Segmented Chart of Accounts in Dynamics GP

The segmented chart of accounts is a useful and powerful feature of Dynamics GP, but there are several counterintuitive details that can trip up new users or even experienced users when they try an unfamiliar task.

I have 30 years of experience with Dynamics GP, first as a customer building my own chart of accounts, and later as a consultant with Encore. In this article, I’ll explain some often-misunderstood fundamentals about accounts in GP and answer some of the most common questions and challenges that I hear from GP users.

Table of Contents

What Are Segments and Accounts in Dynamics GP?

General Ledger accounts in GP are a combination of segments that represent the working details of the organization’s business and are the key factors for financial reporting. GP is flexible and will allow up to 10 segments and 66 characters in any kind of combination. The Maximum Account Length and Maximum Segments is called the account framework and is determined when GP is installed. This cannot be changed.

The Account format window is created when the companies are created in GP, and the account length and segments can be determined here for each company. In my example of the Fabrikam sample company, the account format is shown below, with the Max. Length for Division, Account, and Department set to 6:

Screenshot of an Account Format Setup window highlighting the maximum length column for Division, Account, and Department, as all set to 6.

This is important to know if you want to expand your chart of accounts for an existing company. For example, I could expand Segment 2 – “Account” to 5 characters if I needed more details for this segment as it currently uses only 4 characters out of the maximum of 6 characters.

Segments are important for reporting and analysis. It is helpful to add segment Names to the Account Format window and Segment Descriptions to the Segment window, as shown below for the Department Numbers:

Screenshot in a segments window with a view of all segments for a company.

One of the segments is typically named Account (as in this example) or Main Account. It is not to be confused with the Posting Account, which is the concatenation of segments.

There are several different kinds of accounts in GP: Posting Accounts, Unit Accounts, and two kinds of Allocation Accounts. To learn about those, read on.

Posting Account vs Unit Account

Within GP, there are Posting Accounts and Unit Accounts. However, one stumbling block for new users is that the interface does not use the word “posting” — it refers to posting accounts simply as “Account.”

Screenshot in a Financial Card highlighting the "Account" section.

Posting Accounts

Posting Accounts are the accounts used for creating and posting transactions to the General Ledger for financial reporting. They are a concatenation of the segments and must be set up and saved to create a valid account. You can only use validated accounts on a journal entry.

When setting up a new account, two key points to remember in the Account Maintenance window are:

  1. Category is a required field and can also be used for reporting purposes in Management Reporter.
  2. It is very important for the posting type to be marked correctly so that accounts close to retained earnings or bring a balance forward during the year-end process.
Screenshot in the Account Maintenance window highlighting the category as "Other Employee Expenses" and the posting type set to "Profit and Loss".

Why Does My Expense Account Have a Balance at the Start of a Year?

If you notice that at the start of a fiscal year, one of your expense accounts has carried over its balance from the previous year that usually indicates that your expense account was accidentally set up as a balance sheet account.

When you’re setting up a new account, the balance sheet option is the default, so this is a common mistake.

In order to solve it, you will need to Reverse Year End, fix the Account Maintenance to correct the Posting Type, and then Close the Year End again.

Unit Account

A Unit Account tracks items for analysis, such as the number of employees in a department, square footage, etc. Similar to Posting Accounts, Unit Accounts are also a concatenation of segments. They must be unique and cannot duplicate a Posting Account Number.

Unlike Posting Accounts, Unit Accounts are a one-sided entry that can be added to a journal entry distribution. Unit Account entries do not sum up with the debit and credit entries of Posting Accounts.

Screenshot in the Unit Account Maintenance window.

Account 100-9010-00 is tracing the square footage for Department Administration (100), where in Period 4, ten square feet is the period balance for this department. This value can be used to calculate, for example, janitorial costs by the square footage that each department occupies, by using the Variable Allocation Account described below.

Fixed Allocation Account vs Variable Allocation Account

Fixed Allocation Account

A Fixed Allocation Account will distribute values based on a certain percentage, whereas a Variable Allocation Account will distribute values based on a percentage of another account value, either a Posting Account or a Unit Account.

For example, the Fixed Allocation Account might distribute expenses to each Department based on a predetermined percentage value. In this example, the Utilities expenses entered into 000-6190-00 will immediately be distributed by percentage to the Utilities Expense codes for each Department. There will never be a value in the Fixed Allocation Account of 000-6190-00.

Screenshot in the Fixed Allocation Maintenance window.

Variable Allocation Account

In the Variable Allocation Account, the values will be distributed based on the value for that period in a different account. In the example below, the Rent Expense is based on the square footage (a unit account) used by each department.

Screenshot in the Variable Allocation Maintenance window.

There will never be a value in the Variable Allocation Account of 000-6180-00 as 100% will automatically be distributed to the Distribution Accounts listed in the window.

In general, I would say that Fixed Allocation accounts are easier to set up and understand, but either one needs to match your business structure.

Changing the Dynamics GP Chart of Accounts

As your business grows and matures, you may need to make changes to the Chart of Accounts. Perhaps you add a new location, line of business, or department.

If you need to make a change for an additional structure within your existing chart of accounts, such as a new Department, you can easily add this using the Mass Modify tool. This is found under the Financial>>Cards.

Screenshot in the Mass Modify Chart of Accounts window highlighting the From account 500-5100-00 and the To account 500-5199-00 and the New Account Mask as 700-???-??. And the display set to Selected Range.

In this example, I have selected to Copy an existing range of payroll expense accounts from Department 500 and set up the same range of accounts for my new Department 700. Be sure to Display the Selected Range before hitting the Modify button to make the changes.

This is a very quick and easy way to add new accounts based on existing accounts.

What frequently happens is users might want to reduce accounts by combining accounts or modifying an existing account to a different new account number.

The Professional Services Tool Library (PSTL) has a tool called Account Modifier/Combiner that allows you to make these improvements to your chart of accounts. When you modify or combine an existing account to a new account, all history moves to the new account, as if the old account never existed. It’s a very powerful tool for updating your chart of accounts.

Screenshot in the Account Modifier/Combiner window.

Reporting With the Segmented Chart of Accounts

One of GP’s strengths is its ability to report by various segments. In a Trial Balance Report, I can select single segments or ranges of segments. For example, I might want to see all the Payroll expenses for the Admin Division (100). I would select my range by Date, Account, Segment ID, or Currency ID. I have selected to view the accounts ranging from 5000 to 7999, but only for Division 100.

Of course, there are many more options to view similar segmented reports in Navigation Lists, Smartlist, Excel Reports and SRS Reports.

Screenshot in the Trial Balance Report Options window highlighting the Ranges set to Segment ID and the Segment ID set to Division.

Getting More Flexibility With Your Segmented Chart of Accounts in GP

If you want to “tag” certain transactions more flexibly than you can with GP’s basic segmented chart of accounts, consider asking your Dynamics Partner about the Analytical Accounting tool.

Analytical Accounting provides functionality that is similar to dimensions in Dynamics 365 Business Central. However, the specifics of Analytical Accounting may or may not fit your business’s needs and processes.

To learn more about changing accounts in GP, watch this webinar with my colleague Don McNulty (the discussion of changes starts around 2:15 in the video).

Contact us to learn more about your business needs and processes.

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