GL Impact in NetSuite
In NetSuite, GL Impact refers to how a transaction affects the General Ledger accounts, including which accounts are debited or credited and by what amounts. Every posting transaction updates the balance of one or more GL accounts. NetSuite provides a convenient GL Impact subtab on transaction records (accessible via Actions > GL Impact on standard forms) to quickly view the affected accounts and amounts for that transaction. This helps users verify that transactions are hitting the correct accounts and that debits equal credits for each entry. Not all transactions post to the GL. Posting transactions (such as invoices, vendor bills, payments, etc.) will generate GL impact lines and affect account balances. Non-posting transactions (such as sales orders or purchase orders) are commitments or plans and do not yet hit the ledger. Understanding which transactions create GL entries is important for accurate financial reporting and reconciliation. Below we review common NetSuite transactions and their GL impacts. Each section explains the transaction type, whether it posts to the GL or not, and an example of the typical debit and credit entries (presented in a table format for clarity).
Common NetSuite Transactions and Their GL Impact
Sales Order (Non-Posting Transaction)
A Sales Order records a customer’s request for goods or services. It is a non-posting transaction used to track orders before they are fulfilled or invoiced. Creating a sales order does not generate any GL impact because no actual exchange of goods or funds has occurred yet. It’s essentially a plan or promise of a future sale.
GL Impact: None (Sales Orders are non-posting and do not affect any GL accounts until further action, such as fulfillment or billing, occurs.)
| Account | Debit | Credit |
|---|---|---|
| No GL impact – non-posting transaction |
Item Fulfillment (Inventory Shipment and COGS Recognition)
An Item Fulfillment is the process of shipping or fulfilling items on a sales order. When you fulfill a sales order for inventory items, NetSuite records the removal of those items from inventory and recognizes the cost of goods sold (COGS). This is a posting transaction affecting inventory and COGS accounts. Fulfilling a sales order will decrease an asset (Inventory) and increase an expense (COGS) for the cost of the items shipped. For example, if you ship goods that cost your company $500, the GL impact would debit COGS and credit Inventory for $500:
| Account | Debit | Credit |
|---|---|---|
| Cost of Goods Sold | $500 | |
| Inventory Asset | $500 |
(The inventory asset is credited to reduce it, and COGS is debited to record the expense of goods sold.)
Invoice (Customer Invoice / Accounts Receivable)
An Invoice is issued to a customer to record a sale on credit (when payment is received after the sale). It is a posting transaction that increases the amount the customer owes (Accounts Receivable) and records revenue for the sale. In NetSuite, creating a customer invoice will debit an asset account (Accounts Receivable) and credit an income account (such as Sales or Revenue). For example, if you invoice a customer $1,000 for products or services, the GL impact would be:
| Account | Debit | Credit |
|---|---|---|
| Accounts Receivable | $1,000 | |
| Sales/Revenue | $1,000 |
(Accounts Receivable increases, representing money due from the customer, and Revenue increases, recognizing the earned income.)
If the invoice includes taxable items or other components, additional GL lines (like sales tax payable) may appear, but the core effect is an increase in receivables and an increase in income. In scenarios where revenue is deferred (e.g. with advanced revenue management enabled), the invoice may credit a Deferred Revenue liability account instead of direct income – we cover revenue recognition later in this article.
Customer Payment (Payment Receipt)
A Customer Payment is recorded when a customer pays an open invoice or makes an advance payment. This transaction posts to the GL by reducing the Accounts Receivable balance and increasing your cash on hand (or undeposited funds). If payments are initially recorded in an Undeposited Funds account (a holding account for funds not yet deposited to a bank), the GL impact will reflect that. For example, when a customer payment of $1,000 is received for the above invoice and temporarily held in undeposited funds:
| Account | Debit | Credit |
|---|---|---|
| Undeposited Funds (asset) | $1,000 | |
| Accounts Receivable | $1,000 |
(Accounts Receivable is credited to decrease the amount owed by the customer, and Undeposited Funds is debited, showing the increase in cash awaiting deposit.)
If the payment is directly deposited into a bank account instead of using undeposited funds, the debit would go to the specific Bank account. In either case, the customer payment clears the receivable from the invoice and records the increase in cash assets.
Credit Memo (Customer Credit)
A Credit Memo is issued to a customer to reduce the amount they owe, usually due to product returns, refunds, or billing adjustments. It is a posting transaction that effectively reverses part or all of an invoice. The GL impact of a credit memo will decrease Accounts Receivable and typically decrease revenue. If inventory items are returned as part of the credit, the credit memo will also account for the return of inventory and reversal of COGS. For example, imagine a customer was invoiced $1,000 for a product (with $1,000 revenue and, say, $600 COGS recorded when sold). If the customer returns the product and you issue a credit memo for the full amount, the GL impact would be as follows:
| Account | Debit | Credit |
|---|---|---|
| Sales Revenue (reversal) | $1,000 | |
| Accounts Receivable | $1,000 | |
| Inventory Asset | $600 | |
| Cost of Goods Sold | $600 |
(Revenue is debited to reverse the sales income, and Accounts Receivable is credited to reduce the amount the customer owes. Additionally, Inventory is debited (increased) to put the returned item back into stock, and COGS is credited to reverse the cost expense that was previously recognized. In cases of service credits or adjustments with no inventory involved, only the receivable and revenue accounts are impacted.)
Purchase Order (Non-Posting Transaction)
A Purchase Order (PO) is a non-posting transaction sent to a vendor to request goods or services. It records the items, quantities, and expected prices that the company intends to purchase, but it does not yet affect the general ledger.
GL Impact: None (Purchase Orders are non-posting and have no direct GL impact until the order is fulfilled by receipt of goods or billing.)
| Account | Debit | Credit |
|---|---|---|
| No GL impact – non-posting transaction |
Item Receipt (Receiving Inventory)
An Item Receipt is used when goods or inventory items are received against a purchase order. This posting transaction records the increase in inventory on hand and a corresponding liability indicating the amount owed to the vendor.
For example, if inventory items worth $500 are received:
| Account | Debit | Credit |
|---|---|---|
| Inventory Asset | $500 | |
| Accounts Payable (Accrued Liability) | $500 |
(Inventory increases and liability is recorded for the amount owed.)
Vendor Bill (Supplier Invoice)
A Vendor Bill is an invoice from a vendor for goods or services. Entering a vendor bill increases Accounts Payable and records the corresponding expense or asset.
For example, receiving an $800 bill for office supplies:
| Account | Debit | Credit |
|---|---|---|
| Office Supplies Expense | $800 | |
| Accounts Payable | $800 |
(Expense is recognized, and liability is recorded.)
Vendor Payment (Bill Payment)
A Vendor Payment reduces cash (or bank balance) and decreases Accounts Payable, settling outstanding bills.
For example, paying $800 to a vendor:
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | $800 | |
| Cash/Bank Account | $800 |
(AP is reduced, and cash outflow is recorded.)
Vendor Credit (Vendor Credit Memo)
A Vendor Credit reduces what you owe a vendor due to returns or adjustments. It debits Accounts Payable and credits an expense or asset account.
For example, returning inventory items worth $500:
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable | $500 | |
| Inventory Asset | $500 |
(Liability and inventory are reduced accordingly.)
Journal Entry
A Journal Entry directly adjusts, accrues, or reclassifies GL accounts. Entries must balance debits and credits.
For example, month-end depreciation of $200:
| Account | Debit | Credit |
|---|---|---|
| Depreciation Expense | $200 | |
| Accumulated Depreciation | $200 |
(Records depreciation expense and accumulated depreciation.)
Revenue Recognition (Deferred Revenue Journals)
Revenue Recognition gradually recognizes deferred revenue over a service period.
For example, monthly revenue recognition of $100 from deferred annual subscription revenue:
| Account | Debit | Credit |
|---|---|---|
| Deferred Revenue (Liability) | $100 | |
| Subscription Revenue (Income) | $100 |
(Deferred revenue decreases as revenue is recognized.)
Best Practices for Reviewing GL Impact
- Verify Account Postings: Check GL Impact to ensure correct accounts are affected.
- Posting vs. Non-Posting Awareness: Understand which transactions have GL impact.
- Use GL Impact for Reconciliation: Leverage GL Impact reports for month-end reconciliations.
- Debits Equal Credits: Confirm every transaction balances.
- Enable GL Impact for Custom Forms: Ensure visibility of GL impacts on custom forms.
Conclusion
Understanding GL impact is critical for accurate financial management in NetSuite. Reviewing GL impacts ensures accurate, timely financial reporting and helps detect errors early. Always pay close attention to how transactions impact your GL accounts to maintain accuracy and compliance.