Quick Introduction

All ERP systems aim to make data entry simple, fast and accurate. One way to achieve this is to default as much data as possible when the user is entering transactions, including the General Ledger distributions.  In this post I aim to show how Dynamics NAV \ Business Central defaults the General Ledger codes when entering a Sales Invoice using inventory Items. Also, as I come from a Dynamics GP background, I’ll start off by providing a quick overview of how Dynamics GP achieves this, to offer a comparison between the two Dynamics systems.

The Dynamics GP way

In Dynamics GP you enter default General Ledger codes on entities like customers, vendors, items, fixed assets and then the “catch all” which is the Posting Accounts Setup window.

Once this has been configured the General Ledger codes default automatically onto the transaction. For example, when creating a Sales Invoice for an inventory item usually the control account would default from the customer card and the revenue code would default from the inventory item (you can change this but usually it would be setup this way).
At this point the user can potentially edit and change the General Ledger codes on the transaction prior to posting thus overriding the system defaults. Being able to edit the General Ledger codes inside the transaction gives the user more flexibility however it can also introduce mistakes or errors. An example would be someone changing the control account, which would likely cause a reconciliation issue at month end.

The Dynamics NAV \ Business Central way

From a Dynamics GP perspective things change quite dramatically when you look at how Dynamics NAV \ Business Central defaults the General Ledger codes. Instead of assigning specific General Ledger codes on customers, vendors, items, fixed assets, you assign Posting Groups to each of these entities. It’s the posting groups that have the General Ledger codes assigned and based on the combination of the posting groups used, general ledger postings are automatically performed when the transaction is posted. This means unlike Dynamics GP you can’t edit or change the default General Ledger codes prior to posting which gives less flexibility but there’s also less chance of mistakes being made.

So how do Dynamics NAV \ Business Central posting groups work?

There are two main types of posting groups – Specific and General.

Specific posting groups are used to default the control accounts. For example, I’ve assigned the specific Customer Posting Group “DOMESTIC” to the customer below:

If we open the Customer Posting Group window and look at the setup, we can see when I post a transaction for this customer the General Ledger code 40400 will be used for the receivables control account.

Moving on to the General Posting Groups things become a little more complex.

General posting groups can be split into two further groups – Business and Product. You assign “Business” posting groups to customers and vendors and “Product” postings groups to Items.

The combination of the General Business Posting group from the customer and the General Product Posting Group from the item determines the General Ledger codes that will be used. This is something that is best explained via an image, so I’ve included a screen shot below of the General Posting Setup window from my demo version of Business Central.

As you can see the posting groups form a matrix and the combination of “Business” (labelled Gen. Bus. Posting Group in the window) and “Product” (labelled Gen. Prod. Posting Group in the window) determines the General Ledger codes used when you post a transaction.

Therefore, based on the General Posting Setup above, if a customer has been assigned a Gen. Bus Posting Group of DOMESTIC as per below:

And the item they are buying has been assigned a Gen. Prod Posting Group of RETAIL as per below:

Then based on the General Posting Setup matrix defined in the General Posting Setup window the General Ledger sales account that will be used when the transaction is posted is 10200.

Defaulting the VAT Codes – VAT Posting Groups

A similar concept is used when Business Central is determining the VAT percentage and VAT General Ledger codes to be used. The matrix is defined in the VAT Posting Setup window as per below:

So, in this example if the VAT Bus. Posting Group on the customer was “DOMESTIC” and the VAT Prod. Posting Group used on the Item is “STANDARD” the VAT percentage used would be 20 and the General Ledger code used would be 56100.

So there you have it. A very quick overview of how Dynamics NAV \ Business Central uses Posting Groups to create the General Ledger distributions when posting a Sales Invoice with inventory items.

Thanks for reading.