MMM - OR and PV Reclassification Entry

Description: This guideline outlines the purpose, setup steps, and expected outcome of configuring the account structure in D365 FO. It focuses on ensuring consistent financial dimension usage across transactions.

Purpose: To prevent reclassification entries when there is a mismatch in financial dimensions between the invoice and the payment at the subledger level.

Current Functionality: As MMM has configured all Balance Sheet accounts (Assets and Liabilities) in the account structure to track financial dimensions during invoice and payment processes, the system will automatically generate reclassification entries if there is a mismatch in financial dimensions between the invoice and payment at the subledger level. The reclassification will only affect subledger transactions, and the posting accounts are determined by the Vendor Posting Profiles and Customer Posting Profiles.

Requested Change: MMM requested not to track certain financial dimensions for some of the Balance Sheet accounts (Assets and Liabilities) to prevent reclassification entries during invoice and payment posting.

Steps to Set Up Account Structures:

To prevent reclassification of entries, users must configure the account structure to exclude financial dimension tracking for specific main accounts.

MMM has created a structure called MMM BS, which is configured to track financial dimensions during both invoice and payment posting.

Step 1: Remove Main Account from Existing MMM BS Account Structure

Path: General Ledger > Chart of Accounts > Structures > Configure account structures

1. Edit the account structure and ensure the status is set to Draft.
2. Select the main account that you want to remove.
3. Click the Remove button to delete the selected account.
4. Click Validate to check the structure for errors.
5. Once validation is successful, click Activate and confirm the account structure status is Active.

Step 2: Create a new account structure for those accounts that do not need to track for financial dimensions.

1. Create a New Account Structure For the main accounts that do not require financial dimension tracking: Path: General Ledger > Chart of Accounts > Structures > Configure Account Structures

2. Add Relevant Accounts Add in the main accounts that require setup in the new account structure.

3. Add Financial Dimensions Assign the necessary financial dimension to the main accounts within the new account structure. (Note: Financial dimensions are still required when linking to the ledger setup.)

4. Validate and Activate the New Account Structure • Click Validate to check the structure for errors. • Once validation is successful, click Activate and confirm the account structure status is Active.

Step 3: Add the New Account Structure to the Ledger Setup

1. Navigate to General Ledger > Ledger Setup > Ledger.
2. In the Account Structures section, add the newly created account structure.
3. Save the changes.

Step 4: Delete the Financial Dimensions in the New Account Structure.

1. Navigate to the newly created account structure and click edit (ensure the status is set to Draft)
2. Go to segment actions and delete the financial dimensions one by one for the relevant main accounts.

Remarks:

This step is required because the selected accounts do not need to track financial dimensions in the general ledger. Removing them helps prevent reclassification entries during invoice and payment posting.

3. Validate and Activate the New Account Structure • Click Validate to check the structure for errors. • Once validation is successful, click Activate and confirm the account structure status is Active.

. . . .

Results

Before: Currently, all balance sheet main accounts are assigned to the MMM BS account structure, which is configured to track financial dimensions. As a result, when the financial dimensions differ between the invoice and the payment, the system will automatically reclassify the transaction based on the mismatched dimensions.

After: Following the setup described above, the system will no longer track financial dimensions for the relevant transactions, as the financial dimensions have been removed from the new account structure.

. . . . Scenario - Setting for Account Structure

Scenario 1: Main account is not included in any account structure. As explained earlier, reclassification only occurs for subledger transaction, and subledger main accounts are defined via the vendor posting profiles. Example: Vendor 1200480 is assigned to the vendor group Trade-DP.

Under Account Payable > Setup > Vendor Posting Profiles, locate the profile for Trade-DP – you will find the summary account is 3000110.

If main account 3000110 is removed from all account structures: • When creating an invoice for vendor 1200480, validation will throw an error. • As a result, posting will be blocked.

Validation:

Posting:

Scenario 2: Main account exists in two account structures Let’s say main account 3000110 exists in: • MMM BS WITHOUT DIMENSIONS account structure.

If you try to add the same account 3000110 into another structure like MMM BS, and then attempt to activate it:

• The system will display an activation error, stating that the main account is already present in another account structure. • Resolution: A main account can only exist in one active account structure at a time. You’ll need to remove it from the other structure before activation.