If a firm buy a accounting software in 6000 rs. with one year validity and after one year its renewal charges is 1500 rs per year. Please tell should we considered it as an asset or indirect expense and if it is an asset can we claim depreciation on it. and how to treat its annual renewal charges. if possible please also tell it's journal entries from buying to renewal charges
14 April 2017
At the time of buying the software , it should be capitalized and subject to depreciation. Later on annual renewal charges should be debited to the expense account. The accounting entries will be as under:- At the time of buying the software Software account( An asset account) Dr To Bank. At the time of annual renewal charges Renewal charges ( an expense account) Dr To Bank
CAclubindia
