The amount is later recognized as an expense by moving it out of the deferral account and into a regular expense account using general journal entries at scheduled intervals. When an amortization template is linked, the expense amount is deferred by posting to a deferred expense account. For information about vendor bills without amortization, see Vendor Bills. When you enter a vendor bill, the bill item amounts post directly to an expense account except for items associated with amortization templates. See Amortization Schedules.Īmortization schedules provide a basis for the generation of journal entries that record the impact of amortized items and expenses. Each schedule indicates for an item sale the posting periods in which expenses should be recognized and the amount to be recognized in each period. See Associating Amortization Templates with Expenses.Īmortization schedules are generated for vendor bills and credits containing items or expenses that have associated amortization templates. To amortize costs for an expense, an amortization template must be associated with the expense line item on the transaction record, and a deferral account must be specified on the account record or on the template used.
You also can associate an amortization template with an item on the item line of bill or credit to apply only to that specific item purchase. This template becomes the default for the item on all bills and credits. You can set an amortization template on an item record. To amortize costs for an item on a bill or bill credit, an amortization template must be associated with the item and a deferral account must be specified on the item record or on the template. For each template, you can select from a choice of standard terms or define your own custom terms, set the time period over which recognition occurs, define an offset to delay the start of recognition, and set up an initial amount to be recognized.
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See Vendor Credit Amortization Example and Setting an Amortization Template on a Vendor Credit Line Item.Īfter Amortization has been enabled, you can create amortization templates that indicate how to post expenses from associated items and expenses. This preserves your historical data and audit trail. When the Amortization feature is enabled, you should make change to expenses on purchase transactions by using vendor credits rather than changing the original transaction. For more information about enabling this feature and setting associated preferences, see Setup for Amortization. You can create additional Deferred Expense accounts as needed. Accounts of the type Deferred Expense are included as Other Current Assets on the balance sheet.
NetSuite does not differentiate between prepaid expense and deferred expense. When Amortization is enabled, NetSuite automatically adds a default account with a type of Deferred Expense to the Chart of Accounts because at least one account of this type is required for the feature. For more information, see Using Revenue Recognition and Advanced Revenue Management. The process for amortizing expenses is similar to, and may be used in conjunction with, deferred revenue recognition methods. The Accounting Periods feature must be enabled before the Amortization feature can be enabled. The Amortization feature enables you to record the general ledger impact of item purchases and expense charges across multiple future periods.
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