Developers often ask me what the difference is between the three different menu item types shown in AOT and when should you use them as it appears that all menu items inside the three ‘folders’ I would say have the same set of properties and support the same object types. So what is the difference? The answer is that there is no difference, the difference is a conceptual one rather than a functional or a technical one.
1. Display Menu item
This folder is used to contain menu items that reference runnable objects which are primarily for presenting data to the user such as forms and dialog’s.
2. Output Menu item
An output menu item should have the soul purpose to print a result, mostly used for referencing classes.
3. Action Menu item
As the name says it, you should create a menu item under this folder if your runnable object has an action to perform, for example creating or updating data.
So choosing between these three is on the developers sole discretion and I hope now you’ll be able to make a better choice for your scenario. A basic rule of thumb is:
Display – for Form
Output – for Report
Action – for classes.
For more information visit : Msdn Menu Items Best Practices [AX 2012]