The NetSuite Amortization feature allows you to create amortization schedules in order to defer expenses. Let’s take a look at how you would set up and use this feature in your NetSuite account.
NetSuite Amortization Overview
When you set up the Amortization feature in NetSuite, you can create templates and schedules that allow you to amortize your expenses over specific future periods. This means that the expense will be recorded in the GL over the course of those periods. To use the Amortization feature, you will need to enable it in the Revenue Accounting section of the Accounting tab in Enable Features. You will also need to have enabled the Accounting Periods feature and created your accounting periods.
How to Set Up NetSuite Amortization
After enabling the NetSuite Amortization feature, there are a couple other things you need to do to set everything up for amortization.
Set Amortization Preferences
First, you’ll need to set your preferences for amortization. You’ll find these preferences in Accounting Preferences (Setup > Accounting > Accounting Preferences) under the General subtab. Some of the amortization-specific preferences include things like, “Allow Users to Modify Amortization Schedules,” “Allow Foreign Currency Amortization Schedules,” and “Default Amortization Journal Entry Form.”
Create Auto-Numbered Amortization Schedules
Next, you have the option of creating auto-numbered amortization schedules. To do that, navigate to Setup > Company > Setup Tasks > Auto-Generated Numbers. Under the Schedules subtab, you’ll be able to enable and define your numbering scheme for amortization schedules
Create Deferred Expense Accounts
After the Amortization feature has been turned on, the system will automatically create an account with the Deferred Expense type and add it to the Chart of Accounts. This account will be where deferred expenses are posted until an amortization journal entry moves them to an expense account. If you need any Deferred Expense accounts in addition to the default account, you will need to create those.
How to Use NetSuite Amortization
To use the amortization feature in your NetSuite account, you’ll need amortization templates, amortization schedules, and amortization journal entries. Let’s take a quick look at each of these.
First, you’ll need amortization templates. Each amortization template you create will define the terms for deferring expenses. You can create as many of these as you need. To create an amortization template, navigate to Lists > Accounting > Amortization Templates > New. When creating the template, you’ll determine things like the number of periods over which the amount will be amortized, the deferral account that will be used, and how much of the expense will be recognized in the initial period. Once you’ve created an amortization template, you can connect it to item records or transaction line items.
When you save a vendor bill or vendor credit that has an amortization template associated with it, NetSuite automatically creates an amortization schedule based off the amortization template. Amortization schedules outline the periods in which the expense will be recognized and how much of the expense will be recognized. Journal entries, then, are created based on the amortization schedules on expense transactions. You can view a list of amortization schedules by navigating to Lists > Accounting > Amortization Schedules. In this list, you can view existing amortization schedules and even edit them if necessary.
Amortization Journal Entries
Amortization journal entries are based on amortization schedules, but you still need to generate them. When you have generated an amortization journal entry, the amount on the entry posts to the GL. To generate these journal entries, navigate to Transactions > Financial > Create Amortization Journal Entries. After you set the parameters for which journal entries you want to generate and after you select the specific entries from the list, select the button Create Journal Entries.
With the NetSuite Amortization feature, you can easily manage any amortization schedules and deferred expenses. If you enjoyed this blog, be sure to subscribe below to our newsletter to keep learning more about key NetSuite features like this one.