Software purchase

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Deep Garg (Querist)
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14 April 2017 Dear Experts

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

ND (Expert)
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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

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Deep Garg

Deep Garg (Querist)
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14 April 2017 Thanks for the info Sir. Please also tell what is rate of depreciation on it

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