Asset category: Software (Intangible)
Purchased software licences and similar intangibles, amortised straight line.
In detail
Software (Intangible) holds purchased licences, websites and booking systems that have no physical form but give value over several years. Cost posts to Software - YFF under Intangible Assets, and the straight line charge is called amortisation: it debits Amortisation - Intangible Assets - YFF and credits Accumulated Amortisation - YFF, the intangible version of accumulated depreciation. A subscription paid monthly is an expense, not an intangible; only a licence paid up front for a multi year term belongs here. Over three years a Rs 1,20,000 licence costs Rs 3,333.33 a month. Writing the whole licence off in year one understates that year's profit.
Formula
Monthly amortisation = Licence cost / Licence term in months; Rs 1,20,000 / 36 = Rs 3,333.33
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Amortisation - Intangible Assets - YFF | Rs 3,333.33 | |
| Accumulated Amortisation - YFF | Rs 3,333.33 |
How to record it in BRAccount
- 01Go to Assets > Asset Category and open Software (Intangible); confirm the amortisation accounts.
- 02Go to Buying > Purchase Invoice > New with the licence item marked Is Fixed Asset.
- 03Submit, then open the draft Asset and set the useful life to the licence term in months.
- 04Submit the Asset. The monthly entry below posts from its schedule.
When to use it
Pick it on multi year software purchases rather than expensing them.
Example from the demo books
A Rs 1,20,000 booking system licence over 3 years.