#52 | NetSuite Create Amortization Journal Entry

We will show you how to create an amortization journal entry in NetSuite. Here’s the outline of what we will be discussing in today’s post:

• Going through GL Account Set-Up
  • Deferral Account
• Creating Amortization Entry
  • Schedule, Start date, End date
  • Create Prepaid Balance
  • Find Amortization Journal Entry
  • Approve Amortization

I suggest you watch the video. It’s easier to understand if you are a visual/audio learner. The content below is the same as the video. It’s for those who learn by reading.

How Create Amortization Journal Entry

To create amortization journal entry in NetSuite, we will have to go through the GL Account Set-Up first and then we will walk you through the step-by-step process of creating that amortization entry including the schedule, the start date, end date, how the prepaid balances get created, finding the journal entry, and approving the amortization.

Going through GL Account Set-Up

To start, log in to NetSuite. Go to List – Accounting – Accounts, and it will open up the chart of accounts for you.

The first step in creating an amortization journal entry is to make sure that the GL account has a child account or sub-accounts attached to it. For example, we will be amortizing an insurance expense, so look for insurance expense and click edit.

Deferral Account

In insurance expense, the important account will be the deferral account. Under deferral account, we have number 1300 prepaid expenses. The GL account 1300 has to be populated in order for this expense to be recognized or in order to create the amortization journal entry.

Once that’s been set up, we’re ready to create our journal entry.

Creating Amortization Entry

To start, we now go to Transactions – Financial – Make Journal Entry and open it in a new tab.

This is what a blank journal entry form looks like. We’re going to choose the subsidiary that you want to create this journal entry for. We’re using sub1 in this example.

In the memo field, we are going to put the description create an amortization journal entry.

Next, we have to select the GL account type. In the accounts field, choose expense as part of that drop down menu.

We will then select insurance expense as the next one. You’ll notice that the account is 6100, so you’ll click it.

For our example, we are going to fill out the debit amount, which is 12,000, and the memo is creating an amortization JE. That description carried over for the first tab.

Schedule, Start date, End date Fields

For amortization journal entry, there are 3 important fields needed: schedule, the start date, and the end date. Click on schedule, and there is an annual prepaid insurance schedule already. In order to use the schedule, we actually first have to set it up.

That was one of the set-up or configurations that you can set certain things up to amortize over 3 months, over 6 months, in our case, annual means over 12 months. Now, we look at the start date. We’ve inputted March 1, 2016 and the end of next year because it’s 12 months; it’s going to be February 2017.

For this example, we’re going to be using accounts payable as the credit account. You’re going to click accounts payable, and you’re going to select accounts payable.

Creating Prepaid Balance

One thing to know is that the account 6100 for insurance expense will change to become a prepaid expense. It’s now a balance sheet account.

As soon as you click save, your journal entry won’t show insurance expense anymore. It’s now converted to a prepaid expense, and it will then take this expense over time, over the 12 months, which is what we wanted. Then you’re going to fill out the credit amount of 12,000, and the memo field is the same as before. Then we click add.

Now, you’ll see your prepaid expenses. The account 6100 insurance expense has now changed to account 1300 prepaid expense.

The reason is that in our chart of account, we set up the deferral account for expenses to be prepaid expenses. That’s why that first step was very important to make sure in our chart of accounts we set up the right balance sheet account when we are creating the prepaid balances.

Finding the Amortization Journal Entry

How do we find the amortization journal entries? You’re going to go to Transactions – Financial – Create Amortization Journal Entry.

You’ll then see the list of our amortizations schedules.

In this example, we’ve chosen Subsidiary 1. These are just the different filters to show us and find what journal entries you want to amortize.

You’ll notice there’s a box called “All.” You want to select “All” in order to amortize all of the journal entries and approve it. If you unmarked “All,” you can then delete it. Note that you can check each of the amortization journal entries, each of the 12 journal entries separately because remember it’s 12,000 for the year, so each month, there is 1 journal entry for $1000. If you don’t want to select them individually, you can uncheck the box, and it will amortize all of the journal entries at once.

You can actually drill into individual journal entries to make sure that it’s amortizing the way you expect. You can click the individual schedules, and you can select the journal entry created and click into it.

Approving Amortization

Now, you’ll see the journal entry that was automatically processed. In this case, it is entry 10066, and you can click it.

You can see now that the amount that we’ve amortized is $1,000, which is what we wanted. Again, check if the expense is going to an insurance expense. The prepaid expense where it’s been taking out of is account 1300.

That’s it! That’s how we create the journal entry for amortizing monthly, quarterly, or annual expenses.

I hope this is helpful, and we’ll talk to you in the next session. To recap, here’s what we have tackled with regard to creating amortization journal entry:

• Going through GL Account Set-Up
  • Deferral Account
• Creating Amortization Entry
  • Schedule, Start date, End date
  • Create Prepaid Balance
  • Find Amortization Journal Entry
  • Approve Amortization