How to Set Up the Chart of Accounts in Dynamics 365 Business Central

Learn how to set up the Chart of Accounts in Dynamics 365 Business Central and explore key best practices to guide your setup.

Setting up your Chart of Accounts is one of the most important steps when configuring Dynamics 365 Business Central. A well-structured Chart of Accounts not only keeps your financial data organized; it also makes reporting, analysis, and future growth much easier.

In this training article, we’ll walk through what makes the Business Central Chart of Accounts unique, best practices to follow, and how to create a new GL account.

What Makes the Chart of Accounts in Business Central Unique?

Unlike many systems where the Chart of Accounts is simply a list of accounts, Business Central turns it into a powerful reporting and financial analysis tool. How you structure your Chart of Accounts has a direct impact on the clarity, flexibility, and usefulness of your reports. Before diving into setup, take some time to think about:

1️⃣ How You Want to Group Your Accounts

You’ll want logical groupings such as:

• Assets

• Liabilities

• Equity

• Current vs. long-term accounts

• Inventory

• Fixed assets

  
  

Good grouping creates a clear, easy-to-navigate COA that scales with your business.

2️⃣ Your Account Numbering Strategy

Choose a numbering system that:

• Leaves room for expansion

• Keeps accounts in a logical sequence

• Won’t require renumbering later

  
  

3️⃣ Account Subcategories

Subcategories drive many types of financial reporting, and unlike some other settings, they’re easy to modify later. Use them to enhance reporting flexibility.

How to Create an Account in Business Central

To navigate to your Chart of Accounts, go to the Home menu and select Finance > Chart of Accounts.

If your role profile includes it, you can also access it directly by clicking Chart of Accounts from your homepage shortcuts.

When you're in your Chart of Accounts, click on New+ to create a new GL account.

When creating a new GL account in D365 Business Central, you’ll come across several key sections and fields. Here’s a quick overview of what each one does.

General Section

• No. - A unique identifier for the account. You can use any combination of characters, up to 20 characters.

• Name - A clear, descriptive account name, up to 100 characters.

• Income/Balance - Determines whether the account appears on the Income Statement or Balance Sheet.

• Account Category - This is a standard list that isn’t editable out of the box. Options include Assets, Liabilities, Equity, Income, COGS, and Expense.

• Account Subcategory - A list that you can create and modify as needed. The out-of-box setup comes with a standard list of subcategories.

• Debit/Credit - Specifies which transaction types are allowed.

• Account Type - This is where planning comes in. The Chart of Accounts in BC can be used for financial purposes, not just as a list. Account types include Posting, Heading, Total, Begin Total, and End Total.

• Totaling - Used if a Total account is populated. This can be manually entered or will auto-populate for data between Begin and End Totals.

• Reconciliation Account - Useful for seeing the impact of an account during entries. For example, with a clearing account, you can see the balance after posting to ensure it matches your expectations.

• Direct Posting - Controls whether entries can be posted directly to this account.

• Blocked - Prevents further use of the GL account.

• Review Policy - Allows you to control whether the account should be reviewed. It doesn’t stop transactions from posting; the review is done on the GL account itself.

Posting Section

The posting section is used if:

• GL accounts are used frequently for sales/purchases

• You need prepaid expenses to be amortized over several periods

  
  

Most users can skip this section unless needed.

Consolidation Section

This section is only populated if consolidation has been set up and is being used. It helps with translation and mapping if accounts differ in the consolidation entity.

Reporting Section

This section is used when foreign currencies are involved. Most commonly set to Adjust Amount.

Cost Accounting

Only relevant if Cost Accounting is enabled. Enter the associated Cost Type No. here.

Best Practices for Financial Reporting in Your Chart of Accounts

Before finalizing your Chart of Accounts, here are some best practices for financial reporting you should keep in mind.

✅ Design for Clarity: Group accounts logically and use clear, descriptive names. This makes reports easier to read and understand for both finance teams and management. 

✅ Plan for Growth: Leave gaps in your account numbering so you can add new accounts in the future without disrupting your structure. 

✅ Use Subcategories Wisely: Take advantage of account subcategories to organize your financial data. This helps when building custom reports and analyzing trends. 

✅ Consistency is Key: Maintain consistent naming conventions and account structures across periods and entities. This ensures comparability and accuracy in your financial statements. 

✅ Review Regularly: Periodically review your Chart of Accounts to ensure it still meets your reporting needs and reflects changes in your business. 

Training Video: Setting Up the Chart of Accounts in Dynamics 365 Business Central

Having trouble with your chart of accounts setup, or have other questions around Business Central? Feel free to get in touch with the team at Kwixand Solutions for assistance. Don't forget to subscribe to our YouTube channel for more Business Central training videos, and stay connected with us on LinkedIn, Facebook, and Instagram for the latest updates.