My company acquired a software that has a 3 year license and there are 3 payments - one at the beginning of each year. How should I account for that. I am thinking a prepaid expense when each payment is sent at the beginning of the year then each month a software expense and deduction from prepaid? thoughts?
USA Accounting for software license
- Thread starter David S
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Do you own the licence or is this just an annual fee? Who are the users of the financial statements? What is the dollar amount.
Assuming the amount in question is not material just expense the software expense as incurred. Keep it simple.
You can set up a long term payable and asset account and amortize the software for material amounts.
Assuming the amount in question is not material just expense the software expense as incurred. Keep it simple.
You can set up a long term payable and asset account and amortize the software for material amounts.
That's how I'd do it. And I'd do it all at the same time - so one journal can do the prepayment for the year and syphon each period over the year back to the P&L, and that's it sorted for the whole year rather than have to do an adjustment as each month comes around.