CHAPTER 1: FINANCIAL MANAGEMENT SETUP€¦ · Chapter 1: Financial Management Setup 1 - 3 Field...

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Chapter 1: Financial Management Setup

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CHAPTER 1: FINANCIAL MANAGEMENT SETUP Objectives

The objectives are:

• Explain the fields on the General Ledger Setup window. • Explain and set up Accounting Periods. • Explain and set up Trail Codes, including Source Codes and Reason

Codes.

Introduction Prior to processing financials in Microsoft Dynamics� NAV 5.0, the following areas in Financial Management must be set up:

• General Ledger • Accounting Periods • Trail Codes, including:

� Source Codes � Reason Codes

In this section, these set up areas are explained.

NOTE: There are other setup areas in the General Ledger, such as Currencies, No. Series, Dimensions, and Posting Groups. The set up of these areas is discussed in the sections specific to these topics in the Application Setup content.


Finance in Microsoft Dynamics� NAV 5.0

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General Ledger Setup The General Ledger Setup window is used to specify default setting for the general ledger and all finance related application areas. The General Ledger Setup window must be completed for each company set up in Microsoft Dynamics NAV 5.0. This section describes the five tabs and fields on the General Ledger Setup window. For more information on these fields, press F1 to access online help. To access the General Ledger Setup window, on the Navigation Pane, click Financial Management > General Ledger > Setup > General Ledger Setup.

FIGURE 1.1 GENERAL LEDGER SETUP WINDOW

General Tab The General tab contains the basic setup defaults for General Ledger, including:

Field Definition Allow Posting From / Allow Posting To

Specify the company default posting dates; that is, the date range that all users can post transactions in. Since a period closing process is not required in Microsoft Dynamics NAV 5.0, setting the posting date range prevents users from posting entries that can change prior period data. NOTE: Specific user posting date restrictions are specified in the User Setup window. If there are no user restrictions, the company defaults are in effect. If there are no company defaults, there are no restrictions on dates for data entry and posting.



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Field Definition Register Time Specify whether the program registers the user's time usage. Local Address Format

Specify the address format used on printed documents.

Local Cont. Addr. Format

Specify where the contact name needs to appear in mailing addresses.

Invoice Rounding Precision (LCY)

Specify the size of the interval to be used when rounding amounts in local currency (LCY).

Invoice Rounding Type (LCY)

Specify if invoice amounts are rounded up or down. The option selected here is used with the rounding interval specified in the Invoice Rounding Precision (LCY) field.

Allow G/L Acc. Deletion Before

The date in this field determines if and when G/L accounts can be deleted. G/L accounts with entries on or after the date specified in this field cannot be deleted.

Check G/L Account Usage

If selected, the program prevents G/L accounts that are used in setup tables, such as posting groups, from being deleted.

EMU Currency

Select this field if LCY is an EMU currency. This field is only used when applying entries in different currencies.

LCY Code Enter the currency code for LCY. The value is only used on printouts, since the program uses <Blank> as the indicator for LCY when displaying information in tables.

Pmt. Disc. Excl. VAT

Specify whether the payment discount is based on amounts including or excluding VAT.

Adjust for Payment Disc.

If selected, the program recalculates VAT amounts when posting payments that trigger payment discounts.

Unrealized VAT

Specify whether the program manages unrealized VAT.

Max. VAT Difference Allowed

Enter the maximum VAT correction amount allowed for the local currency.

VAT Rounding Type

Select how VAT is rounded when calculated for the local currency.



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Field Definition Bill-to/Sell-to VAT Calc.

By default this field is set to Bill-to/Pay-to No., which indicates that the VAT Business Posting Group is taken from the Bill-to customer or Pay-to vendor for orders/invoices. Select Sell-to/Buy-from No. to use the VAT Business Posting Group for the Sell-to customer or Buy-from vendor for orders/invoices.

Print VAT Specification in LCY

If selected, a line is added on printed sales documents that specifies the VAT details in LCY in addition to the invoicing currency. If not selected, VAT details will only print in the invoicing currency.

Numbering Tab Bank Account Nos. is the only field on the Numbering tab. In this field, enter the code for the number series that will be used to assign numbers to bank accounts. No. Series are described and set up in the Application Setup content.

Dimensions Tab On the Dimensions tab, specify the global and shortcut dimensions to be used for financial reporting. The codes specified here are selected from the dimensions set up in the Dimension table, as described in the Dimensions section in the Application Setup content.

FIGURE 1.2 GENERAL LEDGER SETUP WINDOW, DIMENSIONS TAB



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Global dimensions can be used:

• As filters for G/L entries. • On all reports, account schedules, and batch jobs.

Determine which two dimensions are likely to be analyzed most frequently and select these as the two global dimensions. Shortcut dimensions offer a fast and convenient way to enter dimension information directly on the line in journals and in sales and purchase documents. The program automatically creates the first two shortcut dimensions using the Global Dimensions. The other six shortcut dimensions are available only if Advanced Dimensions are purchased.

Reporting Tab The Reporting tab is used to determine if and how additional reporting currency is used. Additional reporting currency is used when transaction information also needs to be available in a currency other than local currency. The fields on the Reporting tab are:

Field Definition

Additional Reporting Currency

Specify the currency used as an additional reporting currency in the General Ledger area. If specified: G/L and other entries, including VAT entries in both LCY, and additional reporting currency are automatically recorded. Reports are printed in either LCY or the additional reporting currency.

VAT Exchange Rate Adjustment

Used with the Additional Reporting Currency field, to specify how the accounts set up for VAT posting in the VAT Posting Setup table are adjusted for exchange rate fluctuations between LCY and the additional reporting currency.

Application Tab The fields on the Application tab are used to specify:

• Currency rounding tolerance • How payments are applied to outstanding amounts, including:

� Payments from customers � Payments to vendors



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The Application tab contains the following fields:

Field Definition

Appln. Rounding Precision

Specify the size of the interval allowed as a rounding difference for LCY when applying LCY entries to entries in a different currency.

Payment Disc. Tolerance Warning, Payment Disc. Tolerance Posting, and Payment Discount Grace Period

Complete these fields to allow tolerance on payment discount terms. More information concerning payment discount tolerance is available in the Receivables Management and Payables Management sections of the Finance content.

Payment Tolerance Warning and Payment Tolerance Posting

Complete these fields to close outstanding receivables and payables with payment amounts that are different from what is owed. More information concerning payment tolerance is available in the Receivables Management and Payables Management sections of the Finance content.

Functions Button The Functions button on the General Ledger Setup window contains two functions:

• Change Global Dimensions • Change Payment Tolerance

Use the Change Global Dimensions batch job to change either one or both of the global dimensions.

NOTE: Changing a global dimension code requires that the program make changes to entries already posted. It is important to carefully consider which dimension codes are designated as global dimension to minimize the need for future changes.

Use the Change Payment Tolerance batch job to:

• Change either the maximum payment tolerance or the payment tolerance percentage.

• Filter by currency.



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Matching Activity: General Ledger Setup Window Task: The following are characteristics of the General Ledger Setup window. Match the characteristic to the elements on General Ledger Setup window.

_____ 1. Contains only one field. _____ 2. Prevent entries that can change prior period data. _____ 3. Used to specify two globals and up to eight shortcuts. _____ 4. A function can be run from this window to change this. _____ 5. LCY is the acronym for this. _____ 6. Determine if and how additional reporting currency is used.

a. Numbering tab b. Allow Posting From / Allow Posting To fields c. Local Currency d. Payment Tolerance e. Dimensions tab f. Reporting tab

Accounting Periods Before posting in a fiscal year in Microsoft Dynamics NAV 5.0:

• The fiscal year must be opened. • Accounting periods must be defined.

The shortest possible accounting period is one day and at least one accounting period must be set up for each fiscal year. The Accounting Periods window is used to:

• Open new fiscal years • Define accounting periods • Close fiscal years

Accounting periods can be used as a time reference in Microsoft Dynamics NAV 5.0. For example, when reviewing posted entries in a Balance/Budget window, the length of the accounting period, such as one month or one quarter, is specified. In this section, Accounting Periods are set up.



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Set up an Accounting Period Manually Accounting Periods can be created using one of the following methods:

• Manually • Automatically using the Create Fiscal Year batch job.

To manually set up an Accounting Period, follow these steps:

1. On the Navigation Pane, click Financial Management > Setup > Accounting Periods.

FIGURE 1.3 ACCOUNTING PERIODS WINDOW

2. In the Starting Date field, enter the date that the accounting period

begins.

3. In the Name field, the name of the month corresponding to the Starting Date is entered as a default. Update this field as necessary.

4. Place a check mark in the New Fiscal Year check box to indicate the start of the year.

5. Repeat steps 1-2 for each month in the period.

The New Fiscal Year check box must contain a check mark if an accounting period is the first one in a fiscal year. Microsoft Dynamics NAV 5.0 uses that period to determine which periods to close when the Close Year function is run.



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Set up an Accounting Period Automatically To run the Create Fiscal Year batch job, follow these steps:


2. Click Create Year.

FIGURE 1.4 CREATE FISCAL YEAR BATCH JOB WINDOW

3. In the Starting Date field, enter the date on which the fiscal year

will start.

4. In the No. of Periods field, enter the number of accounting periods the fiscal year will be divided into. There can be from 1 to 365 periods.

5. In the Period Length field, enter how long each accounting period will be, for example, 1M = 1 month, 1Q = 1 quarter, and so on.

6. Click OK.

Inventory Periods and Closing the Year The Accounting Periods window contains two other function buttons that are discussed in other Microsoft Dynamics NAV 5.0 content:

• Inventory Period • Close Year

Inventory periods are discussed and set up in the Trade content. The Close Year process is discussed in the Annual Closing Procedures section of the Finance content.



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Lab 1.1: Create a Fiscal Year Scenario As the controller at CRONUS International Ltd., you need to create a new fiscal year for 2010. Quickly create the new year using the following information:

• The fiscal year begins on January 1, 2010 and ends on the December 31, 2010.

• The length of an accounting period is a month.

Challenge Yourself! Create the fiscal year for 2010 as specified in the scenario.



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Lab 1.1: Create a Fiscal Year Scenario As the controller at CRONUS International Ltd., you need to create a new fiscal year for 2010. Quickly create the new year using the following information:



Need a Little Help!

1. Open the Accounting Periods window. 2. Open the Create Fiscal Year batch job. 3. Use the criteria specified in the scenario. 4. Run the batch job.

Trail Codes Audit trails in Microsoft Dynamics NAV 5.0 begin with Trail Codes. There are three elements to set up in relation to Trail Codes:

• Source Codes • Source Code Setup • Reason Codes

When a new company is set up, the Source Code and Source Code Setup tables are automatically populated. Reason Codes must be set up manually. This topic explains Source Codes and Reason Codes, and provides the process for setting up Reason Codes.

Source Codes Entries are created in the financial statements when:

• Journals, orders, invoices, or credit memos are posted. • Various batch jobs are run.

To assist in finding the point of origin for an entry, Source Codes are used. Source Codes are the basis for the audit trail in Microsoft Dynamics NAV 5.0 and are assigned to transactions and journals.



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Microsoft Dynamics NAV 5.0 provides Source Code system defaults. As new journals or data entry points are added, Source Codes need to be added to identify where the transaction originated. System defaults and access to the posted entries for each source code are available from the Source Code window. To open this window and review the entries, follow these steps:

1. On the Navigation Pane, click Financial Management > Setup > Trail Codes > Source Codes.

2. Click the Source Code to review. 3. Click Source and select the relevant register.

Registers display all instances of where this Source Code is used. To obtain detailed information on each instance, click Register and select the relevant register.

Source Code Setup The Source Code Setup window:

• Is used to define or change source codes. • Contains several tabs, one for each application area. Each tab

contains the source codes that are applicable for that application area. Typically the default source code set up is not changed. If, however, a different source code identification is required, the changes can be made from the Source Code Setup window. To change a source code, follow these steps:

1. On the Navigation Pane, click Financial Management > Setup > Trail Codes > Source Code Setup.

2. Click the tab with the code to change. 3. In the appropriate field, click the AssistButton. The Source Code

window appears. 4. In the Code field, enter the new code. 5. Press TAB or ENTER to commit the change to the field. 6. Click Yes to rename the record. 7. Update the Description as needed. 8. Click OK. The new code appears in the field. 9. Press TAB or ENTER.

All subsequent entries posted will have the new source code.



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Reason Codes Reason Codes are used to indicate why an entry was created. For example, if items from a sale must be returned, a reason code is set up to denote the reason such as, damaged, wrong color, or wrong size. Reason codes can be assigned:

• On transactions, such as sales and purchase invoices. • To specific journal templates and journal batches.

When the codes are linked to a journal line or a sales or purchase header, Microsoft Dynamics NAV 5.0 marks all entries with the Reason Code during posting. This allows the posted ledger entries to be filtered by Reason Code. To create Reason Codes, follow these steps:

1. On the Navigation Pane, click Financial Management > Setup > Trail Codes > Reason Codes.

2. In the Code field, enter a unique identifier. 3. In the Description field, enter a short description of the Reason

Code. For information on assigning Reason Codes, in the Reason Codes window press Help > Related Tasks. 4. Close the Reason Codes window.

Navigate the Audit Trail At times, it may be necessary to trace information back to the entry source. Source Codes and Reason Codes are important pieces of this audit trail. When activity is posted in Microsoft Dynamics NAV 5.0:

• The transaction is assigned a Register Number. • Each line within the transaction is assigned an Entry Number.

In addition to the Register Number, the following information is recorded for each transaction:

• Creation Date • User ID • Source Code • Journal Batch Name • If the journal was reversed • From Entry No. and To Entry No.



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• From VAT Entry No. and To VAT Entry No. To open the window where this information is recorded, on the Navigation Pane click Financial Management > General Ledger > History > Registers. The G/L Register window is used to determine where transactions were posted in the system based on the Source Code assigned.

NOTE: The assignment of Source Codes and Reason Codes to Journals and Batches is explained in the Journals section of the Finance content.

Fill in the Blanks: Trail Codes Instruction: Fill in the blanks to test your knowledge of this section.

1. Source Codes and Reason Codes are important parts of the _____ trail.

2. To view activity posted in Microsoft Dynamics NAV 5.0, open the G/L ________ window.

3. ______ Codes identify where transactions originate. 4. ______ Codes are used to indicate why an entry was created. 5. To modify the default Source Codes used, changes are made to the

Source Code _____ window.



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Summary In this section, the areas that must be set up to use Financial Management in Microsoft Dynamics NAV 5.0 were described. The fields on the General Ledger Setup window were defined and the processes for manually and automatically setting up Accounting Periods were provided. The audit trails of Source Codes and Reason Codes were also described, and set up as necessary. The areas discussed in this content are the basis of the General Ledger application area setup. There are many other areas that must be set up prior to using Microsoft Dynamics NAV 5.0, such as Posting Groups and Dimensions.



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Test Your Knowledge

1. Where are fiscal years defined?

a. Fiscal Year window b. Accounting Periods window c. General Ledger Setup window d. Company Setup window

2. What is the basis of the audit trail in Microsoft Dynamics NAV 5.0?

a. Entry No. b. Reason Codes c. Source Codes d. Register No.

3. Where are posting restrictions set in Microsoft Dynamics NAV 5.0?

a. General Ledger Setup window b. Database or Windows Login windows c. User Security window d. User Setup window

4. There are two types of dimensions specified in the General Ledger

Setup window. What are they?

a. Department Dimensions b. Shortcut Dimensions c. Global Dimensions d. Project Dimensions

5. When activity is posted in Microsoft Dynamics NAV 5.0, which of

the following does the program assign to each transaction?

a. Posting Date b. Register Number c. Creation Date d. Lines with Entry Numbers



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Lab 1.1 Solution: Create a Fiscal Year Scenario As the controller at CRONUS International Ltd., you need to create a new fiscal year for 2010. Quickly create the new year using the following information:



Step by Step


2. Click Create Year. 3. In the Starting Date field, enter 01/01/10. 4. In the No. of Periods field, enter 12. 5. In the Period Length field, enter 1M. 6. Click OK.



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Quick Interaction: Lessons Learned Take a moment and write down three Key Points you have learned from this chapter: 1.

2.

3.



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Solutions General Ledger Setup

Matching Activity: General Ledger Setup Window Task: The following are characteristics of the General Ledger Setup window. Match the characteristic to the elements on General Ledger Setup window. Question 1: Contains only one field. Answer 1: Numbering tab Question 2: Prevent entries that can change prior period data. Answer 2: Allow Posting From / Allow Posting To fields Question 3: Used to specify two globals and up to eight shortcuts. Answer 3: Dimensions tab Question 4: A function can be run from this window to change this. Answer 4: Payment Tolerance Question 5: LCY is the acronym for this. Answer 5: Local Currency Question 6: Determine if and how additional reporting currency is used. Answer 6: Reporting tab

Fill in the Blanks: Trail Codes Instruction: Fill in the blanks to test your knowledge of this section.

1. Source Codes and Reason Codes are important parts of the _____ trail. [Answer: audit]

2. To view activity posted in Microsoft Dynamics NAV 5.0, open the G/L ________ window. [Answer: Register]

3. ______ Codes identify where transactions originate. [Answer: Source]

4. ______ Codes are used to indicate why an entry was created. [Answer: Reason]

5. To modify the default Source Codes used, changes are made to the Source Code _____ window. [Answer: Setup]



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Test Your Knowledge

1. Where are fiscal years defined?

a. Fiscal Year window b. Accounting Periods window c. General Ledger Setup window d. Company Setup window

2. What is the basis of the audit trail in Microsoft Dynamics NAV 5.0?

a. Entry No. b. Reason Codes c. Source Codes d. Register No.

3. Where are posting restrictions set in Microsoft Dynamics NAV 5.0?

a. General Ledger Setup window b. Database or Windows Login windows c. User Security window d. User Setup window

4. There are two types of dimensions specified in the General Ledger

Setup window. What are they?

a. Department Dimensions b. Shortcut Dimensions c. Global Dimensions d. Project Dimensions

5. When activity is posted in Microsoft Dynamics NAV 5.0, which of

the following does the program assign to each transaction?

a. Posting Date b. Register Number c. Creation Date d. Lines with Entry Numbers

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CHAPTER 1: FINANCIAL MANAGEMENT SETUP€¦ · Chapter 1: Financial Management Setup 1 - 3 Field...

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