Item setup: Item group
We Learned how to create a company and how to import data into it Creating a New Company
All companies have a list of items (goods) to work with. Today, we will create a new item and discuss why some fields are mandatory. In Microsoft Dynamics AX, the list of items is maintained in the Item form located under Inventory management > Common Forms > Item details.
Let’s assume that our company resells bottles and cans, an inventory manager needs to create two new items in the Item form: Bottle and Can.
First, we create the Bottle item. Open the Item form (Inventory management > Common Forms > Item details) and press CTRL+N. In the Item number field, type 1. And, then type Bottle in the Item name field.
create new item
Item Group
What should we know about the item Bottle? This question has several answers, for example, we need to know its color, size, price, and inventory unit. But, what is the Item group? We should answer simple questions what general ledger accounts will be used when we post an item transaction. Item transactions are created when an item is, for example, purchased or sold. In Microsoft Dynamics AX, we use the Item group to set up general ledger (or posting) accounts.
What are a general ledger accounts and why should we use them when purchasing or selling an item? This question will be disclosed in the Microsoft Dynamics AX Financial Training. But, before I will create it, you can understand the Financial area yourself.
The great training about Accounting is stored here.
Now, I will try to explain some Financial concepts. Look at the following figure, a company from a financial point of view is a circle with assets, liabilities, and equity parts.
Company from financial point of view
General ledger accounts are used to store the information (amount of money) about a concrete type of assets, liabilities, or Shareholder’s Equities. For example, in the Microsoft Dynamics AX demo data we have such accounts as Bank Account USD, Bank Account EUR, Accounts receivable (money that a company should pay to vendors), Car audio receipts, DVD player receipts, etc. (The path: General ledger > Common Forms > Chart of Accounts Details). Here, we can always find the information about, for example, how much money we spent for purchasing Bottles for the last month. If we don’t have a general ledger account how could we do this?
General ledger accounts
If a company keeps accurate records, the accounting equation will always be “in balance,” meaning the left side should always equal the right side. The balance is maintained because every business transaction affects at least two of a company’s accounts. For example, when a company borrows money from a bank, the company’s assets will increase and its liabilities will increase by the same amount. When a company purchases inventory for cash, one asset will increase and one asset will decrease. Because there are two or more accounts affected by every transaction, the accounting system is referred to as double entry accounting.
A company keeps track of all of its transactions by recording them in accounts in the company’s general ledger.
Let’s return to our Bottle item. We should create general ledger accounts for this item for any possible case. Luckily, I use the demo data and so do you. So, let’s use the existing Item group for the Bottle item. In my demo data, I select the Packaging item group.
Item group
Item group form
Summary
In this post we have created a first item, got acquainted with mandatory fields, and given consideration to the Item group.
In my next post, we will get acquainted with the Inventory model group and Inventory dimension group.
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