Amortization Feature

To use the Amortization feature, the Accounting Periods feature must be enabled because accounting periods are used for amortization schedules. Accounting periods must be set up for the complete range of time covered by your amortization schedules

1. Go to Setup > Company > Enable Features.
2. Click the Accounting subtab, 
3. Enable the Accounting Periods, Amortization
4. Click Save 

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. We can create additional Deferred Expense type accounts as needed.

5. create additional accounts, go to Setup > Accounting > Manage G/L > Chart of Accounts.
6. Ensure that accounting periods are set up for the range of time our amortization schedules will cover, at Setup > Accounting > Manage G/L > Manage Accounting Periods.

Creating Amortization Templates

An amortization template defines the terms of the amortization schedule created by the purchase of an item.

We set these terms on the Amortization Template page at Lists > Accounting > Amortization Templates > New

1. In the Name field, enter a name for this template.
2. In the Type field, select the kind of a template you are creating: Standard (used for most templates) or Variable (used for percent-complete recognition when the Project Management feature is enabled). If we select a type of Variable, we cannot set the following template fields: Method, Term Source, Amortization Period, Period Offset, Start Offset, and Initial Amount. Variable amortization scheduled does not include forecast amounts.
3. In the Method field, select a method to set the terms to post the expense from the net purchase amount.

• Straight-line, by even periods- This method divides the expense from the purchase amount evenly across all periods, even partial periods. Amounts are not prorated based on the number of days in any period.
• Straight-line, prorate first & last period– This method amortizes equal amounts for periods other than the first and the final period, regardless of the number of days in each period. Amounts are prorated for the first period and the final period based on the number of days in each period.
• Straight-line, using exact days- This method amortized amounts individually for each period based on the number of days in each period. Because each day in the term recognizes an equal amount, each period may recognize a different amount.
• Straight-line, prorate first & last period (period-rate) – This method determines the full number of periods in the schedule and allocates expenses based on the proportional period amount.
• Custom-we can define amortization terms that can include uneven periods, amounts, and multiple expense accounts. Define amortization terms by entering information in the columns at the bottom of the page.

4. Select a Term Source to control how the amortization period is determined.

• Transaction Date – sources the date specified in the originating transaction, such as a vendor bill.
• Receipt Date – sources the receipt date on bills associated with an item receipt, using the receipt date as the amortization start date. The receipt date is used generally for fixed assets entered on vendor bills.

(If you select Receipt Date as the term source for a template but no receipt exists, for example when billing in advance, then NetSuite uses the transaction date to determine the amortization period.)

5. In the Deferral Account field, select a Deferred Expense type account for posting. Select Default to use the deferred expense account indicated on either the transaction or item record.
6. In the Contra Account field – the account that accumulates amortized balances. This account is used most often for depreciated expenses.
7. In the Target Account field, select the account where the expense is amortized over time. Select Default to use the expense account indicated on either the transaction or item record.
8. In the Amortization Period field, enter the number of periods over which the amount should be amortized.
9. Optionally, enter the number of accounting periods to delay the start of amortization after the schedule start date.

• Period Offset moves the entire amortization period ahead by the number of periods you specify, keeping the same number of periods.
• Start Offset delays the beginning of amortization, changing the number of periods, and keeping the same end date.

10. In the Residual field, enter an amount or percentage to remain in the deferral account and not be amortized. A residual amount generally represents the salvage value of a fixed asset. A residual amount entered on a transaction overrides a residual amount entered on an item record.
11. In the Initial Amount field- The initial amount is a percentage or fixed currency amount to be amortized in the first amortization period. After the initial amount, the remainder to be amortized is recognized according to the amortization schedule.
12. Click Save

Setting an Amortization Template on an Item Record

1. Go to Lists > Accounting > Items, and click Edit next to an item.

(Only the following types of items can use amortization: Non-Inventory for Purchase/Resale, Other Charge for Purchase/Resale, and Service for Purchase/Resale.)

2. In the item record, click the Accounting subtab, and select an account in the Deferred Expense Account field. This enables the purchase amount to be posted to a deferred expense account instead of a standard expense account.

3. Click the Revenue Recognition / Amortization subtab
4. Select a template in the Amortization Template list. This template is used by default on transactions.
5. In the Residual field, enter an amount or percentage to remain in the deferral account and not be amortized.
6. In the Amortization Period field, enter the number of periods over which the purchase amount should be amortized.

7. Click Save

Setting an Amortization Template on a Vendor Bill Line Item / Vendor Credit Line Item

When we enter a vendor bill/vendor credit, we can select amortization templates for items. we can modify the default template set in the item record or select a template when no default is available.

We cannot select an amortization template for a vendor bill line derived from a purchase order line with an accrual. The amortization settings are disabled for these lines on the vendor bill.

Associating Amortization Template with Items

1. Go to Transactions > Payables > Enter Bill / Enter Vendor Credits.
2. Under Primary Information, select values for the fields as needed.
3. On the Item subtab, select an item.
4. In the Amort. Schedule column, select the appropriate template from the dropdown list.
5. Enter an amortization start and end date
6. Enter the Residual amount not to be recognized if needed.
7. Click Add.
8. Click Save.

Associating Amortization Template with Expense

1. Go to Transactions > Payables > Enter Bill / Enter Vendor Credits.
2. Under Primary Information, select values for the fields as needed.
3. On the Expense subtab, select an expense account and an amount.
4. In the Amort. Schedule column, select the appropriate template from the dropdown list. (A deferral account must be specified on the amortization template)
5. Enter an amortization start and end date
6. Enter the Residual amount not to be recognized if needed.
7. Click Add.
8. Click Save.

When we enter a transaction, the following occurs for any item associated with an amortization template:

• Expenses are deferred – The expense amount is posted to a deferred expense account, not to a standard expense account.
• An amortization schedule is created – Expense amounts are scheduled to be recognized across periods based on the terms defined by the template.

We can customize a transaction form to use a specific template for all items on the transaction. To do so, click Customize on the form.

Amortization schedules provide a basis for the generation of journal entries to post this impact on the general ledger. We can use the Create Amortization Journal Entries page to create journal entries that post deferred expenses. This page lists amounts from all schedules that are due to post. 

Generating Amortization Journal Entries

1. Go to Transactions > Financial > Create Amortization Journal Entries
2. Select a posting period to display the schedules with unposted amortization journal entries for that period.
3. In the Journal Entry Date field, set the transaction date of amortization journal entries are creating.
4. Select Subsidiary
5. Use the other filters at the top of the page to limit the list of amortization schedules displayed for this period. (Transaction Type, Name, Type, Item Type, Original Account, tragic Account, Deferral Account, Transaction Date)

6. Click Create Journal Entries.

7. When Percent Complete is 100.0%, in the Status column, click Complete.

8. On the Processed Schedules page, in the Journal column, click the links to view individual journals.

Editing an Amortization Schedule

If we want to edit amortization schedules after creating them, we must set the preference for Allow Users to Modify Amortization Schedules. 

1. Go to Setup > Accounting > Accounting Preferences
2. Enable the Allow Users to Modify Amortization Schedules under the general subtab

3. Click Save.

To edit an amortization schedule:

1. Go to Lists > Accounting > Amortization Schedules.
2. Click Edit for the schedule we want to change.
3. Click the line you want to change.
   We can edit the account, posting period, and amount for that line.

4.  When you finish changing the line, click OK.
5. Click Save.