The circle of general ledger and sub ledgers in D365FO (or AX)

The ledger and sub ledgers, what about? And how can you find back the relation between ledger and sub ledger in each posting? If you work with ERP software like D365FO, I hope that you can answer this question. Why? Because almost all actions in D365FO will hit them.

When you understand the concept of the ledger and sub ledgers, you understand a very important concept of ERP systems. Also it clarifies why D365FO is not so flexible as by example a CRM-system. That is not a system choice, it is based on regulations that are necessary for complete and correct reporting of the company processes when they effect the financial positions. 

In this article I will explain what the ledger and the sub ledger are. Also I will explain in D365FO how you can find back the relation between ledger postings and sub ledger postings.

 The ledger and sub ledgers

When it comes to definitions, you can see the ledger and the sub ledgers as following:

1.      The ledger is the total financial administration of an organization. In D365FO you find this in the general ledger. It concerns all postings in the General Ledger module on the main accounts (specified on financial dimensions when necessary). This ledger can be used for a complete financial reporting of the company, which are required to manage the company and report to stakeholders or by example tax authorities.  

2.      A sub ledger is an detailed administration that explains a part of that ledger. In D365FO you have by example the customer, vendor, fixed asset or project sub ledger. In this sub ledger you can find the details behind the postings in the general ledger. This can be used to manage on process level and also to justify the presented amounts in the ledger. By example if you present in the general ledger that you have open customer balances for EUR 2.300.000, you must have the same amount when you check the customer open invoices total amount in the Accounts Receivable module.

You can compare the ledger and sub ledgers with a mandarin, where all sub ledgers are parts of the total mandarin. They parts are different, but always belongs to each other to have a mandarin. 

Because of this financial concept, in D365FO you need to configure the link between the sub ledger modules and the general ledger. Most of the modules have ‘Posting profiles’ where you can setup the main accounts of the ledger that must be used when postings are made in the sub ledger. One of the examples is the vendor posting profile, where you enter the main account(s) for reporting vendor postings in the ledger:

Find the relation between ledger and sub ledger postings in D365FO

In D365FO you have like a ‘circle of ledger and sub ledger’: in the ledger posting you can find the link to the sub ledger posting and in the sub ledger posting you can find the link to the ledger posting. I will show you how you can find back:

When you start in the sub ledger, in the sub ledger posting you have to search for the button ‘Voucher’ or ‘Vouchers’. This button is presented to show the ledger transactions, based on the sub ledger posting. By example when I open the sub ledger option ‘Open customer invoices’ I can select one of the invoices and than click on the button ‘Vouchers’:

Now the ‘Voucher transactions’ form will open, filtered with the ledger transactions made for this invoice posting:

Here you see the ledger accounts (main accounts) used, including the posted amounts. Also you will see in all voucher transactions that a column ‘Posting type’ is presented. Here you see what kind of sub ledger posting was the basis for the posted ledger amount. So to find the ledger transactions used, in a sub ledger posting you have to search for the button 'Voucher'

I came in this Voucher transactions form based on the invoice in the sub ledger, but I also can start in the ledger and then come to voucher transactions. In that case I need to find the relation to the sub ledger. In the Voucher transactions form, you see the ‘Original document’ button: 

By clicking on this button, I will get the sub ledger transaction presented:

Here you see again that the posted USD 150 amount came from the free text invoice where we started with. By clicking on ‘View details’ the free text invoice form will open:

This is the form where the free text invoice is created that we selected in the customer open invoices list. So to find the sub ledger posting when you are in the ledger postings, you can use the option 'Original document'. 

When I click on ‘Invoice journal’, I will see the button ‘Vouchers’ again:

When I click on this button ‘Voucher’ I will go back to the ledger transactions of this free text invoices again like described some steps above. And then you have the circle completed: from ledger to sub ledger and from sub ledger to ledger.

Total overview of all (sub) ledgers in a posting

It can be that in one posting the ledger and multiple sub ledgers are used. By example by posting a customer invoice based on a sales order, you can have a link with the general ledger and also the sub ledgers for customers, vat and inventory. If you want to have a complete overview of all ledger transactions from a posting, in the Voucher transactions of that posting you can click on the button ‘Transaction origin’:

Now you will get an overview of all postings made in all the ledgers used in this transaction, including information about the details of each transaction: 

With this overview you have insights in the made ledger postings (main account level), but also insights about all related sub ledger postings that will save the details in that corresponding module. So in D365FO, the option 'Transaction origin' gives you insights in all the (sub) ledgers used during a posting.

I hope this helps!

There is (a lot) more

In this article I had focus on how to find back the relation between the ledger and sub ledgers in made postings. This is a very important basic. But there is more to say, by example:

What means reconcile the ledger and sub ledger? What is the effect of the relationship between ledger and sub ledger on the place where you have to make reversals? Why should the integration between ledger and subledger be knowledge of each D365FO consultant, also if you are not finance consultant? Of course I can describe more, but… are you interested in it? Please let me know in the comments if you want to know more about the ledger and sub ledger, so I know if a part 2 will be relevant 😊.