NetLease - Adjustment Book - Example and Implications

Overview

This article walks through the journal entries in NetLease if an adjustment book is used on the alternate schedule. 

Prerequisite

  • In order to run a journal entry to multiple accounting books, you have to first ensure that you have correctly configured your multi-books and generated alternate amortization schedules.

Step by Step Process

1) How to Set it Up

  • When creating a lease and using the Adjustment Book as the Secondary Book, do not specify an accounting book on the lease's primary schedule by leaving the "Accounting Book" field blank. 
    • Specifying an accounting book on the lease's primary schedule could lead to incorrect reversals and inaccurate GL balances (when also using the adjustment book on the secondary schedule.)
  • The user should only list the adjustment book in the "Secondary Book" field.
  • By not specifying an accounting book in the "Accounting Book" field, the primary schedule's journal entry will post in all books, and the adjustment book's schedule will only post in the adjustment book. 


2) How it Works

  • When journal entries are run, the user will see a link to the amortization entries on the "Multi-Classification Schedule" subtab. 


  • The standard, non-book specific journal entry is found in the "Journal Entry" column.
    • On the GL Impact subtab, the standard journal entry is made in each accounting book. 
    • The impact of the journal entry is also included in the adjustment book through the primary book entries.
      • It is important to note that any entries made in the primary book will flow to the adjustment book. 


  • The secondary's scheudle book specific journal entry, found in the "Book Specific Journal Entry" column, is posted to the adjustment book only. 
  • While both sets of journal entries are correct, the user will notice that the impact of the entries hits the adjustment book twice. 
    • The balance was first posted to the adjustment book through the primary book on the primary schedule's entry and a second time to the adjustment book through the secondary schedule's book specific entry. 
  • Within the book specific entry, there will be a reversal lines to remove the duplicate GL balance.
  • These reversal lines are automatically created by NetLease.


3) FAQ

Can I list an accounting book in both the "Accounting Book" and the "Secondary Book" field so that both journals are book specific?

This is not recommended.

  • A user may want to list an accounting book in both the "Accounting Book" and "Secondary Book" fields (with the Adjustment Book being the secondary book selection.) 
  • By listing a specific book in both these fields, both journal entries generated would be book specific.
  • When the primary schedule's journal entry is book specific, the system will not generate reversal lines on the secondary schedule's book specific journal entry.
    • This lack of reversal lines can lead to duplicate GL impacts and erroneous financial reporting  (especially when the books involved are the Primary Accounting Book and the Adjustment Book.)

 



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