CHAPTER 2: WORKING WITH GENERAL LEDGER ACCOUNTS

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1 Chapter 2: Working with General Ledger Accounts CHAPTER 2: WORKING WITH GENERAL LEDGER ACCOUNTS Objectives Introduction The objectives are: Identify different posting groups and outline their purpose. Explain the use of G/L account cards. Outline the purpose and functions of the Chart of Accounts window. The core of a company is its chart of accounts, a list of the general ledger (G/L) accounts where G/L entries accumulate during a fiscal period. General Ledger entries are created as a result of business transactions posted on different business documents, such as purchase invoices. During posting, transaction figures are routed to the relevant G/L accounts by means of posting group combinations assigned to the customer, vendor, or item on the business document. As one of the central elements of a financial management system, the purpose and functions of the chart of accounts is prerequisite knowledge for anyone training to work with Microsoft Dynamics NAV 2009 at any level. For introductory training on assigning posting groups to business documents, refer to the "Process Purchases" chapter in this course. For detailed information about how and why to set up posting groups, refer to the "Application Setup in Microsoft Dynamics NAV 2009" course. For training in financial management functionality, refer to the "Finance in Microsoft Dynamics NAV 2009" course, which is intended for the bookkeeper role. 2-1

2 Introduction to Microsoft Dynamics NAV 2009 Posting Groups Posting groups help users create links between master data records in the different application areas and the G/L accounts in the chart of accounts. When sales, purchases, and other transactions are recorded and posted for these master data records, posting groups route the derived transaction figures to the correct G/L accounts. You can use three types of posting groups when selling inventory and resources to customers and buying inventory from vendors: Specific posting groups General posting groups VAT posting groups Specific Posting Groups The primary purpose of specific posting groups is to identify the balance sheet account for each subledger. (The term subledger refers to transaction entries in application areas, such as Inventory, Sales, Purchases, and Resources). Specific posting groups are assigned to the following master data records: Customers Vendors Items Fixed Assets Bank Accounts These posting groups create the direct link to the primary balance sheet account for each master data record. NOTE: Posting groups are not necessary in companies that only use the General Ledger application area and only record regular journal entries to G/L accounts. 2-2

3 Chapter 2: Working with General Ledger Accounts To view Customer Posting Groups, go to: Departments > Financial Management > Administration > Posting Groups > Customer Posting Groups FIGURE 2.1 CUSTOMER POSTING GROUPS IN CRONUS To view Vendor Posting Groups, go to: Departments > Financial Management > Administration > Posting Groups > Vendor Posting Groups FIGURE 2.2 VENDOR POSTING GROUPS IN CRONUS 2-3

4 Introduction to Microsoft Dynamics NAV 2009 The following table briefly describes the purpose of each type of specific posting group. Specific Posting Group Customer Posting Group Vendor Posting Group Inventory Posting Groups/Inventory Posting Setup Fixed Asset Posting Group Bank Account Posting Group Maps the accounts receivable accounts, payment discount accounts, invoice and application rounding accounts, and interest and fee accounts relating to customers. Maps the accounts payable account, payment discount accounts, invoice and application rounding accounts, and interest and fee accounts relating to vendors. Inventory posting groups specify the type of inventory and are then combined with location codes in the Inventory Posting Setup window. Each combination is then mapped to the inventory accounts, WIP account, and other variance accounts relating to inventory in the chart of accounts. Specifies the accounts to which transactions involving fixed assets are posted. Maps a bank account to a bank G/L account. Inventory Posting Setup Inventory posting groups are specific posting groups that are used to group items for statistical purposes. Reports, such as the Inventory Valuation, and batch jobs, such as the Post Inventory Cost to G/L, use inventory posting groups to list the results. The inventory posting group setup is slightly different than the setup of customer and vendor posting groups because two windows are used: Inventory Posting Groups Inventory Posting Setup In the Inventory Posting Group window, item group codes such as RAW MAT can be specified. This setup allows users to link G/L accounts to item groups rather than to specific items. The Inventory Posting Setup window defines the posting links between inventory locations, item groups (see Inventory Posting Group Code field in figure 3.2), and G/L accounts relating to inventory. 2-4

5 Chapter 2: Working with General Ledger Accounts To view Inventory Posting Setup, go to: Departments > Financial Management > Administration > Inventory Posting Setup FIGURE 2.3 INVENTORY POSTING SETUP WINDOW REFLECTING THE POSTING LINKS BETWEEN INVENTORY AND G/L General Posting Groups The primary purpose for general posting groups is to identify the income statement account that represents each subledger. General posting groups are added to customers, vendors, items, and resources to link the following to the general ledger: Item and/or resource transactions from purchases and sales documents Item journals and job journals There are two types of general posting groups, shown in the following table. General Posting Group General Business Posting Group General Product Posting Group Specifies who is sold to (customers) and who is purchased from (vendors). Specifies what is being sold (items and resources) and what is being purchased (items). 2-5

6 Introduction to Microsoft Dynamics NAV 2009 General Business Posting Groups To go to General Business Posting Groups, go to: Departments > Financial Management > Administration > Posting Groups > Gen. Business Posting Groups FIGURE 2.4 GENERAL BUSINESS POSTING GROUPS LINKING TRANSACTIONS TO G/L BY BUSINESS TYPE General business posting groups are assigned to: Customers Vendors G/L accounts When setting up general business posting groups, you must consider how many groups are needed for breaking down: Sales by customers Purchases by vendor For example, general business posting groups can be divided by: Geographical area Type of business Type of industry 2-6

7 Chapter 2: Working with General Ledger Accounts General Product Posting Groups General product posting groups are assigned to: Items Resources G/L accounts When setting up general product posting groups, you must consider how many groups are needed for breaking down: Sales by products (items and resources) Purchases by items For example, general product posting groups can be divided by: Raw material items Retail items Resources Capacities General product posting groups provide the major product groups reflected in the chart of accounts. Each inventory item and resource is assigned a general product posting group. General Posting Setup Window The General Posting Setup window is a matrix that combines business and product posting groups. 2-7

8 Introduction to Microsoft Dynamics NAV 2009 To view the General Posting Setup, go to: Departments > Financial Management > Administration > Posting Groups > Gen. Posting Setup. FIGURE 2.5 GENERAL POSTING SETUP WINDOW REFLECTING THE POSTING LINKS BETWEEN GENERAL POSTING GROUPS AND G/L Each combination determines the accounts that the program uses to post the following: Sales and purchases Sales and purchase credit memos Sales and purchase invoice discounts and payment discounts Cost of goods sold (COGS) and inventory adjustments Direct cost applied and overhead applied Purchase variances For each combination of business and product posting groups, a different set of G/L accounts can be assigned. As a result, it is possible to post the sale of the same item to different sales accounts in the general ledger since customers are assigned different general business posting groups. VAT Posting Groups Value-added tax (VAT) is a transaction tax paid by the end consumer and businesses. VAT posting groups define how VAT is calculated and posted according to: Who is sold to or purchased from (customers and vendors) 2-8

9 Chapter 2: Working with General Ledger Accounts What is sold or purchased (items and resources) The principles for setting up VAT posting groups are similar to those for setting up general posting groups: VAT business posting groups are set up and assigned to customers and vendors. VAT product posting groups are set up and assigned to items and resources. Combinations of VAT business and product posting groups are specified in the VAT Posting Setup window. VAT Posting Setup Window The VAT Posting Setup window is a matrix that combines VAT business and product posting groups, similar to the General Posting Setup window. However, the VAT Posting Setup window contains additional fields specific to VAT recording and posting. To view the VAT Posting Setup, go to: Departments > Financial Management > Administration > VAT Posting Group > VAT Posting Setup FIGURE 2.6 VAT POSTING SETUP WINDOW REFLECTING THE POSTING LINKS BETWEEN VAT POSTING GROUPS AND G/L 2-9

10 Introduction to Microsoft Dynamics NAV 2009 G/L Account Cards Each line in the chart of accounts is represented by a G/L account card where you define how the related G/L entries for that account are managed. For running companies where a posting setup is in place and a chart of accounts already exists, you will need to create additional G/L accounts from time to time, for example, for transactions from a new type of revenue. To learn how to create new G/L accounts, refer to the "Finance" course. This lesson merely explains the most important fields and buttons in the G/L Account Card window. G/L account cards are accessed from the Chart of Accounts window, which is explained in the next lesson. To open a G/L account card, follow these steps: 1. Click Departments > Financial Management > General Ledger > Lists > Chart of Accounts. 2. Double-click or press Enter on a G/L account to view it. FIGURE 2.7 THE G/L ACCOUNT CARD WINDOW FOR THE FIRST POSTING ACCOUNT TYPE IN CRONUS, THE LAND AND BUILDINGS G/L ACCOUNT 2-10

11 Chapter 2: Working with General Ledger Accounts General FastTabs The General FastTabs contains various fields that define what and how G/L entries are handled in the G/L account. Field No. Name Income/Balance Debit/Credit Account Type Totaling No. of Blank Lines New Page Search Name Balance The number of the G/L account. Note that number series are not used for G/L accounts so this number is entered manually. A short description of the G/L account. Indicates whether the account is an income or balance sheet account. This field is important in determining what accounts are closed at the fiscal year end. Indicates the type of entries that will normally be posted to this account. The selection made does not restrict the type of transactions posted to the account; it only enhances the reporting capabilities. This field identifies the purpose of the account. The options are: Posting - Used to accumulate transactions. Heading - Used for descriptive purposes only. Total - Used to total a range of accounts, as specified in the Totaling field. (This option is useful for totaling groups of accounts that are not in the same classification, such as gross income.) Begin-Total - is used to mark the beginning of an account range. End-Total is used to mark the end of the range. Each End-Total account has an account range in the Totaling field. The range can be calculated or entered manually. Determines which accounts go into a Total or an End-Total account type. Determines the number of blank lines before the account is displayed in a report. Determines if a new report page is printed after the account is displayed in the report. Search for a particular account when the account number cannot be recalled. Displays the current balance of the account. Look up from this field to access the General Ledger Entries window. 2-11

12 Introduction to Microsoft Dynamics NAV 2009 Field Reconciliation Account Automatic Ext. Texts Direct Posting Blocked Last Date Modified Determines whether the G/L account is included in the Reconciliation window in the general journals. The Reconciliation window is used prior to posting to review the effect of posting the accounts in the journal. If selected, extended text set up on the account is automatically added to sales and purchase documents in the field. If not selected, extended text can still be set up on the account and added to documents manually. To create the extended text, click Related Information > Account >Extended Texts. Indicate whether posting is allowed directly into this account from a journal line. Note that this field is automatically checked when new accounts are created. If selected, prevents entries from posting to this account. G/L accounts can be blocked and reopened as needed. System generated field, displays the date when the G/L account was last modified. Posting FastTabs The Posting FastTabs contains the fields that determine how the G/L and VAT entries are recorded. The following table briefly describes the purpose of each field. Field Gen. Posting Type Gen. Bus. Posting Group Gen Prod. Posting Group Defines whether the account is used only in connection with a sale or purchase transaction or with both types of transactions. This field is used with the VAT Bus. Posting Group and VAT Prod. Posting Group fields to find the account that the program posts VAT to. It is only filled in for revenue and expense accounts where VAT is involved. Identifies the default general business posting group for the account. This field indicates whom you sell to or buy from. It is used with the Gen. Prod. Posting Group and Gen. Posting Type fields to find the G/L accounts to post to for sales, purchases, discount amounts, COGS (cost of goods sold), and inventory adjustments. Identifies the default general product posting group for the account. This field indicates the type of item sold or purchased. It is used with the Gen. Bus. Posting Group and Gen. Posting Type fields to find the G/L accounts to post to for sales, purchases, discount amounts, COGS, and inventory adjustments. 2-12

13 Chapter 2: Working with General Ledger Accounts Field VAT Bus. Posting Group VAT Prod. Posting Group Default IC Partner G/L Acc. No. Identifies the default VAT business posting group for the account. This field is used with the VAT Prod. Posting Group and Gen. Posting Type fields to: Determine VAT percent and VAT calculation type. Find the G/L accounts where the program posts VAT. Identifies the default VAT product posting group for the account. This field is used with the VAT Bus. Posting Group and Gen. Posting Type fields to: Determine VAT percent and VAT calculation type. Find the G/L accounts where the program posts VAT. Identifies the default intercompany G/L account number for this G/L account. When entering this G/L account in the intercompany general journal, the IC G/L account specified in this field is used as the default balancing account number. After the posting types and the posting group codes are assigned to a G/L account, these codes are automatically inserted in a journal, sales, or purchase line when the G/L account is selected. Account Button The Account button in the G/L Account Card window contains the options shown in the following table. Option Ledger Entries (Ctrl+Shift+N) Comments Dimensions (Ctrl+Shift+D) Extended Texts Displays all ledger entries for the account. Displays or enters comments relating to the account. Displays or enters default dimensions for the account. Displays or enters extended text for the account. 2-13

14 Introduction to Microsoft Dynamics NAV 2009 Option Receivables-Payables Where-Used List Provides a summary of: Expected net operational cash flow from customers and vendors over time. Open customer and vendor ledger entries sorted by their Due Date instead of Posting Date. View this summary by the: Period, such as daily, monthly, or quarterly. Expected cash flow movement for a period by clicking the Net Change option. Expected net balance of outstanding customer and vendor balances at any date by clicking the Balance at Date option. Displays a list of tables where this G/L account is used. To view the options, open an account card and go to: Related Information > Account. For detailed information about dimensions, refer to the "Add and View Dimensions" chapter in this course. Balance Button Use the Balance button to display information about the balances and transaction amounts for the account. Each window accessed from this button contains filters to assist in viewing the information more specifically. The Balance button contains the options shown in the following table. Option G/L Account Balance G/L Balance G/L Balance by Dimensions Displays the balance or net change for the G/L account over time. Displays the balance or net change for all G/L accounts for a specific time period. Displays balance or net change information for all accounts. The information displayed in columns and lines can be set to one of the following views: G/L account Period Global Dimensions 1 and 2 To view the options, open an account card and go to: Related Information > Balance. 2-14

15 Chapter 2: Working with General Ledger Accounts These options are described in more detail in the "Business Intelligence for Information Workers" course. Functions Button On the Functions button, you can accesses the Apply Template function. This function is available when master templates are prepared during the Rapid Implementation Methodology (RIM) process. Master templates for G/L accounts provide the ability to: Create multiple default G/L account setups for accounts that are often created, such as expenses. Use these templates as a basis when creating accounts of this type. Eliminate the need for repetitive data entry for similar account creation. Go to Actions > Functions to select the options available. For more information about using master templates to structure new master data, refer to the "Application Setup" course. When a new G/L account is created in the G/L Account Card window, the Indent Chart of Accounts function must be run. This function is explained in the "The Chart of Accounts" Lesson. 2-15

16 Introduction to Microsoft Dynamics NAV 2009 Chart of Accounts Window The Chart of Accounts window contains the same fields as in the G/L Account Card window - only displayed in table format. In addition to the information on the individual account cards, the Chart of Accounts window displays current net change and balance figures for each G/L account. In this way, the window provides direct insight to the status of company finances at all times. To view the chart of accounts, go to Departments > Financial Management > General Ledger > Lists > Chart of Accounts. FIGURE 2.8 PARTS OF THE CHART OF ACCOUNTS IN CRONUS The Chart of Accounts window contains buttons similar to the G/L Account Card window, but with slightly different menu options. Account Button The Account button contains the options shown in the following table. Options Dimensions - Single Dimensions - Multiple The same functions as the dimensions function on the account card. Assign the same default dimensions to multiple accounts. Since the Chart of Accounts window is a list of accounts, it is possible to assign the same default dimensions to several accounts by selecting the relevant account lines, thus reducing the entry time needed for setting up default dimensions. 2-16

17 Chapter 2: Working with General Ledger Accounts Options Ledger Entries, Comments, Extended Texts, Receivables- Payables, Where-Used List Same functions as described in the G/L Account Cards lesson. To view these options, go to the Chart of Accounts Window and go to: Related Information > Account. Balance Button The Balance button contains the options shown in the following table. Options G/L Account Balance, G/L Balance, G/L Balance by Dimension G/L Account Balance/Budget G/L Balance/Budget Chart of Accounts Overview Same functions as described in the G/L Account Cards lesson. Displays the actual and budgeted balance or net change for the G/L account over time. Displays the actual and budgeted balances or net change for all G/L accounts for a specific time period. Displays the chart of accounts with different levels of detail. Use the Expand and Collapse feature to view only header and footer accounts or all of the accounts in between. To view the options, go to the Chart of Accounts Window and go to: Related Information > Balance. Functions Button The Functions button contains one function: Indent Chart of Accounts. This function is used to: Format the Total, Begin-Total and End-Total fields. Indent accounts according to a defined hierarchy. Establish the hierarchy by using the account types Begin-Total and End-Total. Account numbers within this range are included in the End-Total range in the Totaling field. Every time you create a new G/L account, run the Indent Chart of Accounts function to indent it according to a hierarchy and recalculate the totals. To access this function, go to Actions > Functions > Indent Chart of Accounts and click Yes. 2-17

18 Introduction to Microsoft Dynamics NAV 2009 Summary Posting groups route posted business transactions to the relevant G/L accounts according to specific, general, or VAT posting groups as set up in a posting setup matrix. Posted business transactions are routed by the posting setup to G/L accounts where they accumulate as G/L entries and contribute to the annual accounts of the company. Each G/L account can be managed in a G/L Account Card window that holds the setup information and links to related entry details. The list of all existing G/L accounts is displayed in the Chart of Accounts window, which is the central interface to the company's financial records. As one of the central elements of a financial management system, the purpose and functions of the chart of accounts is prerequisite knowledge for anyone training to work with Microsoft Dynamics NAV 2009 at any level. For hands-on training in the financial management functionality that surrounds the chart of accounts, refer to the training manuals titled "Finance in Microsoft Dynamics NAV 2009," aimed at the bookkeeper role, and "Business Intelligence for Information Workers," aimed at controllers, accountants, managers and others roles involved in reporting financial information. 2-18