The first classification of main accounts in Microsoft Dynamics 365 for Finance and Operations is the type, which represents the nature of the ledger account, that is, is it a balance sheet account or profit and loss account? The following figure shows an example of a balance sheet and an income statement that contains the profit and loss account:
A balance sheet report represents the assets, liabilities, and owner's equity at specific date, and is also known as the company's financial position. This report's balances are accumulated during the lifetime of the company.
An income statement represents the revenues, expenses and resulting net income or net loss for a specific period, and is also known as the operational results for a specific period. This report's balances are reset to 0 each year. In the year-end transaction, the balances are rolled up in the retained earnings account.
Microsoft Dynamics 365 for Finance and Operations classifies main account types into two main groups. The first group is transactional accounts, where all financial transactions are recorded. The second group is reporting accounts, which is used to report and classify caption totals, as shown in the following figure:
The transactional accounts, which carry posted transactions on the application, maintain a record of all the data related to the transaction. This includes the main account number, amount, transaction side (debit/credit), currency, transaction text, and transaction type, in addition to original documents (that generate this entry), and who posted the transaction.
These classifications help at the reporting level and are considered as the first classification layer for main accounts.
In order to view all the main account types, navigate to General ledger | Chart of accounts | Accounts | Main accounts. Click on Edit, go to the General fast tab, and then go to the Main account type combobox.
Common type: This is used only for China.