General Ledger in Dynamics 365 Finance | AICITSS Unit 5 Chapter 4

AICITSS · Unit 5 · Chapter 4

📒 The General Ledger in
Dynamics 365 Finance

Chart of Accounts · Financial Dimensions · Periodic Processes · Journaling Concepts

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Chapter Overview

4 learning objectives covering the General Ledger

      🎯 Learning Objectives:

Describe chart of accounts, including main accounts and classification

Describe financial dimensions and dimension set concepts

Describe periodic financial processes

Describe journaling concepts

📒 What Does This Chapter Cover?

Dynamics 365 Finance provides fast, dependable, and comprehensive accounting, financial reporting, and analysis. It manages the accounting processes involved in classifying, sorting, storing, and summarizing financial transactions related to a company’s assets, liabilities, and capital.

4.2 — Chart of Accounts: COA concept, ledger setup, balancing financial dimension, journal setup, posting layers
4.3 — Financial Dimensions: Custom dimensions, entity-backed dimensions, dimension sets, activating dimensions
4.4 — Periodic Financial Processes: Period close checklist, financial period close workspace, 1099 reporting, year-end close, consolidation, intercompany eliminations
4.5 — Journaling Concepts: 15 journal types and their purposes

🔑 Key Concepts at a Glance

COA = Index of all financial accounts in the general ledger
Each legal entity has one ledger; multiple ledgers can share the same COA
2 types of financial dimensions: Custom + Entity-backed
3 posting layers: Current (default), Operations, Tax
2 detail levels: Details (separate per account) or Summary (auto-summarized)
Year-end close creates 2 transactions: Opening (always) + Closing (optional)
Journal entries are recorded in the General Ledger and used to create financial statements

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4.2 — Chart of Accounts & Ledger Setup

COA, ledger configuration, journal setup & posting layers

📑 What is a Chart of Accounts (COA)?

A Chart of Accounts (COA) is an index of all the financial accounts in the general ledger of a company. It is an organizational tool that provides a digestible breakdown of all financial transactions during a specific accounting period, separated into subcategories.

🏦 Ledger — Key Facts

Each legal entity has one ledger
Each ledger can be linked to one chart of accounts
Multiple ledgers can be linked to the same COA — allowing the same COA to be shared with more than one legal entity
You must indicate which account structure(s) to attach to the ledger for each legal entity
Ledger rules are applicable to all financial transactions in the selected legal entity

⚖️ Balancing Financial Dimension

Interunit accounting requires that you generate a balance sheet for a specific financial dimension. All accounting entries must be balanced for the values of that dimension — called the balancing financial dimension.

Set on the Ledger page: General ledger → Ledger setup → Ledger
Every accounting entry must balance at the total level AND at the financial dimension values level
If an entry doesn’t balance at the dimension level, additional entries are created automatically to balance it

📓 Journal Setup — Manual vs. System Generated Section 4.2

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System-generated journals — come from subledgers of Accounts Receivable and Accounts Payable automatically.

Manual journal entries — generated by postings entered by users (e.g., monthly recurring insurance expense, one-off revenue redistribution). Transactions are NOT posted immediately. Before posting, manual journals can be in these states:

Changed | Reviewed | Approved | Deleted

Journal Approval: Optional. You cannot use both the manual approval system AND the workflow approval system for the same journal name.

⚠️ Make sure the necessary voucher series (number sequences) is set up before creating journals.

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3 Posting Layers

Determines where the transaction is recorded

📌 Current

Default layer used for all standard postings.

⚙️ Operations

Used for entry of operational transactions.

🧾 Tax

Records transactions that impact tax reporting.

📊 Detail Level — 2 Options

Details — Every instance of an account number in journal lines is posted as a separate account transaction
Summary — Journal lines are auto-summarized into one transaction during posting if voucher, date, account number, dimension, and currency code all contain the same values

⚠️ Note: Summation is NOT performed on transactions with sales tax.

📋 Transaction Types — Default Description Text

You can add custom text to default descriptions for these transaction types:

Customer invoices | Customer credit notes | Customer cash payments
Vendor payments | Sales orders | Purchase orders
Inventory journals | Master planning (MRP) | Fixed assets

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4.3 — Financial Dimensions & Dimension Sets

Types, setup, activation & dimension sets

🔷 What are Financial Dimensions?

Financial dimensions are segments in your accounting structure — critical for reporting purposes. Use the Financial dimensions page to create dimensions you can use as account segments for the chart of accounts.

🛠️ Custom Dimensions

Shared across legal entities. Values are entered and maintained by users. Created for entities that don’t exist in Finance. Use the “Use values from” field → select Custom dimension.

Account Mask: Limits input using placeholders — # for numbers, & for letters. Example: CC-### = “CC” + 3 numbers.

🗂️ Entity-Backed Dimensions

Values are defined elsewhere in the system — such as in Customers or Stores entities. Some are shared across legal entities; others are company-specific.

Example: Select “Projects” → a dimension value is created for each project name automatically.

⚡ Activating Financial Dimensions

You can enter dimension values before activating
But a dimension cannot be used anywhere until it is activated — cannot add to an account structure without activation
When you click Activate, the table is updated with the dimension name and all dimensions display status changes

🌐 Translations & Legal Entity Overrides

Text translation page — Enter text for the selected financial dimension in various languages
Main account translation page — Enter text for main accounts in various languages
Legal entity overrides — Specify companies where the dimension should be suspended, the owner, and the period when the dimension is active (for dimensions not valid for all legal entities or only for a specific period)

📊 Financial Dimension Sets

Contains either financial dimensions or financial dimension combinations
Main account is always included and can be combined with other dimensions
Main account can also be the only dimension in a set
The order in which dimensions appear in a set determines how transactions are sorted and fields are printed on reports
Example: Department first + Cost center second → Department amounts shown first on reports, then Cost center amounts
You can select a primary and secondary financial dimension set — secondary provides more detail about the primary set’s amounts

⚠️ Limitations of Using Financial Dimensions as Legal Entities

Sales tax functionality can only be used with legal entities, NOT with financial dimensions
Some reports don’t include financial dimensions — you may need to modify reports to report by financial dimension
Financial dimensions are NOT designed for operational/business requirements of legal entities — only for the accounting entries created by each transaction

Before using financial dimensions as legal entities, evaluate business processes in: Inventory, Sales/purchases between dimensions and legal entities, Sales tax calculation, Operational reporting

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4.4 — Periodic Financial Processes

Period close, 1099 reporting, year-end close, consolidation

📋 Period-End Close Checklist Optional Steps

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Settle invoices and payments
Post all transactions for period end
Verify that all journals are posted
Run foreign currency revaluation for General Ledger (unrealized gain/loss)
Run foreign currency revaluation for AP and AR
Settle ledger transactions
Process any required allocations
Reconcile the subledgers to the general ledger
Manually post period-end adjustments
Journalize transactions and review the Ledger journal report
Perform a consolidation using a consolidation company or financial reporting
Generate period-end financial statements using financial reporting
Set ledger periods to “On hold” to prevent further posting

⚠️ Best practice: Do NOT use “Permanently closed” status — you CANNOT reopen a period that is permanently closed.

🖥️ Financial Period Close Workspace Section 4.4

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Tracks financial closing processes across companies, areas, and people
Path: General ledger → Workspaces → Financial period close
Must first select a closing schedule — all data is filtered by it
Summary tiles show: past due tasks, remaining tasks for today, tasks blocked by dependencies, all remaining tasks
Depending on your security role, you see either all tasks or only tasks assigned to you

🇺🇸 Year-End 1099 Reporting US Specific

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Required if you do business with vendors subject to US 1099 tax reporting (typically individuals — not employees — who provide services).

Track amounts paid to each 1099 vendor throughout the year using 1099 box and 1099 amount fields on invoice lines
If no 1099 amount is entered, the posted payment amount contributes to the 1099 total
If a 1099 amount IS entered, that entered amount is used instead
Must send a statement to each 1099 vendor informing them of the amount reported

Supported 1099 types:

1099-MISC | 1099-DIV | 1099-INT
1099-S (Proceeds from Real Estate Transactions)
1099-G (Certain Government Payments)

📅 Year-End Close Process 2 Transaction Types

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Year-end tasks:

Make adjustment entries reflecting transactions from the previous year
Print reports including financial statements
Back up data
Create a new fiscal year and transfer opening balances

Two transaction types created during year-end close:

Opening Transaction — Always generated. Creates opening balances in the new fiscal year. Presents balance sheet ledger account balances AND transfers profit/loss balances to the retained earnings ledger account
Closing Transaction — Optionally created. Brings balances of profit and loss accounts down to zero in the fiscal year being closed

📌 Most companies run the year-end close process multiple times — first to move balances, then again to move adjusting entries.

🏢 Closing Sheet & Period Adjustments Section 4.4

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Companies may print a trial balance sheet to find inconsistencies before closing. Two ways to make adjustments:

Make typical journal entries
Use the Closing period adjustments page — advanced view of account balances; allows year-end postings directly

The Closing period adjustments page:

Postings typically occur in the closing period of the fiscal year
Can create multiple closing sheets (revenue, expenses, balance accounts)
Load balances from GL → make transfers between accounts
Resembles a journal — create as many closing sheets and lines as needed
Cannot make transactions to the Opening period from a closing sheet — use Opening option only for beginning balance
After posting, change the period back to “On hold”

🌐 Financial Consolidation & Intercompany Eliminations Section 4.4

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Financial Consolidation — Gathers transactions from several company accounts into a single set. Can print financial statements from the consolidation company, but cannot use it for daily transactions.

Perform before closing (don’t close subsidiary accounts until consolidation is complete)
Can consolidate from external databases OR same database (“online” consolidation)
To use foreign currency conversion: must set up consolidation company main accounts
Enable “Use for financial consolidation process” option on the legal entity

Intercompany Eliminations — Required when a parent company does business with subsidiaries using consolidated financial reporting.

Transactions between parent and subsidiary companies must be removed/eliminated from consolidated statements
Predefined elimination rules create elimination transactions in a specified destination company
Generated during consolidation or using an elimination journal proposal

📊 Financial Reporting

Allows users to create, maintain, deploy, and view financial statements
Includes dimension support — choose which financial dimensions to include and their sequence
Build a custom reporting structure mapping: Main accounts, Financial dimensions, or combinations of both
Create financial row structures focused on cost accounts with unlimited financial dimensions

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4.5 — Journaling Concepts & Journal Types

15 journal types in Dynamics 365 Finance — click any to learn more

📝 Purpose of Journal Entries

A journal entry records a business transaction in an accounting book. It is recorded in the General Ledger, which is then used to create financial statements for the business.

The most important area to set up: Journal Names (Journal names page). Specific journal names should be configured for each purpose (intercompany, accrual adjustment, error correction, etc.).

⚙️ Journal Names Page — 3 Key Setup Elements

Workflow Approval — Define journal workflows with limits for review and approval steps (based on criteria like total debit amount). Set up on the General ledger workflows page
Default Values — Select default values for offset accounts, currency, and financial dimensions
Journal Control — Set up restrictions on company, account type, and segment values

📋 Budget Journal

Processes budget appropriations. Enable via: General ledger parameters → Enable budget appropriation.

↩️ Check/Payment Reversal

Reverses a posted check. Enable via: Cash and bank management parameters → Use review process for payment reversals.

👤 Customer Payment Journal

Creates customer payment transactions. Used to settle receivables.

🏦 Deposit Slip Payment Cancellation

Cancels a deposit slip. Enable via: Cash and bank management parameters.

❌ Elimination Journal

Creates elimination transactions. Requires “Use for financial elimination process” enabled on legal entity AND a ledger elimination rule created first.

🏗️ Fixed Asset Journal

Posts fixed asset transactions.

📒 General Journal

Posts financial transactions to GL accounts and other accounts (bank, customer, vendor). Always creates entries on GL accounts — even when posting to a customer account (via posting group to receivables account).

🌍 Global General Journal

Newly introduced. Allows movement between legal entities without switching the legal entity. Increases productivity for GL accountants working across legal entities.

✅ Invoice Approval Journal

Posts approved vendor invoices to appropriate ledger accounts.

📝 Invoice Register

Registers basic information about vendor invoices.

🔄 Periodic Journal

Creates periodic transactions based on a schedule.

📤 Process Allocation Journal

Creates allocation transactions. Requires an allocation rule on the Ledger allocation rule page first.

🗂️ Project Expense Journal

Creates project expense transactions.

🏦 Remittance Journal

Creates a bill of exchange remittance file for customers OR a promissory note remittance file for vendors — both sent to the organization’s bank.

💱 Reporting Currency Adjustment Journal

Makes adjustments in the reporting currency for balances on ledger accounts.

📦 Vendor Invoice Pool & Vendor Payment Journal

Vendor Invoice Pool — Creates vendor invoice pool transactions
Vendor Payment Journal — Creates vendor disbursement transactions to settle accounts payable
General Journal can also perform intercompany and/or cross-currency finance transactions

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