Partial ledger settlements

The ledger settlement process enables an organization to reconcile clearing accounts. This process ensures that the amount posted to a main account is fully cleared out of that account.

Example

An organization pays an insurance company $12,000 USD in October for a yearly policy. You can't fully expense the $12,000 USD yet, because the insurance company didn't fulfill its contractual obligations. As each month passes, $1,000 USD is recognized as an expense, and $1,000 USD is cleared from the accrued expense account as a credit amount. Therefore, the accrued expense account begins with a balance of $12,000 USD debit. Then, each month, a $1,000 USD credit is posted to reduce the balance in the account. After 12 months, the $12,000 USD is cleared, and ledger settlement can be completed by marking the 13 transactions, which net to zero. You can't settle the $12,000 USD debit until all the credits are posted. If expenses of this type cross fiscal years, it can be difficult to use ledger settlements and the advanced awareness options, because settlements can't cross fiscal years.

In Microsoft Dynamics 365 Finance version 10.0.42, functionality for partial ledger settlements is available. This functionality fixes the issue of expenses that cross fiscal years, because it enables a partial ledger settlement to be done at the end of the year (or each month or fiscal period). In the preceding example of an insurance policy, at the end of December, $3,000 USD is cleared from the accrued expense account. Therefore, on the Ledger settlements page, the original $12,000 USD debit and three $1,000 USD credit transactions can be selected and ledger-settled. The remaining $9,000 USD is then carried forward to the next year for ledger settlement.

Another benefit of partial ledger settlements is that settlements that originate in accounts payable or accounts receivable can be automatically settled in the general ledger. To enable this functionality, set the Subledger to ledger auto settlement option to Yes on the Ledger settlements tab of the General ledger parameters page (General Ledger > Ledger setup > General ledger parameters).

Prerequisites for partial ledger settlements

To use partial ledger settlements, set the following options to Yes on the General ledger parameters page:

• Enable advanced awareness options
• Enable post currency realized gains/losses for ledger settlements

For partial ledger settlements, as in the existing functionality for ledger settlements, add the main account to the list of accounts. The exception to this rule is any account that is settled in the subledger (accounts payable or accounts receivable). If you set the Subledger to ledger auto settlement option to Yes, the system automatically settles accounts of that type and you don't have to include them in the list of accounts. If you add them to the list, you can view them on the Ledger settlements page.

Partially settle transactions

If you set the Awareness between ledger settlement and year-end close and Partial ledger settlements options to Yes, the Ledger settlements page changes as follows:

• You must enter the main account, because all ledger settlements must complete transactions in a single main account.

• All ledger settlements must complete within a fiscal year.

• You can change the posting layer as you require, but you can't settle transactions that are in different posting layers.

• To show the main account and dimensions separately, select a financial dimension set.

• The Status filter has a Partially settled status, and you can select more than one status at a time. The following status options are available:

  • All
  • Not settled (the default option)
  • Settled
  • Partially settled

• The accounting currency and reporting currency totals are shown.

• The Reverse marked transactions button is moved to the Ledger settlements history page.

For partial ledger settlements, debits don't have to equal credits. Therefore, if transactions are partially settled, some transactions have a remaining balance. Settlement history is now tracked for all transactions, and the following columns are added to the grid to track this information:

• History
• Amount in reporting currency
• Remaining amount in transaction currency
• Remaining amount in accounting currency
• Remaining amount in reporting currency

When a debit transaction is partially settled with a credit transaction, or when a credit transaction is partially settled with a debit transaction, the status of the fully settled transaction is Settled. The status of the partially settled transaction is Partially settled, and the remaining amount columns show the amount that must still be settled. One debit transaction can be settled with multiple credit transactions, or one credit transaction can be settled with multiple debit transactions. For example, voucher GJ00105 is a debit for 1,000 USD. Voucher GJ00210 for 700 USD and voucher GJ00236 for 300 USD are marked for settlement with the debit.

After settlement, the Settlement ID column is set to Multiple for the debit transaction, because more than one credit was settled. Each pair of debit and credit transactions has its own settlement ID, which is shown in the Settlement ID column. Because the second credit transaction for 400.00 isn't fully settled, the status is Partially settled, and the remaining amount is updated to 100.00.

View settlements and ledger settlements history

To view the settlement ID and the history of settlements, select a transaction that has a Settlement ID value, and then select View settlements on the Action Pane. The Ledger settlements history page shows each pair of debit and credit transactions that the settlement ID settles.

Use the Ledger settlements history page to reverse any transactions that are already settled. When you select a transaction, the corresponding transaction that has the same settlement ID is automatically selected. Select Reverse marked transactions, select the reversal date options, and enter a comment as required. Then select Reverse. If a transaction was settled and then reversed, and it has a status of Partially settled or Not settled, the History column has a check mark to indicate that there's history. To view all settlement history, select View settlements. To view all reversed settlements, select the Show reversals checkbox.

The User ID column provides an audit trail of the user ID that settled or reversed the transaction.

Ledger settlements inquiry

To view ledger-settled transactions, go to General ledger > Inquiries and reports > Ledger settlements inquiry.

The Remaining amount in transaction currency, Remaining amount in accounting currency, and Remaining amount in reporting currency columns in the grid show values for partially settled transactions.

If the Settlement ID column is set to Multiple, select View settlements to open the Ledger settlement history page, where you can view the full settlement history.

Subledger to ledger auto settlement

The Subledger to ledger auto settlement option is found on the Ledger settlements tab of the General ledger parameters page. Before you enable it, set the following options to Yes:

• Enable advanced awareness options
• Enable post currency realized gains/losses for ledger settlements
• Partial ledger settlements

Turn on (set to Yes) or turn off (set to No) the Subledger to ledger auto settlement option as required. When you set it to Yes, the system automatically settles the accounts payable and accounts receivable accounts during the settlement process in the subledger. This process keeps the general ledger entries aligned with subledger settlements, without extra manual steps. Set this option to Yes to enable automatic settlement. However, you don't need to manually add the accounts receivable and accounts payable accounts to the list of accounts. If you add the accounts to the list of accounts, you can view them on the Ledger settlements page. You can then view transactions that are automatically settled. As required, you can manually settle any transactions that use the accounts payable or accounts receivable accounts.

The system doesn't automatically settle other subledger accounts that you add to the list of accounts. However, you can manually settle those subledger accounts on the Ledger settlements page.

The system doesn't automatically settle existing transactions in the accounts payable and accounts receivable accounts if the related subledger transactions were settled before the Subledger to ledger auto settlement option was set to Yes.

Settlement across multiple main accounts

When you use Vendor invoice register and Approval journals and settle a payment against an invoice in the subledger, the resulting ledger settlement can span multiple main accounts. For example, it can span the arrival and summary accounts. In this scenario, the system assigns a single settlement ID to all transactions included in the process. This identifier creates a clear link between the settled entries and is displayed in the ledger settlement history.

Reversal behavior

If you later reverse the subledger settlement, the ledger settlement is automatically reversed. During the reversal, the system generates a new settlement ID for each main account involved, rather than reusing the single combined identifier. This approach ensures that the reversal history accurately reflects account-level detail instead of one shared ID.

If two main accounts share a single settlement ID before reversal, each main account receives its own unique settlement ID after the reversal is completed. This behavior applies consistently whenever the Subledger to ledger auto settlement option is enabled. Reversing the subledger transactions also reverses the corresponding ledger settlement.