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?
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Depreciation on software licences
Replies (2)
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.
since fees is to be paid annually the amount paid is to be recognised in that concerned year only
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