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Amortization is an expense recognition feature and an accounting technique that is used to spread the cost of an asset over time. This feature can help in the deferral of purchase expenses. Amortization is similar to depreciation as they are both methods of calculating expense over a given amount of time.
The Amortization Schedule is now a feature in NetSuite. This Amortization feature allocates an expense for the systematic payment over a preferred period of time.
Benefits of Amortization
This feature brings a lot of benefits, some of these include:
It reduces tax in the current tax year without paying cash.
It allows you to have more assets and income on your balance sheet
Setting up the Amortization Feature
To use this feature, you have to enable the accounting period feature. This will determine the periods for the amortization schedule.
Navigate to the ‘Setup’ drop-down menu, then to the ‘Enable Functions’ option.
2.Under the Accounting sub-tab, tick the checkboxes for ‘Accounting Periods’ and ‘Amortization’. The others can be selected based on your preferences.
3. The system will add a default account to the Chart of Accounts. It will be a type of deferred expense and each amortization must have one assigned.
4. To create or view accounts, navigate to Lists > Accounting > Chart of Accounts
5. To edit the accounting period, navigate to ‘Setup’ drop-down menu, then ‘Accounting’ then click the ‘Manage Accounting Periods’
Once these steps have been completed, Amortization Preferences can be configured. To set these preferences go to Setup > Accounting > Accounting Preferences. Some of these checkboxes include:
Allow Foreign Currency Amortization Schedules
Default Amortization Journal Date To- (Last Day of Period or Current Date)
Allow Users to Modify Amortization Schedules
The Auto-Numberer Amortization Schedules
Enabling this feature requires you to navigate to Setup > Company > Setup Tasks > Auto-Generate Numbers. Click the Schedule tab and tick the checkbox beside Amortization Schedule.
Populate the boxes and click Save.
Templates are used after enabling the various features to allow you to customize your deferral terms. You can create a template by navigating to ‘list’ in the drop-down menu, ‘Accounting’ then click ‘Amortization Schedules’. When creating an Amortization template there are many features and variables to specify from. These include Name, Type, Method, Team Source, Deferral Account, Contra Account, Target Account and more as shown in the picture below.This template can aid in the deferral expenses by linking it to the item you have purchased.
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