Financial Management On Microsoft Dynamic Navision

Chapter 1: Financial Management Setup
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.
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Finance in Microsoft Dynamics™ NAV 5.0
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 Specify the company default posting dates; that is, the date
From / Allow range that all users can post transactions in.
Posting To 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 Specify the address format used on printed documents.
Format
Local Cont. Specify where the contact name needs to appear in mailing
Addr. Format addresses.
Invoice Specify the size of the interval to be used when rounding
Rounding amounts in local currency (LCY).
Precision
(LCY)
Invoice Specify if invoice amounts are rounded up or down. The
Rounding option selected here is used with the rounding interval
Type (LCY) specified in the Invoice Rounding Precision (LCY) field.
Allow G/L The date in this field determines if and when G/L accounts
Acc. Deletion can be deleted. G/L accounts with entries on or after the date
Before specified in this field cannot be deleted.
Check G/L If selected, the program prevents G/L accounts that are used
Account Usage in setup tables, such as posting groups, from being deleted.
EMU Select this field if LCY is an EMU currency. This field is
Currency 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. Specify whether the payment discount is based on amounts
Excl. VAT including or excluding VAT.
Adjust for If selected, the program recalculates VAT amounts when
Payment Disc. posting payments that trigger payment discounts.
Unrealized Specify whether the program manages unrealized VAT.
VAT
Max. VAT Enter the maximum VAT correction amount allowed for the
Difference local currency.
Allowed
VAT Select how VAT is rounded when calculated for the local
Rounding currency.
Type

Field Definition
Bill-to/Sell-to By default this field is set to Bill-to/Pay-to No., which
VAT Calc. 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 If selected, a line is added on printed sales documents that
Specification specifies the VAT details in LCY in addition to the invoicing
in LCY 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

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
Specify the currency used as an additional reporting

currency in the General Ledger area. If specified:
Additional G/L and other entries, including VAT entries in both LCY,
Reporting and additional reporting currency are automatically
Currency recorded.
Reports are printed in either LCY or the additional reporting
currency.
Used with the Additional Reporting Currency field, to

VAT Exchange specify how the accounts set up for VAT posting in the
Rate VAT Posting Setup table are adjusted for exchange rate
Adjustment 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

The Application tab contains the following fields:
Field Definition
Specify the size of the interval allowed as a

Appln. Rounding
rounding difference for LCY when applying LCY
Precision
entries to entries in a different currency.
Payment Disc.
Complete these fields to allow tolerance on
Tolerance Warning,
payment discount terms. More information
Payment Disc.
concerning payment discount tolerance is available
Tolerance Posting, and
in the Receivables Management and Payables
Payment Discount
Management sections of the Finance content.
Grace Period
Complete these fields to close outstanding

receivables and payables with payment amounts
Payment Tolerance that are different from what is owed. More
Warning and Payment information concerning payment tolerance is
Tolerance Posting 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.

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. a. Numbering tab

_____ 2. Prevent entries that can b. Allow Posting From / Allow
change prior period data. Posting To fields
_____ 3. Used to specify two globals c. Local Currency
and up to eight shortcuts. d. Payment Tolerance
_____ 4. A function can be run from e. Dimensions tab
this window to change this. f. Reporting tab
_____ 5. LCY is the acronym for this.
_____ 6. Determine if and how
additional reporting currency is used.
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.

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.

Set up an Accounting Period Automatically

To run the Create Fiscal Year batch job, follow these steps:

Accounting Periods.
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.

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
31, 2010.
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:
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.

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:
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.

• 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.

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.

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

Lab 1.1 Solution: Create a Fiscal Year

Scenario
31, 2010.
Step by Step

Accounting Periods.
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.

Quick Interaction: Lessons Learned

Take a moment and write down three Key Points you have learned from this
chapter:
1.
2.
3.

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]

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

• Explain the fields on the General Ledger Setup window.

In this section, these set up areas are explained.

Microsoft Official Training Materials for Microsoft Dynamics ™ 1-1

General Ledger Setup

FIGURE 1.1 GENERAL LEDGER SETUP WINDOW

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Microsoft Official Training Materials for Microsoft Dynamics ™ 1-3

FIGURE 1.2 GENERAL LEDGER SETUP WINDOW, DIMENSIONS TAB

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Global dimensions can be used:

• As filters for G/L entries.

Shortcut dimensions offer a fast and convenient way to enter dimension

The fields on the Reporting tab are:

Specify the currency used as an additional reporting

Used with the Additional Reporting Currency field, to

• Currency rounding tolerance

Microsoft Official Training Materials for Microsoft Dynamics ™ 1-5

The Application tab contains the following fields:

Specify the size of the interval allowed as a

Complete these fields to close outstanding

• Change Global Dimensions

Use the Change Payment Tolerance batch job to:

• Change either the maximum payment tolerance or the payment

1-6 Microsoft Official Training Materials for Microsoft Dynamics ™

Matching Activity: General Ledger Setup Window

_____ 1. Contains only one field. a. Numbering tab

• The fiscal year must be opened.

The Accounting Periods window is used to:

• Open new fiscal years

Accounting periods can be used as a time reference in Microsoft Dynamics NAV

In this section, Accounting Periods are set up.

Microsoft Official Training Materials for Microsoft Dynamics ™ 1-7

Set up an Accounting Period Manually

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

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

FIGURE 1.3 ACCOUNTING PERIODS WINDOW

1-8 Microsoft Official Training Materials for Microsoft Dynamics ™

Set up an Accounting Period Automatically

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

FIGURE 1.4 CREATE FISCAL YEAR BATCH JOB WINDOW

Inventory Periods and Closing the Year

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Lab 1.1: Create a Fiscal Year

1 - 10 Microsoft Official Training Materials for Microsoft Dynamics ™

Lab 1.1: Create a Fiscal Year

Need a Little Help!

1. Open the Accounting Periods window.

• Journals, orders, invoices, or credit memos are posted.

Microsoft Official Training Materials for Microsoft Dynamics ™ 1 - 11

Source Code Setup

• Is used to define or change source codes.

To change a source code, follow these steps:

1 - 12 Microsoft Official Training Materials for Microsoft Dynamics ™

Reason codes can be assigned:

• On transactions, such as sales and purchase invoices.

To create Reason Codes, follow these steps:

4. Close the Reason Codes window.

Navigate the Audit Trail

When activity is posted in Microsoft Dynamics NAV 5.0:

• The transaction is assigned a Register Number.

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