Software
Cost of software licences and systems bought for long-term use, on the Balance Sheet. Amortised over the licence life.
In detail
Software holds the cost of licences and systems bought for use over several years: an accounting package, a booking engine, a point-of-sale system or an ERP implementation. The cost includes the licence fee, customisation and installation needed to put it to use. It is amortised straight line over the licence life through Accumulated Amortisation, with the monthly charge going to Amortisation - Intangible Assets. A three-year licence at Rs 1,20,000 amortises at Rs 3,333 a month. Monthly or yearly subscriptions paid as you go are expenses, usually Communication or Miscellaneous Expenses, because you own nothing when you stop paying. The asset category Software (Intangible) in BRAccount is set up to post here.
Formula
Monthly amortisation = (Cost - Salvage value) / Licence life in months; Rs 1,20,000 / 36 = Rs 3,333.
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Software | Rs 1,20,000 | |
| Creditors (vendor) | Rs 1,20,000 |
How to record it in BRAccount
- 01Go to Stock > Item > New, tick Is Fixed Asset and choose Asset Category Software (Intangible).
- 02Go to Invoicing > Purchase Invoice > New for the vendor, add the licence at Rs 1,20,000 and Submit.
- 03Open the Asset from Assets > Asset, set the available-for-use date and a 36-month life, then Submit.
- 04Open Assets > Asset Depreciation Schedule; each month shows Rs 3,333.
- 05The month-end Depreciation Entry debits Amortisation - Intangible Assets and credits Accumulated Amortisation.
When to use it
Post through an Asset record linked to the Purchase Invoice. Monthly subscriptions are expenses, not assets.
Example from the demo books
Dr Software Rs 1,20,000, Cr Creditors Rs 1,20,000 for a three-year booking system licence for the travel desk.