NetLease - Sublease Overview
Sublease Summary
Our sublease process is simple. (1) Input lease data via user interface and generate the amortization schedules. (2) Commence leases. (3) Kick off a system generated journal entry to establish the proper balances. (4) Run monthly journals. (5) Perform any modifications or terminations, if necessary.
Pre-Requisites
Prior to creating a lease we need to have the lease types and account mappings finalized. Ensure Operating - Sublease is selected as the lease classification either on the lease record or as the default classification for the selected lease type. See Lease Type Configuration and Account Mapping for guidance.
Transition Journal Entries
NetLease will book the following entries for each sublease with deferred rent at go-live date:
Debit: Sublease Accrued Rent
Credit: Transition Entry Account
Note: If our sublease does not have deferred rent at the go-live/transition date, there will be no transition journal entry.
Customer should book the following sublease income entries:
Debit: Transition Entry Account
Credit: Deferred Rent
Together these entries net to zero (or small transition adjustment amount).
Schedule Journal Entries
NetLease will book the following monthly sublease income entries:
Debit: Lease Payable Clearing Account
Debit: Sublease Accrued Rent
Credit: Sublease Income
Customer should book the following monthly sublease income entries:
Debit: Cash/AR
Credit: Lease Payable Clearing Account
Together the Lease Payable Clearing Account will net to zero, leaving the revenue and cash/AR balance.
Terminations
NetLease will book the following entries if cash is received/paid at termination:
Debit: Lease Payable Clearing Account
Debit/Credit: Gain/Loss on Lease Termination
NetLease will book the following entries if there is an accrued rent balance at termination:
Debit: Lease Payable Clearing Account
Credit: Sublease Accrued Rent