Shortage, Damage and Short-Dated Stock on PO 4471
A distributor of packaged foods in Amritsar receives a truck from a biscuit manufacturer against PO 4471: 1,200 cartons, 24 packs per carton, batch B-2411, with at least six months' shelf life on receipt. The driver's lorry receipt shows 1,200 cartons. On unloading, the team counts 1,180 cartons. Of these, 20 cartons are water-stained and crushed, and 12 cartons carry batch B-2312 with only four months' shelf life remaining. The supplier's invoice, received by email, bills 1,200 cartons at Rs 420 each plus 18% GST. The driver refuses to sign any shortage note, saying his LR is clean and the container seal was intact at loading. The warehouse has a four-hour unloading window before the truck must leave for another delivery, and the rack allocated to this SKU holds only 1,000 cartons. The supplier's monthly reconciliation is due in three days.
1. How should the receipt be recorded on the GRN and in the stock system? State the quantities you would accept, quarantine and reject, and the entries you would make.
Read the worked answer
Reconcile first, then post. Of 1,200 cartons ordered, 1,180 physically arrived, so 20 cartons are short-landed. Of the 1,180, twenty are damaged and twelve are short-dated.
| GRN line | Qty | Batch | Status | Location |
|---|---|---|---|---|
| Accepted | 1,148 | B-2411 | Available | Rack, subject to capacity below |
| Damaged | 20 | B-2411 | Rejected / quarantine | Damaged-goods cage |
| Short-dated | 12 | B-2312 | Hold pending supplier decision | Quarantine |
| Not received | 20 | - | Shortage line | - |
The 12 short-dated cartons should not be silently mixed into saleable stock: the purchase agreement requires six months, so either reject them or accept them only against a written supplier credit. The rack holds 1,000 cartons, so 148 accepted cartons need an overflow location recorded in the system - do not leave them unlocated, or the next count will show a phantom shortage. Post the GRN against PO 4471, not against the invoice, so the three-way match fails cleanly and payment is not released for goods not received.
2. What documents and written communications must be raised before the truck leaves, and why does each matter later?
Read the worked answer
The driver's refusal to sign is itself a fact that must be recorded, not argued about at the gate.
- GRN with separate lines for accepted, damaged, held and shortage quantities, signed by the receiving officer and countersigned by a second person.
- Damage and shortage report with time-stamped photographs of the water-stained cartons, the seal number, the vehicle number, the arrival and departure times, and a note that the driver declined to sign, with the name of the witness.
- Remarks on the transporter's LR copy (received subject to verification, with count and damage noted) even if the driver will not counter-sign; the copy plus the report is the evidence trail for a transit claim.
- Written notice to the supplier the same day, listing the 20 short cartons, the 20 damaged cartons and the 12 short-dated cartons, and asking for a credit note or replacement instruction.
- Debit note raised in the accounts system so the payable is reduced before the reconciliation in three days.
- Internal exception report to the warehouse manager, flagging the rack-capacity overflow and the quarantine stock.
Each document answers a different challenge later: the GRN settles the quantity, the photographs and witness note settle the damage dispute, and the same-day notice preserves the claim under any notice-period clause.
3. The invoice is for 1,200 cartons. What should happen to payment and supplier reconciliation, and what risk are you actually managing?
Read the worked answer
The three-way match between PO, GRN and invoice must fail, and that failure is the control working as intended.
- Pay only for accepted goods: 1,148 cartons at Rs 420 plus GST on that quantity, unless the supplier replaces the 20 short and 20 damaged cartons, in which case payment follows the replacement GRN.
- Raise a debit note for 40 cartons (Rs 16,800 before GST) covering the 20 short plus 20 damaged, and hold the 12 short-dated cartons as a separate line pending the supplier's credit note.
- Reconcile against the supplier statement in three days using the GRN, not the invoice, and attach the damage report.
The risk being managed is twofold. Commercially, paying the full invoice removes all leverage to recover the shortage and damage. Statutorily, GST input credit claimed on goods never received or destroyed is an ineligible credit that will surface as a mismatch in the supplier's return and can attract interest and penalty. The correct posture is to accept liability only for what is physically on the rack and fit for sale, and to document the rest before the truck leaves the yard.