The Method behind the Madness: NAV Posting Groups

I have introduced Microsoft Dynamics NAV Posting Groups in a previous post and as promised I wanted to ensure that you have some practical examples to back up the theory so here is the method behind the madness.  I will be running this in the Cronus Demonstration Database that Microsoft provides so you will be able to follow this and repeat it for yourself if you want to.

Please remember that this is the basic introduction to posting groups so I will be showing the General and VAT Posting Groups.  Specific Posting Groups such as Vendor or Fixed Assets Posting Groups will be covered in a different post.  Let’s keep it simple and focussed for now…

We already know we have two types of General Posting Groups: Business and Product and we also have two types of VAT Posting Groups: Business and Product.  We have seen that they can interact with each other in different ways and they are applied to different areas within NAV depending on if they are Business related (WHO) or Product related (WHAT).

Let’s take a look at where we set up the Posting Groups.  This can be found in Microsoft Dynamics NAV 2013 R2 under the following menu path:  CRONUS UK Ltd./Departments/Financial Management/Administration

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This will show you the Posting Groups that are available and allow you to navigate and view the options under each of the Posting Groups.  Let’s look first to the General Business Posting Groups.

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These display the WHO we do business with.  If we consider this as the areas around the world that we have customers or vendors in we can almost think of this geographically which also helps us envisage what type of VAT rules should apply.  As you can see from the screenshot above, we can now also begin specifying a default VAT Business Posting Group that will automatically be inserted (note the tick on the Auto Insert Default), whenever we set up new Customer/Vendor and G/L cards and choose a General Business Posting Group.  This helps save time during setups and ensure that the incorrect VAT Business Posting Group is not chosen for a related General Business Posting Group.
If we look at the VAT Business Posting Groups, you will notice how they are similar to the General Business Posting Groups.

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Think of these as the first step in the guidelines for VAT that should/should not be applied according to where in the world the transaction takes place.  Who we deal with will have different VAT rules.

So now we have looked at the Business Posting Groups.  Let’s see where these fit in on the different setups in NAV.

First we will look at Customers and Vendors as we can clearly draw a relationship there of the WHO we deal with.  For this example I am going to navigate to the Customer List and click Edit on Customer 10000 The Cannon Group PLC

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For Vendors I will navigate to the Vendor List and click Edit on Vendor 10000 – London Postmaster.

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Expanding the Invoicing Fast Tab in both cases will show you the General and VAT Business Posting Groups but you will not see any information for the Product Posting Groups on these cards.  This is because this information is held elsewhere but also because our customers and vendors could have more than one product we buy from/sell to them and each of these with different VAT Rates.

Business Posting Groups can also be held on G/L Cards.  Let’s look at G/L Card 8420 in the Chart of Accounts.

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Here we can see that there are setups for both General and VAT Business and Posting Groups as well as General and VAT Product Posting Groups.  This is because a G/L Account can have many roles and be used in different ways in the business.  First we will look at the other places that Product Posting Groups can be set and then look at some examples of the postings that occur as a result of particular combinations.

Now let’s look at the General Product Posting Groups (you can navigate to these from the same menu path shown earlier: CRONUS UK Ltd./Departments/Financial Management/Administration)

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Once again we can see that we can set up default VAT Product Posting Groups in the same way we did the VAT Business Posting Groups against the General Business Posting Groups.

Think about General Product Posting Groups as the types of Products we buy or sell.  The VAT Product Posting Groups would then be the different rates of VAT that can be applied to those products.

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VAT Product Posting Groups can be changed per transaction that you enter into the system, even though there is a default code set up on Item and G/L Cards.

Let’s look at some examples.

First I will show a Sales Invoices against the Cannon Group for Front Hubs and the relating postings and demonstrate how changes to the Posting Groups will result in postings to different accounts in the Ledger according to the Posting Setups.

I have raised a new Sales Invoice against the Cannon Group for a quantity of 12 Front Hubs (item 1150).  I have expanded the Invoicing Fast Tab which shows the VAT Business Posting Group and also shown the column for the VAT Product Posting Group on the Invoice Lines.

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You will notice that the General Business Posting Group is not viewable and can’t be changed from the Invoice.  This will need to be changed on the Customer Card and the customer refreshed on the invoice before continuing.  Think of this as Master Data that shouldn’t really be changed on an ad-hoc basis.

Posting of this invoice will result in postings into the accounts associated with setups for combinations between NATIONAL and RETAIL with a 17.5% VAT rate.  There will be other postings concerning the Specific Posting Groups that will post to particular control accounts on the balance sheet but we will review those another time.

If we view the General Posting Setups for NATIONAL and RETAIL combination we will see the Sales Accounts relevant to the invoice have been posted to these accounts.

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G/L Postings show the following:

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You can see the posting for the Sale to Account 6110, there is also a posting to the Customer Control Account 2310 but what about the posting to 5610?  What is this?

This is the VAT posting for 17.5% VAT to account 5610.  The VAT Entries show the VAT Amount based on the VAT Base for the percentage of VAT applicable according to the combination set up on the VAT Posting Setups.

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VAT Posting Setup shows the G/L Accounts that the VAT portion of the invoice will post to:

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If we post another sales invoice and change the VAT Product Posting Group on the line to VAT5 then the resulting VAT postings will show in G/L Account 5611 according to the setup shown above.

Now let’s change things up a bit and post a Sales Invoice to a Customer with a General Business Posting Group that will put them in the EXPORT category which will have 0% VAT according to the VAT Posting Setup shown above.

For this example I will use Customer 41497647 – Pilatus AG and the same Item Code for Front Hub.  The Customer shows a Business Posting Group of EXPORT, but the Item card still has 17.5% VAT on it.  I will not change the VAT Product Posting Group on the Invoice Line.  Let’s look at how the entries will post in this case.

The Invoice:

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Note the Discount % granted here.

The G/L Entries that were posted:

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Here you can see the posting to G/L Account 6130, the Sales Account in the General Posting Setup.  There is also a posting to G/L Account 6910, the Account shown for Discounts in the General Posting Setup.
There is also the posting to the Balance Sheet Customer Control Account 2910 (driven by the Specific Customer Posting Setup).

What we do not see here is any posting for VAT.  If we look at the VAT Entries we can see that there are two lines – One for the total amount on the invoice and another for the discount amount shown in the Base Amount column, however the VAT Amount column shows 0.00 in both cases.

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This is because the VAT % in the VAT Posting Setup shows as 0 for the combination of EXPORT and VAT17.

The final example will show a General Journal between two G/L Accounts and the resulting postings.  Since we are not choosing a Customer or Vendor or Item, the system will need to determine the Posting Setups from the combination of General and VAT Business and Product Posting Groups that have been set up on the G/L Cards.

For this I will use G/L Account 6610 – Sales, Other Job Expenses and G/L Account 6120 – Sales, Retail – EU.  I am using these accounts purely because they have different General and VAT Business Posting Groups, one for NATIONAL and the other for EU, as well as two different General Product Posting Groups.  Both have VAT17 for the VAT Product Posting Group.

The General Journal is entered as follows:

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and the following postings result for G/L Entries:

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You can see the interaction between the two accounts mentioned and also a line for VAT to G/L Account 5610.  The system has determined that VAT is due according to the posting setups but why only one line for VAT?  Let’s look at the VAT Entries:

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The VAT Entries show the second line is Reverse Charge VAT and therefore holds 0.00 VAT Amount and has not posted a VAT entry to the G/L for the combination of EU and VAT17.

I hope this has helped understand General and VAT Posting Groups better.  Please try a few examples of your own and see what results you get from postings.  Remember that these Posting Setups drive where in the Ledger your entries will post to according to the combination of WHO you deal with and WHAT you are buying/selling.

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