NetSuite Financial User Exam Dumps & Practice Test Questions

Question 1:

Which three statements are true about using Parent Accounts in NetSuite? (Choose three.) 

In NetSuite's account hierarchy, which three statements accurately describe the functionality and creation of Parent Accounts and their associated Child Accounts?

A. Checking the Summary box on the account record prevents anyone from posting activity to the account. 

B. Parent accounts can be posting or non-posting. 

C. Checking the Summary box allows the posting of reversing journal entries to this account. 

D. Parent accounts are created by setting the "Parent of" field. 

E. Child accounts are created by setting the "Subaccount of" field. 

Correct Answers: B, D, E

Explanation:

In NetSuite's robust financial management system, Parent and Child accounts are fundamental for structuring the chart of accounts, enabling businesses to organize, summarize, and analyze their financial data effectively. This hierarchical arrangement facilitates detailed tracking at the child level while providing consolidated views at the parent level for reporting.

Let's examine the three correct statements:

• B. Parent accounts can be posting or non-posting. This statement is true. A parent account's configuration dictates whether direct journal entries can be posted to it. If a parent account is set as a "posting" account, transactions can directly affect its balance. Conversely, if it's "non-posting," no direct transactions can be recorded; instead, its balance will solely reflect the aggregated activity from its child accounts. This flexibility allows for both operational detail and reporting summary.

• D. Parent accounts are created by setting the "Parent of" field. This statement is also accurate. While creating an account that will serve as a parent, you establish its hierarchical role by indicating that other accounts (its future child accounts) will be "Parent of" this account within the system's structure. This implicitly defines an account's role in the hierarchy. This field helps NetSuite understand the intended relationship for rollup purposes.

• E. Child accounts are created by setting the "Subaccount of" field. This is correct. The primary method for establishing a child account's relationship to a parent is by selecting the designated parent account in the "Subaccount of" field on the child account's record. This linkage ensures that all transactions posted to the child account automatically contribute to the aggregate balance of its parent account, which is crucial for consolidated financial reporting.

In summary, NetSuite's parent-child account structure offers robust financial organization, allowing for detailed transaction recording at the child level and summary reporting at the parent level, all governed by specific field configurations.

Question 2:

What specific attribute of an account in NetSuite primarily dictates its default placement within standard financial reports? 

A. Department | Class | Location classification 

B. Account type 

C. Account number

D. Currency 

Correct Answer: B. Account type

Explanation:

In NetSuite, the structure and presentation of financial reports like the Balance Sheet and Income Statement are fundamentally driven by the Account type assigned to each individual account. This essential classification acts as the primary determinant for where an account's balance will appear by default in these core financial statements.

Let's clarify why "Account type" is the correct answer and why the other options are not:

• B. Account type: This is the correct answer. The "Account type" field categorizes accounts based on their nature in accounting principles. For instance, common account types include:

• Asset: Accounts like Cash, Accounts Receivable, Inventory, Fixed Assets. These will naturally appear in the Assets section of the Balance Sheet.

• Liability: Accounts such as Accounts Payable, Credit Card Payable, Loans. These show up in the Liabilities section of the Balance Sheet.

• Equity: Represents the owner's claim on assets, like Retained Earnings, Owner's Equity. These are found in the Equity section of the Balance Sheet.

• Income: Accounts for revenue generated from sales, services, etc. These appear in the Income (Revenue) section of the Income Statement (Profit & Loss).

• Expense: Accounts for costs incurred in operations, like Rent Expense, Utilities Expense. These appear in the Expenses section of the Income Statement. NetSuite uses these predefined account types to automatically group and display accounts in their respective sections on standard financial reports, ensuring compliance with accounting standards.

Now, let's review why the other options are incorrect:

• A. Department | Class | Location classification: While these classifications are vital for segmented reporting, they do not dictate an account's default section in a standard financial report. They allow for breaking down report data (e.g., viewing income by department or expenses by location) within the established account type categories, but they don't change whether an income account appears in the Income Statement versus the Balance Sheet.

• C. Account number: The account number is a unique identifier and a tool for organizing accounts within your chart of accounts. It helps in sorting and searching for accounts but has no direct bearing on which financial report section an account falls into. Accounts with sequential numbers can belong to entirely different account types and thus appear in different report sections.

• D. Currency: The currency assigned to an account defines the monetary unit in which its transactions are recorded and reported. This is crucial for multi-currency operations and accurate currency conversion, but it does not determine the fundamental type of account (e.g., whether it's an asset or an expense) or its default placement on a Balance Sheet or Income Statement.

Therefore, the "Account type" is the foundational setting in NetSuite that universally determines the default financial report section for each account.

Question 3: 

 If your business simultaneously purchases goods or services from, and sells goods or services to, the same external company, how does NetSuite manage and connect these dual relationships within its system?

A. NetSuite uses a single Company record to track this combined relationship. 

B. NetSuite uses unrelated Customer and Vendor records to track these. 

C. Either the Vendor or the Customer can be set as "Parent of" the other record to link them. 

D. NetSuite tracks this using the "Other Relationships" function to link the Customer and Vendor records. 

Correct Answer: D. 

Explanation:

In many business scenarios, a single external entity can act as both a supplier (vendor) and a client (customer) to your company. NetSuite, designed for comprehensive business management, handles this dual relationship by maintaining separate Customer and Vendor records for the entity while providing a specific mechanism to link them. The correct method for connecting these dual roles is through the "Other Relationships" function.

Let's break down why "Other Relationships" is the accurate solution:

• D. NetSuite tracks this using the "Other Relationships" function to link the Customer and Vendor records. This is the correct answer. NetSuite recognizes that a customer and a vendor, though representing the same legal entity, require distinct sets of data and transaction flows. Customer records manage sales orders, invoices, payments received, and sales-related history. Vendor records handle purchase orders, vendor bills, payments made, and procurement-related history. The "Other Relationships" subtab (or similar feature depending on NetSuite version and configuration) on both the Customer and Vendor records allows you to explicitly link them together. 

Now, let's clarify why the other options are incorrect:

• A. NetSuite uses a single Company record to track this combined relationship. This is incorrect. While it might seem intuitive to consolidate, NetSuite's architecture keeps Customer and Vendor functionalities separate due to distinct operational and accounting requirements (e.g., AR vs. AP). A single record cannot effectively manage both the sales-side and purchase-side complexities simultaneously without compromising data integrity or reporting clarity.

• B. NetSuite uses unrelated Customer and Vendor records to track these. This is partially true in that separate records are used, but the crucial point is that they are not unrelated. NetSuite provides the "Other Relationships" feature precisely to establish a connection between these otherwise distinct records, enabling visibility into the combined interaction with the entity. If they were truly unrelated, reconciliation and a holistic view would be difficult.

• C. Either the Vendor or the Customer can be set as "Parent of" the other record to link them. This is incorrect. The "Parent of" field is used to create hierarchical relationships between similar record types (e.g., a parent customer and child customers, or a parent vendor and child vendors) for reporting consolidation. It is not designed to link fundamentally different record types like Customer and Vendor. The "Other Relationships" feature is explicitly for this cross-record type linkage.

In conclusion, NetSuite's "Other Relationships" function is specifically engineered to bridge the separate Customer and Vendor records of a single entity, providing a unified view while maintaining the distinct operational flows required for sales and procurement.

Question 4:

What two essential configurations must be in place for specific items to be successfully included and displayed on a NetSuite Customer Invoice as charges?

A. Billable checkbox 

B. Memo 

C. Invoice Number 

D. Customer 

Correct Answers: A. Billable checkbox, D. Customer

Explanation:

For items or services to be designated as billable and subsequently appear on a customer invoice in NetSuite, two critical settings must be correctly configured. These settings ensure that the system recognizes the item as a charge to be passed on to a client and associates it with the appropriate recipient. The two essential requirements are the Billable checkbox and the Customer association.

Let's detail why these two options are correct:

• A. Billable checkbox: This is a fundamental setting. When an item or an individual line on a transaction (like a Sales Order, Expense Report, or Time Entry) is intended to be charged to a customer, the "Billable" checkbox must be marked as true. This flag tells NetSuite that this particular item or service is an outstanding charge waiting to be included on a customer invoice. Without this checkbox being selected, the item will not be picked up by the billing process (e.g., when generating invoices from billable line items or from sales orders).

• D. Customer: Equally crucial is the association of the billable item with a specific Customer. For NetSuite to know who to bill, the billable item or transaction line must be linked to an existing customer record. When you go to create an invoice for a customer, NetSuite will look for all billable items or time entries associated with that specific customer that have not yet been invoiced.

Now, let's clarify why the other options are not necessary settings for items to appear as billable on an invoice:

• B. Memo: The "Memo" field allows users to add descriptive notes or additional information to a transaction line. While memos can be useful for internal communication or for providing more detail on the invoice itself, they do not determine whether an item is billable or if it will appear on an invoice. It's purely informational.

• C. Invoice Number: The "Invoice Number" is a unique identifier assigned by NetSuite after an invoice has been generated and saved. It is a result of the invoicing process, not a prerequisite for items to be selected for billing. Items are marked as billable before an invoice number is ever assigned.

In summary, ensuring an item is marked with the "Billable" checkbox and correctly associated with the "Customer" are the two indispensable settings for it to flow through NetSuite's billing process and appear on a customer invoice.

Question 5:

When processing a customer payment in NetSuite, to which two distinct types of financial records can this payment be directly allocated or associated?

A. Refund 

B. Cash Sale 

C. Customer Deposit 

D. Credit Memo 

Correct Answers: A. Refund, C. Customer Deposit

Explanation:

In NetSuite's financial framework, a customer payment transaction is primarily used to record funds received from a client. These payments can then be applied to (or associated with) specific types of outstanding financial obligations or pre-payments. The two record types that can be directly applied to a customer payment are Refunds and Customer Deposits.

Let's delve into why these two options are correct:

• A. Refund: A "Refund" record in NetSuite is created when money needs to be returned to a customer. While a refund represents an outflow of funds, it is often linked to a previous customer payment. For instance, if a customer overpaid or returned an item for which they had already paid, a refund would be issued and could be associated with the original customer payment record, effectively reversing or balancing the transaction. This ensures a clear audit trail of funds moving back to the customer, related to a prior payment.

• C. Customer Deposit: A "Customer Deposit" is a payment received from a customer in advance of goods or services being delivered or invoiced. This typically occurs when a customer prepays for an order or puts down a retainer. When the cash is received, it's recorded as a Customer Deposit. This deposit itself is a payment, and later, when the actual invoice for the goods/services is generated, the Customer Deposit is "applied" to that invoice to offset the amount due. Thus, a customer payment creates a Customer Deposit record, and this deposit is then applied to future invoices.

Now, let's clarify why the other options are not directly applied to a customer payment in the same way:

• B. Cash Sale: A "Cash Sale" is a transaction where goods or services are sold and immediately paid for (e.g., point-of-sale transactions). In NetSuite, a Cash Sale is the record of both the sale and the payment occurring simultaneously. Therefore, a separate "customer payment" record is not typically "applied to" a Cash Sale; rather, the Cash Sale itself encapsulates the payment. You wouldn't apply a separate payment record to it because the payment is integral to the Cash Sale.

• D. Credit Memo: A "Credit Memo" is a document issued to a customer that reduces the amount they owe (e.g., due to a return, discount, or billing error). A Credit Memo is generally applied to an outstanding invoice to reduce the customer's accounts receivable balance. It is not something a customer payment is applied to; rather, a payment might satisfy an invoice that has been partially reduced by a credit memo.

In conclusion, customer payments in NetSuite are directly linked to Customer Deposit records (as the initial advance payment) and Refund records (when money is returned, often referencing an original payment).

Question 6:

What specific NetSuite transaction is utilized to reclassify a Customer Deposit from a liability to an offset against a Customer Invoice's Accounts Receivable General Ledger impact?

A. Deposit Application 

B. Credit Memo 

C. Journal Entry 

D. Sales Order 

Correct Answer: A. Deposit Application

Explanation:

In NetSuite, when a customer provides an advance payment for goods or services that have not yet been delivered or invoiced, this payment is initially recorded as a Customer Deposit. From an accounting perspective, a Customer Deposit represents a liability for the business, as it owes either the goods/services or a refund. This deposit sits in a Customer Deposits liability account on the Balance Sheet. When the actual goods or services are eventually delivered and an Invoice is issued to the customer, the system needs a formal transaction to move the funds from the Customer Deposits liability account to offset the Accounts Receivable (A/R) balance created by the invoice. 

Let's break down why "Deposit Application" is the correct transaction:

• A. Deposit Application: This is the correct answer. The "Deposit Application" transaction in NetSuite serves the precise purpose of linking a previously recorded Customer Deposit to an outstanding Customer Invoice. When a Deposit Application is processed:

• The Customer Deposits liability account (a Balance Sheet account) is debited, which reduces the liability.

• The Accounts Receivable (A/R) account (also a Balance Sheet account) is credited, which reduces the amount the customer owes on that specific invoice. This effectively transfers the balance, ensuring that the customer's prepaid amount reduces their outstanding invoice balance and accurately reflects the GL impact, moving it from a liability to a reduction of receivables. It formalizes the application of the pre-payment.

Now, let's look at why the other options are incorrect:

• B. Credit Memo: A "Credit Memo" is used to reduce a customer's outstanding balance, typically due to a return, a pricing adjustment, or a billing error. It directly reduces Accounts Receivable, but it does so by creating a credit, not by applying a pre-existing deposit liability. It doesn't transfer a deposit liability.

• C. Journal Entry: While a "Journal Entry" could theoretically be used to manually adjust GL accounts (debiting Customer Deposits and crediting Accounts Receivable), it is not the standard, recommended, or auditable method for applying customer deposits in NetSuite. Using a Journal Entry would bypass the system's designed transactional integrity, automated linking, and reporting capabilities for deposit applications.

• D. Sales Order: A "Sales Order" is a non-posting transaction that records a customer's commitment to purchase. It initiates the order-to-cash cycle but does not directly affect General Ledger accounts (until fulfillment and billing) nor does it have the functionality to apply customer deposits. It simply documents the intent of sale.

Therefore, the "Deposit Application" is the specific and correct NetSuite transaction that formalizes the use of a Customer Deposit to offset an Invoice's Accounts Receivable, accurately reflecting the financial impact in the General Ledger.

Question 7:

If a NetSuite Sales Order requires invoicing to occur specifically upon the completion of predefined project tasks or stages, what kind of billing schedule is most appropriate to implement?

A. Fixed Bid Milestone 

B. Standard 

C. Time and Material 

D. Charge Based 

Correct Answer: A. Fixed Bid Milestone

Explanation:

In NetSuite, billing schedules are crucial for automating the invoicing process according to predefined terms. When a sales order's billing is contingent upon the successful completion of specific phases or tasks within a project, the most fitting and designed billing schedule type to use is Fixed Bid Milestone. This schedule directly supports project-based engagements where payment is released as significant progress points are reached.

Let's elaborate on why "Fixed Bid Milestone" is the correct choice:

• A. Fixed Bid Milestone: This is the correct answer. The Fixed Bid Milestone billing schedule is specifically engineered for projects with a predetermined total price, where billing events are tied to the achievement of identifiable project milestones. For example, a software development project might have milestones like "Design Completion (25% billed)," "Development Complete (50% billed)," and "User Acceptance Testing (UAT) Passed (25% billed)." Once a project task or phase is marked as complete in NetSuite (often linked to project records or specific events), the system is triggered to generate an invoice for the portion of the sales order associated with that milestone. This method provides clarity for both the customer and the service provider, aligning payments directly with deliverable achievements rather than time or simple dates.

Now, let's explain why the other options are not suitable for this scenario:

• B. Standard: A "Standard" billing schedule is typically used for recurring or date-based invoicing. This includes daily, weekly, monthly, quarterly, or annual billing cycles, common in subscription services or long-term contracts where payments occur at regular intervals regardless of specific project progress. It does not allow for billing triggered by task completion.

• C. Time and Material: A "Time and Material" billing schedule calculates invoices based on actual hours worked (time entries) and materials used (expenses or items consumed). This is ideal for engagements where the total cost is variable and depends directly on the resources expended, such as consulting services billed hourly or repair work where parts and labor are charged. While project-related, it's not designed for billing based on the completion of predefined, fixed-price milestones.

Therefore, for scenarios where billing is directly linked to the achievement of specific project tasks or phases on a sales order, the Fixed Bid Milestone billing schedule in NetSuite is the precise and most appropriate solution.

Question 8:

When a specific billing schedule is associated with an Item record in NetSuite, what is the resulting effect on how that item behaves when added to a Sales Order? 

A. It forces all the lines on a Sales Orders to have a Billing Schedule. 

B. It ensures the Item will always have the Billing Schedule default in correctly on the Sales Order. 

C. It requires that all Items on the same Sales Order have a Billing Schedule of some kind. 

D. It requires that all Items on the same Sales Order use the same Billing Schedule. 

Correct Answer: B.

Explanation:

In NetSuite, associating a Billing Schedule directly with an Item record is a powerful feature designed to streamline the sales and billing process. This configuration establishes a default behavior for that particular item, ensuring consistency and efficiency. The true statement about this action is that it ensures the Item will always have the Billing Schedule default in correctly on the Sales Order.

Let's break down why this is the correct understanding:

• B. It ensures the Item will always have the Billing Schedule default in correctly on the Sales Order. This statement is true. When a billing schedule (e.g., monthly, quarterly, fixed bid milestone) is pre-assigned to an item record, NetSuite's system logic is set up such that whenever that specific item is subsequently added as a line item on a Sales Order, the pre-defined billing schedule from its item record will automatically populate the "Billing Schedule" field for that sales order line. This default behavior significantly reduces manual data entry, minimizes errors, and ensures that the item's intended billing terms are consistently applied across transactions. While a user can manually override this default on the Sales Order line, the system's default behavior is to pull it in correctly.

Now, let's analyze why the other options are incorrect:

• A. It forces all the lines on a Sales Order to have a Billing Schedule. This is incorrect. Assigning a billing schedule to one item only affects that specific item. It does not create a mandatory requirement for every other line on the same Sales Order to also have a billing schedule. A Sales Order can contain a mix of items, some with predefined billing schedules, some that are one-time billed, and others that do not require a separate schedule.

• C. It requires that all Items on the same Sales Order have a Billing Schedule of some kind. This is also not true. Similar to option A, setting a billing schedule on one item does not impose a system-wide rule that all items on a Sales Order must possess a billing schedule. NetSuite allows for flexibility, where some items might be billed immediately upon fulfillment, while others might follow a schedule.

• D. It requires that all Items on the same Sales Order use the same Billing Schedule. This is incorrect. NetSuite is designed to handle complex billing scenarios. Different items on the same Sales Order can legitimately have different billing schedules. For instance, a software license might be on an annual standard schedule, while an implementation service on the same order might be on a fixed-bid milestone schedule. The system supports line-level billing schedule assignments.

In essence, assigning a billing schedule to an item record acts as an efficient default, ensuring that the item's intended billing frequency or method is automatically populated when added to a Sales Order, thereby streamlining operational processes.

Question 9: 

Regarding NetSuite's multi-currency functionality for vendors, which two statements accurately describe how currencies are managed and utilized with vendor records and associated transactions? 

A. The currency on the purchase order can be changed at the point when the purchase order is billed. 

B. Currencies must be added to the Vendor before being used on a transaction. 

C. The primary currency is used for the credit limit. 

D. To remove a currency from a vendor you must first close any open transactions in that currency. 

E. Vendors can have up to five currencies. 

Correct Answers: B and D

Explanation:

NetSuite's multi-currency capabilities are crucial for businesses operating globally, allowing them to transact with vendors in their respective local currencies while maintaining consolidated financial records in the base currency. However, this flexibility comes with specific rules to ensure data integrity and proper financial reporting. Two key statements accurately describe how currencies interact with vendor records:

• B. Currencies must be added to the Vendor before being used on a transaction. This statement is correct. Before you can create any transaction (such as a Purchase Order, Vendor Bill, or Vendor Payment) in a specific foreign currency for a particular vendor, that currency must first be enabled for the vendor on their record. This is typically done on the "Financial" subtab within the vendor record, where you can select and add the desired currencies from a list of available active currencies in your NetSuite account. 

• D. To remove a currency from a vendor you must first close any open transactions in that currency. This statement is also correct. NetSuite enforces strict data integrity rules. If there are any open, pending, or partially processed transactions (e.g., unbilled purchase orders, unpaid vendor bills, open prepayments) associated with a vendor in a particular foreign currency, you will not be able to remove that currency from the vendor's record. 

Now, let's analyze why the other options are incorrect:

• A. The currency on the purchase order can be changed at the point when the purchase order is billed. This is incorrect. Once a Purchase Order (PO) is created and saved with a specific currency, that currency is locked for that transaction. You cannot modify the PO's currency at a later stage, such as when converting it to a Vendor Bill. If an incorrect currency was selected, the PO generally needs to be cancelled or deleted and re-entered with the correct currency.

• C. The primary currency is used for the credit limit. This statement is misleading and generally incorrect in the context of vendor credit limits. While the primary currency is your company's base currency for reporting, vendor credit limits in NetSuite (if used) are typically managed on a vendor-specific basis and might not strictly adhere to the primary currency, especially in multi-currency scenarios where individual transaction currencies are paramount. 

• E. Vendors can have up to five currencies. This is incorrect. There is no hard-coded limit of five currencies that can be assigned to a single vendor record in NetSuite. Businesses can assign as many active currencies to a vendor as their operational needs dictate, limited only by the total number of active currencies configured in your NetSuite account.

In summary, NetSuite requires pre-adding currencies to vendor records for transactional use and mandates the closure of all open transactions before a currency can be removed, ensuring robust multi-currency financial management.

Question 10:

Which feature in NetSuite allows you to automate the creation of recurring journal entries, such as monthly depreciation or accruals?

A. Scheduled Reports
B. Memorized Transactions
C. Saved Searches
D. Amortization Schedules

Correct Answer: B

Explanation:

In NetSuite, Memorized Transactions are a critical feature designed to streamline and automate recurring financial entries, such as monthly depreciation, accruals, or rent expense. When a company performs the same journal entry at regular intervals, creating it manually each period can lead to inefficiencies and errors. To mitigate this, NetSuite allows users to create a memorized transaction template, which includes all the details of the journal entry—accounts, amounts, classifications, and memo—and then set it to recur on a defined schedule.

For example, suppose a company needs to post a $1,000 rent expense every month. By using a memorized transaction, NetSuite can automatically post this entry on the 1st of each month, saving time and ensuring consistency.

This differs from an amortization schedule (Option D), which is used for managing prepaid expenses and deferred revenue, where expenses or income are recognized gradually over time. While it also supports automation, it's more specialized and tied to items and billing, not general journal entries.

Scheduled Reports (Option A) are used for reporting automation, not journal entries, while Saved Searches (Option C) provide dynamic data queries and are useful for reporting or identifying specific records but do not perform transaction automation.

NetSuite’s financial automation capabilities are essential for organizations that want to reduce manual entry, improve financial accuracy, and ensure compliance with accounting policies. Understanding how to properly utilize features like Memorized Transactions is fundamental to passing the NetSuite Financial Certification exam and succeeding in a NetSuite administrator or accountant role.

Knowing when to use memorized transactions versus amortization schedules is also key, as the exam frequently tests your knowledge of choosing the right feature for specific financial scenarios.