, and why is it important?

Answer:

The GR/IR (Goods Receipt/Invoice Receipt) account is a temporary clearing account used in the P2P process to record:

• The value of goods received but not yet invoiced.

• The value of invoices received before goods are received.

It helps maintain accurate accounting by reflecting the difference between the goods received and invoices posted.

Key point: It ensures that inventory and liabilities are correctly recorded even if the invoice or goods is delayed.

Q2: What are common reasons for mismatches in the GR/IR account?
Answer:

• Common causes include:

• Quantity differences between PO and invoice
• Price differences between PO and invoice
• Goods receipt posted but invoice not yet received
• Invoice received before goods receipt (especially in services)
• Partial deliveries or invoicing

Q3: How is GR/IR cleared using T-code F-03 in SAP?

Answer: F-03 is used to manually clear open items in General Ledger accounts, including the GR/IR account. Here's how it's
done:

1. Enter the clearing date, company code, and G/L account (usually the GR/IR account).

2. Select the open debit and credit entries that match (e.g., GR and corresponding IR).

3. Match and clear them manually.

4. Post the document to update the clearing status.

> This is typically done when automatic matching fails, or at month-end/year-end to clean up the GR/IR account.

Q4: What is the journal entry when GR/IR is cleared?

Answer:

There is no new financial impact; it just clears the balance between the two entries.

At Goods Receipt (GR):

Dr. Inventory Account ₹10,000

Cr. GR/IR Clearing Account ₹10,000

At Invoice Receipt (IR):

Dr. GR/IR Clearing Account ₹10,000

Cr. Vendor Account ₹10,000
After clearing using F-03:

→ The debit and credit entries in the GR/IR account offset each other and are marked as cleared. No new journal entry is
created; it is only a clearing action.

Q5: What is SQ01 – GRNI report, and how is it used?

Answer:

SQ01 is a customized transaction or query used in some SAP systems to run the GRNI (Goods Receipt Not Invoiced) report. It is
a report that:

• Lists all open GR/IR items where goods have been received, but the invoice has not yet been posted.
• Helps reconcile and track GR/IR balances, especially during month-end close .

> Some companies call it GRNI, others refer to it as GRIR Aging Report.

Q6: How does GR/IR clearing impact R2R?

Answer:

GR/IR balances are a key reconciliation item in the Record to Report (R2R) process:

• Unreconciled GR/IR items affect liability and inventory reporting.

• If not cleared timely, it may cause misstatements in financials.
• At month-end, the GR/IR account must be reviewed and aged, and manual accruals or write-offs may be required.

Hence, timely clearing using F-03 and monitoring using SQOI/GRNI reports is essential for accurate financial reporting.

Q7: What controls do you apply to ensure proper GR/IR clearing?

Answer:

• Regularly review GR/IR Aging Reports (via SQOI or similar T-codes)

• Set up tolerance limits to allow automatic clearing when minor differences exist
• Investigate and resolve blocked invoices
• Collaborate with Procurement and Warehousing teams for mismatches
• Perform manual clearing via F-03 before period-end to avoid carry-forward balances

Record-to-Report (R2R) - P2P with R2R understanding

1. Situation: Handling Month-End
Q: How do you manage vendor invoices that haven't been received but the goods/services are delivered, especially
at month-end?

Answer: In such cases, I raise an accrual entry in coordination with the business or procurement team. I ensure that goods
receipt is available in SAP (GR/IR clearing), and I record the expense in the appropriate month. This ensures the cost is reported
in the correct period under R2R. Once the invoice is received, it's matched and reversed against the accrual entry in the next
period.

2. Situation: Expense Booking in the Wrong Period

Q: What would you do if an invoice dated June was booked in July? How does it affect R2R?
Answer: If the invoice pertains to June but was booked in July, it misstates both June and July's financials. In such cases, I’d
raise a manual accrual entry in June for the expense and reverse it in July when the actual invoice is posted. This ensures
period-end reporting (R2R) reflects true expenses. I’d also notify the team for better invoice submission timelines.

3. Situation: Intercompany Reconciliation

Q: How do you handle an intercompany payable which is not matching with the counterparty’s receivable?
Answer: I first review the vendor ledger and intercompany reconciliation report. I contact the counterpart (usually through the
shared service or intercompany team) to align on mismatches. It might be due to currency exchange, posting dates, or missing
invoices. For R2R, it’s critical to reconcile intercompany balances before period close to ensure accurate financial consolidation.

4. Situation: Prepaid Expense

Q: How do you handle a vendor invoice that is a prepaid expense?

Answer: I record the invoice to a prepaid GL account, not directly to an expense account. Then, using a monthly amortization
schedule, I transfer the portion applicable to each month. This matches the expense to the period incurred and supports
accurate R2R financials.

5. Situation: Missing Invoices During Close

Q: What steps do you take if some recurring vendor invoices are missing during month-end closing?
Answer: If invoices are not received but expected, I liaise with the vendor and the business team. If confirmation is received
about services delivered, I book a manual accrual in the appropriate GL. This avoids understatement of liabilities and expenses
during R2R close.

6. Situation: Depreciation Impact

Q: How do asset purchases in P2P affect R2R accounting, especially for depreciation?
Answer: When recording fixed asset purchases in P2P (using SAP transaction codes like MIRO or F-90), it's critical to assign the
correct asset code and cost centre. The asset is capitalized, and depreciation is calculated monthly. This affects R2R reporting
as depreciation needs to be posted accurately to reflect asset utilization over time.

7. Situation: Duplicate Payments Detected

Q: What action do you take if a duplicate payment is discovered during reconciliation?

Answer: I first reverse or recover the excess payment and mark the duplicate invoice accordingly in SAP. I update the
reconciliation report and inform both the vendor and internal stakeholders. This impacts R2R as AP balances and cash flow are
misstated if not corrected.

8. Situation: GR/IR Not Cleared Timely

Q: What is your approach if the GR/IR clearing account shows unmatched balances for long?
Answer: I review old open items and coordinate with the purchasing and warehouse teams to verify whether goods were
actually received and/or invoiced. If the PO is closed or mismatches exist, I take corrective action such as reversal of GR or
invoice. Timely clearing is vital for accurate liability representation in R2R.

9. Situation: Cost Centre Error

Q: What if a vendor invoice was wrongly posted to an incorrect cost centre?

Answer: I reverse or correct the entry using a journal voucher with proper justification. This ensures the correct department
bears the cost and financial reports are accurate under R2R. I also follow up with the person who created the invoice entry to
prevent recurrence.

10. Situation: Supporting R2R During Audit

Q: As an AP professional, how do you support R2R activities during audits?

Answer: I provide aging reports, invoice copies, GR/IR reconciliations, vendor confirmations, and support for accruals. I also
explain any abnormal entries, reversals, or corrections. This ensures the R2R team has clean books for external reporting and
audit compliance.
P2P (Procure-to-Pay) and R2R (Record-to-Report) scenarios with SAP-like logic:
1. Month-End Accruals (Goods Received, Invoice Not Received)

Scenario: Goods received in June, invoice not yet received.

Journal Entry (June):

Dr. Expense A/C (e.g., Raw Material Expense) ₹10,000

Cr. Accrued Liabilities A/C (or GR/IR Clearing) ₹10,000

Reverse the entry in July once the actual invoice is received:

Dr. Accrued Liabilities A/C ₹10,000

Cr. Vendor A/C (Accounts Payable) ₹10,000

2. Expense Booked in the Wrong Period

Scenario: June expense booked in July.

Correcting Entry in June:

Dr. Expense A/C ₹5,000

Cr. Accrued Expenses A/C ₹5,000

July (when invoice is received and booked):

Dr. Accrued Expenses A/C ₹5,000

Cr. Vendor A/C ₹5,000

3. Intercompany Reconciliation Issue

Scenario: Intercompany payable not matching with the counterparty’s receivable.

Entry for intercompany invoice:

Dr. Expense A/C ₹15,000

Cr. Intercompany Payables A/C ₹15,000

Resolution involves ensuring both companies reflect the same amount. No journal if already matched — just reconciliation.

4. Prepaid Expense

Scenario: Annual insurance paid upfront.

At time of payment:

Dr. Prepaid Insurance A/C ₹12,000

Cr. Bank A/C ₹12,000

Monthly amortization (each month):

Dr. Insurance Expense A/C ₹1,000

Cr. Prepaid Insurance A/C ₹1,000

5. Missing Invoices During Month-End Close

Scenario: Known services rendered but no invoice.

Month-End Accrual:

Dr. Expense A/C (e.g., Consulting Expense) ₹8,000

Cr. Accrued Liabilities A/C ₹8,000

Next month, when invoice is received:

Dr. Accrued Liabilities A/C ₹8,000

Cr. Vendor A/C ₹8,000

6. Asset Purchase and Depreciation

Asset Capitalization Entry:

Dr. Fixed Asset A/C ₹50,000

Cr. Vendor A/C ₹50,000

Monthly Depreciation (Straight-line example):

Dr. Depreciation Expense A/C ₹4,167

Cr. Accumulated Depreciation A/C ₹4,167

7. Duplicate Payment Correction

Initial (duplicate) payment:

Dr. Vendor A/C ₹6,000

Cr. Bank A/C ₹6,000

Correction (upon recovery):

Dr. Bank A/C ₹6,000

Cr. Vendor A/C ₹6,000

8. GR/IR Not Cleared Timely

Goods Received but Invoice Missing:

Dr. Inventory A/C ₹20,000

Cr. GR/IR Clearing A/C ₹20,000

When invoice received:

Dr. GR/IR Clearing A/C ₹20,000

Cr. Vendor A/C ₹20,000

9. Cost Centre Error (Correction Entry)

Incorrect Entry:

Dr. Expense A/C – Wrong Cost Centre ₹7,000

Cr. Vendor A/C ₹7,000

Correcting Journal:

Dr. Expense A/C – Correct Cost Centre ₹7,000

Cr. Expense A/C – Wrong Cost Centre ₹7,000
10. Audit Support: No entry, but document sharing

You would supply:

• Vendor aging reports

• Invoice copies
• GR/IR clearing report
• Accrual listings
• Ledger extracts

Let's now connect the above P2P + R2R situations specifically to “Capitalization”
Q1. What is Capitalization in Accounting?
Answer: Capitalization means treating a purchase (usually high-value and long-term use) as a fixed asset (e.g., equipment,
machinery, furniture) instead of an immediate expense. The value is then depreciated over its useful life.

Now, let’s explore how capitalization is connected to each of the earlier situations:

1. Month-End Accruals

Connection: If goods like machinery or capital equipment are delivered but invoice is pending, an accrual must be capitalized.

Correct Journal Entry (Capital Item Accrual):

Dr. Fixed Asset Under Construction A/C ₹50,000

Cr. Accrued Liabilities A/C ₹50,000

Once invoice arrives, it’s settled and moved from "under construction" to actual asset.

2. Expense Booked in the Wrong Period

Connection: If a capital expense (e.g., IT server) is incorrectly expensed in the wrong period, it violates matching principle and
impacts asset tracking.

Correction: Reclassify the amount from expense to fixed asset.

Dr. Fixed Asset A/C ₹1,00,000

Cr. IT Expenses A/C ₹1,00,000

3. Intercompany Reconciliation

Connection: Capital items purchased via intercompany should be recorded properly in fixed assets and matched to the
counterparty. If not done, group-level consolidation in R2R gets impacted.

4. Prepaid Expense

Connection: Prepaid expenses are not capitalized as fixed assets but are treated as short-term assets, whereas capitalized
assets go to fixed assets and are depreciated.

Key distinction:

• Prepaid Rent → Current Asset

• Building Purchase → Capitalized Fixed Asset

5. Missing Invoices During Close

Connection: If a capital asset (e.g., machine) has been received but invoice is missing at month-end, then capitalize via accrual
using temporary asset code.

Entry:
Dr. Fixed Asset A/C (or CWIP) ₹75,000
Cr. Accrued Payables A/C ₹75,000

6. Asset Purchase and Depreciation

Directly Related to Capitalization

This is the core capitalization process:

• Asset is recorded as a capital asset

• Depreciation posted over useful life
• Affects balance sheet and P\&L via depreciation, not full purchase value.

7. Duplicate Payment

Connection: If duplicate payment was made for a capital asset, recovering it ensures:

• No overstatement of asset value

• Accurate fixed asset register
• Clean vendor reconciliation in P2P and proper asset schedule in R2R

8. GR/IR Not Cleared Timely

Connection: For capital assets, open GR/IR affects the Asset Master Clearing. Delay in clearing can result in:

• Asset not appearing in fixed asset register

• Incorrect depreciation posting
• R2R reporting mismatch

9. Cost Centre Error

Connection:

Fixed assets must be assigned to the correct cost centre or business area for depreciation allocation and internal reporting.

Wrong cost centre means:

• Misstatement of departmental asset use

• Incorrect depreciation charging
• Errors in statutory and management reporting

Correction via:

Dr. Fixed Asset – Correct Cost Centre ₹XXX

Cr. Fixed Asset – Wrong Cost Centre ₹XXX

10. Audit Support

Connection: Capitalization entries and supporting documents are critical in audits. You must:

• how purchase invoices

• Asset master data
• Depreciation policy
• Asset capitalization thresholds

This supports R2R’s asset disclosure in the balance sheet and complies with accounting standards (like IND AS 16, IAS 16, or
GAAP).

Summary:
Capitalization in the P2P-R2R context ensures:

• Proper treatment of long-term purchases

• Accurate asset recording and depreciation
• Compliance with financial reporting standards
• Smooth month-end/year-end closures

1. Scenario: Goods Received, Invoice Not Received (Month-End Accrual)

Q1: What do you do when goods/services are received, but the invoice has not arrived by period-end?
Answer: I raise an accrual to match the expense with the correct accounting period. This helps the R2R team close the books
with accurate liabilities.

Journal Entry (Accrual):

Dr. Expense A/C (e.g., Consulting Expense) ₹10,000

Cr. Accrued Liabilities A/C (or GR/IR) ₹10,000

Once the invoice is received:

Dr. Accrued Liabilities A/C ₹10,000

Cr. Vendor A/C ₹10,000

2. Scenario: Capital Asset Purchased but Mistakenly Expensed

Q2: An invoice for a capital item (e.g., laptop) is wrongly booked to an expense account. What do you do?
Answer: I reclassify the entry from expense to a fixed asset to ensure capitalization and correct depreciation reporting in R2R.

Correcting Entry:

Dr. Fixed Asset A/C ₹50,000

Cr. Office Expenses A/C ₹50,000

3. Scenario: GR/IR Mismatch in SAP

Q3: What action would you take if there are open GR/IR items not cleared during month-end close?
Answer: I would check the PO, delivery, and invoice status. If goods were received but invoice is missing, I accrue it. If invoice
exists but goods are not received, I notify procurement.

Initial GR Entry (upon receipt):

Dr. Inventory A/C (or Asset CWIP) ₹20,000

Cr. GR/IR Clearing A/C ₹20,000

Invoice Entry:

Dr. GR/IR Clearing A/C ₹20,000

Cr. Vendor A/C ₹20,000

4. Scenario: Prepaid Expenses vs. Capitalization

Q4: How do you distinguish between prepaid expense and capital expenditure?
Answer: A prepaid expense is a short-term benefit (e.g., insurance), while a capital expenditure provides long-term value and
must be capitalized.

Prepaid Expense Entry:

Dr. Prepaid Insurance A/C ₹12,000
Cr. Bank A/C ₹12,000

Monthly Amortization:

Dr. Insurance Expense A/C ₹1,000

Cr. Prepaid Insurance A/C ₹1,000

5. Scenario: Vendor Invoice Missing During Close

Q5: What do you do if a known recurring invoice is not received during the month-end closing?
Answer: I accrue the expected cost based on previous months or confirmation from the business team to ensure expense is
captured in the right period.

Journal Entry:

Dr. Expense A/C (e.g., Rent, IT Support) ₹15,000

Cr. Accrued Expenses A/C ₹15,000

6. Scenario: Fixed Asset Purchase and Depreciation

Q6: How do you handle the purchase and depreciation of a fixed asset?
Answer: I book the purchase against a fixed asset code. Then, based on the asset’s useful life, I calculate monthly depreciation
which impacts the P\&L and asset value in R2R.

Asset Purchase:

Dr. Fixed Asset A/C ₹1,00,000

Cr. Vendor A/C ₹1,00,000

Monthly Depreciation:

Dr. Depreciation Expense A/C ₹8,333

Cr. Accumulated Depreciation A/C ₹8,333

7. Scenario: Duplicate Payment Identified

Q7: A duplicate payment was made to a vendor. How do you handle it?
Answer: I inform the vendor, request a refund or adjustment, and update SAP with the recovery entry.

Refund Journal Entry:

Dr. Bank A/C ₹6,000

Cr. Vendor A/C ₹6,000

8. Scenario: Invoice Posted to Wrong Cost Centre

Q8: What do you do if an invoice is booked to the wrong department/cost centre?

Answer: I reclassify the expense using a journal voucher and notify the responsible team.

Correction Journal:

Dr. Expense A/C – Correct Cost Centre ₹12,000

Cr. Expense A/C – Wrong Cost Centre ₹12,000
9. Scenario: Intercompany Invoice Mismatch

Q9: What action would you take if your payable doesn’t match the other entity’s receivable?
Answer: I compare invoices, payment terms, FX rates, and work with the intercompany or global finance team to reconcile.

Entry for Intercompany Purchase:

Dr. Expense A/C ₹25,000

Cr. Intercompany Payables A/C ₹25,000

10. Scenario: Supporting Internal/External Audit

Q10: What data do you provide during audits from P2P and how does it link to R2R?
Answer: I provide:

1.Vendor ledgers 2.GR/IR reconciliation

3.Aging reports 4.Accrual working

5.Asset purchase proofs

This ensures R2R closing aligns with underlying P2P data, improving transparency.

Bonus: P2P to R2R Flow Overview

1. Invoice Booking →Impacts AP, GL

2. GR/IR Clearing → Impacts Liability Reconciliation

3. Capitalization →Affects Depreciation, Balance Sheet

4. Accruals → Ensures Matching Principle for R2R

5. Asset Depreciation → R2R impact through P\&L & BS

6. Vendor Payments → Impacts Cash Flow & Liability Reports

7. Reclassifications → Ensure clean segment-wise reporting

Basic Questions on P2P with R2R Relevance

Q1: What is P2P and how does it link with R2R?
Answer: P2P (Procure to Pay) refers to the end-to-end process of procuring goods/services and making payments to vendors.
R2R (Record to Report) involves the final processing of financial data to generate reports like balance sheets and P\&L
statements.

The link is through Accounts Payable — all vendor invoices and payments processed in P2P are recorded in the general ledger,
which is part of R2R.

Example:

Invoice from a vendor → Booked in AP → Reflected in GL (R2R) as an expense or asset

Q2: What are the journal entries in the P2P process and how are they relevant to R2R?
Answer:

Transaction Journal Entry

Invoice Booking Dr. Expense/Asset A/c ₹XXX
Cr. Vendor A/c ₹XXX
Payment to Vendor Dr. Vendor A/c ₹XXX
Cr. Bank A/c ₹XXX
 Prepaid Expense Dr. Prepaid Expense A/c ₹XXX
Cr. Vendor A/c ₹XXX
Expense Recognition Dr. Expense A/c ₹XXX
Cr. Prepaid Expense A/c (via R2R month-end process) ₹XXX
These entries are picked up by R2R during monthly closing to ensure correct financial reporting.

Q3: What happens if an invoice is not booked in the right period?

Answer: It will cause a cut-off issue. Expenses may appear in the wrong period, impacting the P\&L and balance sheet.

R2R will not have an accurate view of liabilities and expenses, hence proper accruals must be made.

Q4: How do you handle accruals for un-booked invoices?

Answer: If an invoice is not received but the goods/services are delivered, an accrual is made during the month-end:

Journal Entry:

Dr. Expense A/c ₹XXX

Cr. Accrued Liability A/c ₹XXX

In R2R, this helps reflect the liability and correct expense for the period.

Q5: What is the impact of P2P errors on financial reporting?

Answer: Errors like duplicate invoices, wrong GL coding, incorrect tax handling affect:

• Trial balance
• Profit & Loss
• Audit reports

Hence, R2R depends on accurate P2P data for correct financial closure and reporting.

Q6: How are prepaids handled between P2P and R2R?

Answer: In P2P, prepayments are recorded when paid before the service/goods are delivered.

Journal Entry (at time of payment):

Dr. Prepaid Expense ₹XXX

Cr. Bank ₹XXX

R2R then amortizes the expense monthly:

Month-end Journal (R2R):

Dr. Expense ₹XXX

Cr. Prepaid Expense ₹XXX

Q7: How do you handle fixed asset purchases in P2P?

Answer:

If an invoice relates to a capital item, it should not be expensed. Instead:

Journal Entry (P2P):

Dr. Asset A/c ₹XXX

Cr. Vendor A/c ₹XXX

R2R will then capitalize and start depreciation on it. Wrong coding in P2P will impact asset reporting in R2R.
Q8: What is the role of GR/IR in P2P and how does it affect R2R?
Answer: GR/IR (Goods Receipt/Invoice Receipt) is a temporary clearing account.

At GR:

Dr. Inventory A/c ₹XXX

Cr. GR/IR ₹XXX

At Invoice Receipt:

Dr. GR/IR ₹XXX

Cr. Vendor A/c ₹XXX

If not cleared timely, it results in open items that R2R needs to monitor during closing and audit.

Q9: What controls in P2P help ensure accurate R2R reporting?

Answer:

• Three-way match (PO, GR, Invoice)

• Vendor master data accuracy
• Correct GL and cost centre tagging
• Timely accruals
• Reconciliation of GR/IR
• Aging analysis of vendor balances

Q10: Explain how month-end closing activities are coordinated between P2P and R2R.
Answer:

At month-end:

• P2P team ensures all invoices are posted

• Accruals are shared with R2R for unbilled services
• Open POs and GR/IR are reconciled
• P2P gives input to R2R for vendor aging, prepaids, asset purchases

Capital Expenditure (CAPEX), Operating Expenditure (OPEX), and Work Breakdown Structure WBS Elements

What is CAPEX and OPEX?

CAPEX (Capital Expenditure):

Definition: Money spent by a company to acquire or upgrade physical assets such as property, industrial buildings, or
equipment.

• Nature: Long-term investment.

• Accounting Treatment: Recorded as an asset on the balance sheet and depreciated over time.

Example: Buying a machine, constructing a building, or developing a new IT system.

Journal Entry in SAP (Invoice Booking):

Dr. Asset under Construction / Asset Account ₹XXX

Cr. Vendor ₹XXX

OPEX (Operating Expenditure):

Definition: Ongoing expenses for running the day-to-day operations of the business.

• Nature: Short-term; consumed within the financial year.

• Accounting Treatment: Charged directly to the P\&L (Profit & Loss) account.

Example: Rent, utilities, office supplies, maintenance services.

Journal Entry in SAP (Invoice Booking):

Dr. Expense A/c (e.g., Repairs & Maintenance) ₹XXX

Cr. Vendor ₹XXX

What is a WBS Element?

WBS = Work Breakdown Structure

• It is a project-related cost collector used in SAP (under module SAP PS – Project System).
• A WBS element helps break down a project into smaller, manageable parts to track costs, budgets, and progress.
• Used especially for CAPEX projects like infrastructure, IT systems, or construction projects.

How WBS Elements are related to CAPEX and OPEX?

Item CAPEX OPEX

WBS Used? Yes, always used for capital projects Sometimes, if related to a project or
cost tracking
Purpose Track capital project progress and cost Track operational project costs
Accounting Entry Impact Helps track asset under construction (AUC) Tracks costs against budgets or
departments
Final Posting Asset Capitalization Expense in P\&L

Integration with P2P and R2R:

Process P2P Involvement R2R Impact

Vendor Invoice for CAPEX Booked against a WBS element → hits R2R capitalizes the AUC to final asset
AUC (Asset Under Construction) and starts depreciation
Vendor Invoice for OPEX Booked against Cost Centre or R2R reports it as expense in
sometimes WBS monthly/annual reporting
Month-End Closing Ensure all WBS expenses are captured R2R ensures proper capitalisation and
expense recognition
Real-Life Example in SAP:

Case: Your company is building a new IT office.

1. P2P Books Vendor Invoice: 2. R2R at Project Completion:

Invoice for contractor = ₹10,00,000 Capitalizes AUC to final asset:
WBS Element: PROJ1001 (New Office Construction) Dr. Building Asset A/c ₹XXX
Entry: Cr. AUC(Asset Under Construction) ₹XXX

Dr. AUC (WBS PROJ1001) ₹XXX

Cr. Vendor ₹XXX

3. Depreciation Starts:

Monthly:

Dr. Depreciation A/c ₹XXX

Cr. Accumulated Depreciation ₹XXX
Summary Table:

Term Meaning Example Relation to SAP & Interview Insight

CAPEX Long-term investment New machine Use WBS → AUC → Asset
OPEX Operating cost Office electricity bill Expense → Cost centre or WBS
WBS Project cost tracker Construction Project Tracks all CAPEX/OPEX for reporting and control

SAD = Single Administrative Document

It is a customs declaration document used when importing goods into the European Union (EU), including Poland.

Purpose of SAD:

• Shows that goods have legally entered the EU

• Contains details like customs duty, VAT, freight charges, commodity codes, and origin country
• Required for customs clearance and compliance in EU accounting and tax regulations

Where does SAD fit in P2P (Accounts Payable)?

When a company imports goods, it receives an SAD from the customs agent or freight forward

Amortization and Deferrals

BASIC CONCEPTS

Deferral = Postponing recognition of an expense or revenue to a future period.

Amortization (of prepaids) = Systematically recognizing deferred expenses over time (monthly/quarterly).

Q1: What is a deferral in Accounts Payable?

Answer: In P2P, a deferral happens when a vendor invoice is paid upfront, but the service or benefit is for a future period.
Instead of expensing it immediately, it’s recorded in a Prepaid Expense account.

Example: Annual software subscription of ₹1,20,000 paid in Jan for the full year.

Entry (at invoice posting):

Dr. Prepaid Expense A/c ₹1,20,000

Cr. Vendor A/c ₹1,20,000

R2R will amortize this monthly over 12 months:

Dr. Expense A/c ₹10,000

Cr. Prepaid Expense A/c ₹10,000

Q2: How is amortization of prepaid expenses handled between P2P and R2R?
Answer:

• P2P team ensures the initial posting to prepaid GL at the time of invoice.
• R2R team sets up or performs the monthly amortization journal to gradually move the amount to P\&L.

This ensures expenses are recognized in the correct accounting periods.

Q3: Can SAD costs be deferred and amortized?

Answer: Yes, depending on the nature of the import:

• If related to CAPEX (e.g., imported machinery) → cost is capitalized and amortized via depreciation
• If related to OPEX or Prepaid Services (e.g., freight contract paid annually) → SAD portion may be deferred and
amortized monthly

Journal Entries:

1. At time of invoice (for prepaid freight):

Dr. Prepaid Freight A/c ₹XXX

Cr. Vendor A/c ₹XXX
2. R2R amortization entry:

Dr. Freight Expense ₹XXX

Cr. Prepaid Freight ₹XXX

Q4: What happens if deferrals are missed in P2P?

Answer: If the P2P team books prepaid invoices directly to the expense account, expenses will be overstated in the current
period and understated in future periods.

This leads to:

• Incorrect P\&L (affecting profitability)

• Non-compliance with matching principle
• Rework during audits/closing

R2R must then reverse and reclassify the amounts — leading to delays.

Q5: How do you differentiate between deferral and accrual in P2P?

Aspect Deferral Accrual

Payment Happens first Payment/invoice not yet received
Expense Recognition Delayed Brought forward
Example Annual rent paid in advance Invoice not received for month-end utility
Journal Entry Dr. Prepaid A/c / Cr. Vendor Dr. Expense / Cr. Accrued Liability

Q6: How are amortizations tracked in SAP?

Answer:

• In SAP, amortization of prepaid expenses is managed using recurring entries or manual month-end entries by R2R.
• The P2P team tags the correct GL account (Prepaid) when entering the invoice.
• R2R schedules the deferral logic, e.g., monthly posting over 12 months.

Q7: What controls can be applied to ensure proper deferral and amortization?
Answer:

• Use of Prepaid Expense GLs in PO or invoice entry (P2P responsibility)

• Clear communication of service duration in PO descriptions
• Monthly review of prepaid GLs by R2R team
• Setup of amortization templates for recurring deferrals in SAP

Real Scenario: Software Subscription Paid Annually

Step Responsible Team Action Entry

 Invoice received P2P Book to Prepaid GL Dr. Prepaid Software / Cr. Vendor
Monthly Closing R2R Post amortization Dr. Software Expense / Cr. Prepaid Software

Interview Tip:

Q1: If you receive a vendor invoice for ₹6,00,000 covering consultancy services from April to September, how would you
handle it?

Answer: I’d defer the expense by posting to Prepaid GL in April and inform R2R for monthly amortization. This spreads the cost
across 6 months, ensuring accurate P\&L.

Definitions with Key Differences

Term Definition Trigger Event Account Type P2P Role R2R Role Example from
Used Scenarios
Deferral Postponing Advance Prepaid Book invoice Amortize Software
recognition of payment for Expense to prepaid GL monthly license paid for
an expense to future service (Asset) 12 months in
a future period advance
Amortization Gradual Deferral Expense (P\&L) Ensure correct Post monthly R2R posts
recognition of already made; + Prepaid GL during journals ₹10,000/month
a deferred spread (Asset) invoice from prepaid
(prepaid) software
expense over
time
Capitalization Recording a Purchase of Asset or AUC Book invoice Capitalize to Machinery
cost as an capital goods (Asset under to WBS (CAPEX asset register imports with
asset instead or project Construction) GL) WBS → Asset
of an expense spend
because it
gives future
benefit
Depreciation Systematic After asset is Depreciation Ensure correct Run depreciation Machinery
reduction of a capitalized and Expense + tagging to monthly/annually depreciated
capital asset's available for Accumulated asset/WBS ₹5,000/month
value over its use Depreciation for 5 years
useful life

How They Are Related in Workflow (SAP or Any ERP)

1. Deferral & Amortization: 2. Capitalization & Depreciation:

• P2P books the invoice to Prepaid Expense A/c • P2P books invoice to WBS element (Capex)
• R2R amortizes it monthly to Expense A/c • R2R capitalizes to Asset Register
• Starts Depreciation every month/year
Quick Example Comparison

Scenario GL Entry Category When used

₹1,20,000 software license Dr. Prepaid Software ₹XXX Deferral Service spans multiple future
paid in Jan for 1 year Cr. Vendor ₹XXX periods
₹10,000 amortized monthly Dr. Software Expense ₹XXX Amortization Monthly recognition of
Cr. Prepaid Software ₹XXX deferred expense
Imported Machinery with Dr. AUC (WBS) ₹XXX Capitalization Long-term asset with WBS
SAD ₹5,00,000 Cr. Vendor ₹XXX tagging
Monthly depreciation ₹8,000 Dr. Depreciation Expense ₹XXX Depreciation Cost of asset spread over
Cr. Accum. Depreciation ₹XXX useful life
Interview Question Tip:

Q: Can you explain how deferral, amortization, capitalization, and depreciation are used in the P2P and
R2R process?
Answer:

• Deferral is used when we pay for a service in advance (e.g., annual software); P2P books to Prepaid GL.
• R2R then amortizes it monthly into the expense.
• Capitalization is used when costs relate to assets (e.g., imported machinery); P2P tags WBS, and R2R capitalizes and
starts depreciation.
• Depreciation spreads the capitalized cost over time as per asset life.

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