Ledger entries setup approach

It’s been a long time since accountants kept journals on paper and posted amounts to a ledger book. Modern bookkeeping software creates general ledger entries automatically based on the business operations performed. In order to be able to post an entry, the usual need is to set up which account should be used for the exact operation in the software. In this post I would like to share the approach I usually follow to set up ledger postings in Dynamics 365 for Operations (aka Dynamics AX or Axapta).

When the Chart of Accounts (COA) is clarified, I start gathering information from  subject-matter experts regarding ledger entries. I prepare an Excel file in which I collect business operations applicable for the company I work for. At this point I am interested in the operations which influence the general ledger. The typical list of operations is:

• Purchasing
• Manufacturing
• Sales
• Inbound/Outbound payments
• Fixed asset: purchase, depreciation, sales, write-off, etc.
• Inventory movements
• Other operations

After that, for each operation I write the ledger entries ERP usually makes. If it’s clear from the COA, I also write which account can be used. If the account is not clear, I put a question mark instead. Let’s look at the “Purchasing of goods/materials” section shown below.

In the figure, there are account codes ending in “x”. That means the entry may be used for any account that begins with the numbers in the table. To be more specific, I create additional sheets for the accounts. I describe the rules that have to be applied on the sheet in order to pick the correct account. The example for the entry 31xxx is shown below.

Instead of “31xxx”, the appropriate vendor group or sales tax code would be used for a specific account.

When the file is ready, I send it to a subject-matter expert and ask for review of the  entries I prepared and answer any questions I have. When all questions are closed and the file is reviewed, I begin setting up accounts in the system. Prior to that, the COA must be ready in the system and linked to the legal entity. When setup is done, we perform operations in the system and validate the general ledger entries.

That’s the approach I use in projects where the general ledger is my responsibility. It helps me to get accurate general ledger entries and satisfy the client’s needs. If you use a different approach, please share it in comments, I’d be interested to know.

Thanks for reading.