What is the concept of Ledger Settlements?

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Posted on by lally

I really did not understand the concept of the Ledger Settlement and in my implementation never used this functionality.

Could you explain the importance of the functionality with an example to understand how to implement in our implementation ?

Thanks in advance.

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André Arnaud de Cal... 300,915 Super User 2025 Season 2 on at

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Hi Lally,

Please create new questions if your question is different. Otherwise the subject will be changed. I have splitted the thread for you now.

You can use ledger settlements to mark ledger transactions that should zero out credit and debit amounts for certain main accounts. E.g. clearing accounts or accrual accounts could be "cleaned". If you have e.g. an invoice and the costs must be spreads over 12 months, you can use a balance account to post the amount. Then montly you can post from this account to the costs. At the end of the year you can settle these transactions.

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lally 8 on at

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[quote user="André Arnaud de Calavon"]At the end of the year you can settle these transactions.[/quote]

Thank you for the reply ,

This is what i did not understand the functionality.

The example what you explained to achieve the requirement , will use the Accural schemes functionality in Ax , system would take care everything . And again why we need to settle these transactions .

Please let me know.

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Omar Dimech 2 on at

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Hi Ially

As Andre is suggesting, I came across this business requirement where the accruals are posted and then reversed manually (for example not using the purchase order functionality but using journals). I also used this to post accruals on purchase orders for miscellaneous charges, which are then (manually) reversed as soon as the invoice journal is posted. In these circumstances the FC decided to use ledger settlements to reconcile the accruals to their actual invoices and adjust accordingly. In this manner we could keep track of what accruals are still to be received as well. Settlements are done on a monthly basis as part of the monthly close procedure.

It is not a requirement to implement this function but it is useful if you want to have control.

Trust this helps.

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André Arnaud de Cal... 300,915 Super User 2025 Season 2 on at

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Hi Lally,

I hope with Omar's answer you have some more understanding. It is not mandatory, but useful in some scenarios. You highlighted my remark with "at the end of the year". This was just an example for that scenario. You could do it on occasion, weekly or at month end closing as well. It also depends on the number of transactions.

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lally 8 on at

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Thanks Omer and Andre ,

I am very sorry that still i am not clear about this .

My point is even we take the Omar's example , why we need to run the ledger settlements , i did not understand the impact if we do not run the ledger settlements.

Andre or Omar , could you one example for my testing purpose to replicate the same in my system and understand the importance of ledger settlements.

Thanks in advance.

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Omar Dimech 2 on at

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Just for clarity's sake allow me to mention that financial controllers use the Accrual Accounting concept, meaning that income and expense must be recognized in the accounting periods to which they relate. Thus posting an accrual and confirming that the accrual has been reversed since the invoice for the expense was posted in AX is one example why we can use ledger settlements. It is also common practice by accountants to review accruals during their month / year end procedures.

Re testing, you can try the following:

1. Create a purchase order with miscellaneous charges (example Freight). The charges need to be configured to post stock vs an accrual account. Processing the purchase order (up to invoice) will create a credit entry in the Accrual account

2. Open an invoice journal and mimic the posting of the invoice for the charge (Freight). In your case you need to post the invoice using a Vendor and the Accrual account used in step 1. You should have a debit entry now in the Accrual account

3. Open the ledger settlements form and call the accrual account. Find the Debit and Credit entry and match (reconcile) them. In this manner the accountant is matching the accrual to the actual expense and thus verifying that the accrual reflects the actual expense as well as confirming that the accrual for an invoice is now no longer valid since the invoice has been received.

4. Once the ledger settlement is posted, and you close / re-open the form you will notice that these transactions are no longer visible and you will only see unmatched transactions. In this manner accountants know what invoices are still to be received. It is also possible to re-open ledger settlements

As mentioned the use of ledger settlements is not mandatory and is used to monitor / control accruals.

Hope this helps.

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Community Member on at

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Hi Omar, this is a really great explanation.

With point 4 you mention that 'it is also possible to re-open ledger settlements. Are you able to explain how or let me know where you can see the posted settlements? I have tried looking in the GL -> inquires -> voucher transactions section and using the field transaction type as settlement but nothing is appearing.

Thank you in advance.

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Hossein.K 6,648 on at

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Hi,

According of below link:

This is a periodic task done weekly, monthly, quarterly, depending on the needs of every organization. It is definitely useful to reconcile the debits and the credits of a given account or between the given accounts. It is useful for the accruals and the clearing entries but in general can be applied for all transactions in the general ledger.

blog.saglobal.com/.../ledger-settlements-in-ax-2.html

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