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Software

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Shivani

Learner

1167 Points Posted on 07 August 2014

Dear Friends

when we purchase software, is it a fixed asset or intangible asset?

what is intangible asset - something we cant see touch?

we see software working - shouldnt it be a fixed asset.

if it is a fixed asset how will we calcualte depreciation on it.

some softwares have licenses like for 1 or 2 years after which we need to renew it.

please advise after taking above into account.

suppose a company buys a SAP software for Rs. 50 lakhs on 10th April.

what will be the entries with depreciation.

thanks

shivani

Replies (2)

Tribhuvan Aditya Singh

Student as well as Self-employed

3853 Points Posted on 07 August 2014

tangible and intangible are two diff clasifications of fixed assets. software is an intangible fixed asset and dep will be charged accordingly........ where a software license is for fixed period and cant be renewed then dep. to be charged over the life of software. but where software can be renewed by paying nominal fees, then dep. to be charged at rates prescribed and renewal fees to be capitalised.