Revenue Recognition and Expense Amortization with Chart of Accounts Mapping
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Revenue recognition and expense amortization journal entries are book-specific. In the general ledger, revenue recognition journal entries debit deferred revenue and credit revenue. Expense amortization journal entries debit expense and credit deferred expense.
The following mapping rules are used to determine the deferral accounts for posting of sales and purchase transactions such as invoices and bills.
Revenue Recognition
The deferred revenue account for revenue recognition can be derived either from the item record or from the deferral account specified on the revenue account record. Chart of Accounts Mapping uses these two sources to determine the deferred revenue account for revenue recognition. The rules are as follows:
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For item lines on the sales invoice, item account mapping is used to map from the primary book deferred revenue account to the secondary book deferred revenue account.
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For lines on the billable subtabs, global account mapping is used to map from the primary book revenue account to the revenue account for the secondary book. Then the deferral account on the secondary book revenue account is used as the secondary book deferred revenue account.
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If no deferral account is included for an item or an account, revenue recognition cannot be completed.
Amortization
The deferred expense account for amortization can be derived from the amortization template, as well as from item and account records. The rules for determining the source for Chart of Accounts Mapping are as follows:
For lines on the Items subtab of the bill:
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Global account mapping is used to map from all accounts specified on the amortization schedule including the Deferral Account, Target Account, and Contra Account. These accounts are optional on the amortization template.
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If the amortization schedule does not specify the Deferral Account, item account mapping is used to map from the primary book deferred expense account to the secondary book deferred expense account.
For lines on the Expenses subtab of the bill:
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Global account mapping is used to map from all accounts specified on the amortization schedule including the Deferral Account, Target Account, and Contra Account.
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If the Deferral Account is not specified, global account mapping is used to map from the primary book expense account to the expense account for the secondary book. Then the deferral account on the secondary book expense account is used as the secondary book deferred expense account.