NetSuite offers one of the expense recognition feature called Amortization which lowers the cost of an intangible asset. It is also known as repayment. One of the major advantages is that it diminishes the tax in the present tax year. In general, Amortization in NetSuite means, an asset should be amortized over a period of time or its estimated useful time period.
For better understanding,
Assets are of two types:
• Tangible Asset
• Intangible Asset
Tangible assets are having a physical form or value while intangible assets which are not having a physical substance or value.
Mainly Amortization in NetSuite focuses on two processes.
• Amortization of loans
• Amortization of assets.
The principal of the loan paid down over the life period based on the amortization schedule. And that is Amortization of loans. Then the second one is – assets refers to the process of allocating the value of intangible assets.
Amortization in NetSuite
Firstly, we have to enable Amortization feature in NetSuite. This allows us to record General ledger impact. And it also enables expense charges across future periods. Further, specify deferral accounts for amortization.
To set Amortization In NetSuite:
• Enable amortization feature
• Set up amortization preferences
• Enable auto-numbered amortization schedules
• Specify deferral accounts for amortization.
Advantages of Amortization
• Tax deduction in the current tax year without paying cash for the asset.
• More income and assets on the balance sheet.
• Then it reduces the taxable income throughout an asset’s lifetime period.
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