Cost accounting – Configuration basics

Cost accounting is the process of recording, analyzing and reporting all of a company’s costs. It classifies a company’s costs by behaviour (fixed, variable, etc), by nature (direct, indirect),  by function (administration, production, etc)…

The following example shows the difference between direct and indirect costs. 

The cost accounting module in D365 F&O has been dramatically refined, and no piece of code has been reused. That means that it is not a well-known module at the moment. 

I would like to demystify that module and explain how it works in detail. 

First there are several elements that need to be configured:

  • Cost element dimensions
  • Cost object dimensions 
  • Statistical dimensions
  • Dimension hierarchies
  • Cost accounting ledger 

Cost elements 

Navigate to Cost accounting > Dimensions > Cost element dimensions 

Add a new cost element dimension

The data provider needs to be ‘Dynamics 365 for Finance and Operations – Main accounts’ when you don’t import main accounts from an external source 

Click Configure data provider 

Select the chart of accounts 

In the Main account rules section, select the main accounts you would like to import into the cost accounting module. You can define the rules by main account type as well. 

Close the dialog and click on Import dimensions members 

Then, click View dimension members 

All cost elements have the type Primary 

When you manually add a new cost element, the type will be Secondary

Navigate to Cost accounting > Dimensions > Dimension hierarchies

Click New 

Select Dimension classification hierarchy 

In the Dimension field, select the cost element dimension you created above. 

Click View hierarchy 

Build your hierarchy depending on the level of details you want to display in the module 

For each node, define the range of main accounts 

Cost objects 

Navigate to Cost accounting > Dimensions > Cost object dimensions 

Add a new cost object dimension

💬: A cost object is a type of object that you want to allocate costs to. It is most of a time a financial dimension in the General ledger. 

The data provider needs to be ‘Dynamics 365 for Finance and Operations – Financial dimensions’’ when you don’t import cost objects from an external source 

Click Configure data provider 

Select the financial dimension associated with that cost object. 

Close the dialog and click on Import dimensions members 

Repeat those steps for each cost object 

Navigate to Cost accounting > Dimensions > Dimension hierarchies

Click New 

Select Dimension classification hierarchy 

In the Dimension field, select the cost object dimension you created above. 

Click View hierarchy 

Build your hierarchy depending on the level of details you want to display in the module

I separated direct and indirect SSBL which means Business unit. 

I did that for allocation purposes. It will be explained later in that article. 

For each node, define the range of SSBLs. 

Cost accounting ledger

Navigate to Cost accounting > Ledger set up > Cost accounting ledgers

Enter a Name

Enter a cost element dimension, a fiscal calendar, an accounting currency, an exchange rate type 

Select Actual Versions, then Manage > General ledger 

Click New and select the cost element dimension

The data provider should be ‘Dynamics 365 for Finance and Operations – General ledger entries’ if you don’t import financial data from an external system. 

Click Configure data provider 

Select the source of the general ledger transactions and the posting layer 

Close the dialog and the form 

Click Control units 

Add a new cost control unit to import the general ledger entries by cost object (= financial dimension)

Close the form

Select Actual versions, then Source data processing and General ledger in the Process data sources group   

A dialog form pops up

Import the general ledger transactions for a specific period 

Click All processing journals and you can view all GL journals that contain GL transactions imported into the cost accounting module. 

All is set to start designing allocation rules and I will show that in my next article.

2 thoughts on “Cost accounting – Configuration basics

  1. I followed all the mentioned steps but GL transactions did not come into cost accounting module. Do you have any idea why ?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: