Hi,
When software licences are purchased and there cost of license is paid annually, do we treat this as an asset or as a revenue expenditure?
Sumathy Sundararajan (CA Job) (25 Points)
25 February 2014Hi,
When software licences are purchased and there cost of license is paid annually, do we treat this as an asset or as a revenue expenditure?
Krunal Jani
(Article Assistant)
(63 Points)
Replied 03 March 2014
software license is considered as an intangible asset, so cost will be considered as a capital expenditure and it will be amortised over its validity period.
If license is valid only for 1 year and you have to pay the renewal cost every year then amortise entire amount in a year. Or you can also debit the amount in Profit & Loss Account under Indirect Expenses - like computer Maintenence Exp. Either way, the effect will remain same but to debit in P&L A/c. looks better.
siva thunder
(article student)
(253 Points)
Replied 05 March 2014
since fees is to be paid annually the amount paid is to be recognised in that concerned year only
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