Do you use the ARM module in NetSuite to recognize revenue? How do you recognize expense and ensure matching principle? NetSuite has an easy way to recognize expense alongside revenue in the ARM module.
First, set up three accounts in your COA:
- Deferred Expense
- Expense Recognition
- Expense Clearing
For #3, this will be the account that you debit in your normal A/P process for all associated costs. When deferring expense on the revenue arrangement, it will provide the credit.
Second, go to Setup >> Accounting >> Accounting Preferences and check “Enable Advanced Cost Amortization” in the “Advanced Revenue Management Only” section. Then enter the following accounts:
- Deferred Expense in “Contract Acquisition Deferred Expense Account”
- Expense Recognition in “Contract Acquisition Expense Account”
- Expense Clearing in “Contract Acquisition Expense Source Account”
Lastly, enter the cost you want to amortize on the revenue arrangement in “Cost Acquisition Cost Amount” field. It will immediately generate a deferred cost journal entry and will then recognize cost in the same revenue journals period-over-period.
