Software

Code: 1232
👁 Views: 113

Account Information

Financial Statement Statement of Financial Position
Normal Balance Debit

Definition

Cost of software and computer systems used in operations

Common Journal Entries

Purchased accounting software

Dr. Software
Cr. Bank Account

Recorded software amortization

Dr. Amortization Expense
Cr. Accumulated Amortization Software

Internally developed software capitalized

Dr. Software
Cr. Development Costs

Written off obsolete software

Dr. Write-off Expense
Cr. Software

📐 IFRS vs US GAAP Accounting Treatment

IFRS IAS 38 Intangible Assets
US GAAP ASC 350 Intangibles - Goodwill and Other
⚠️ Key Difference Between IFRS and US GAAP

IFRS capitalises development costs earlier; GAAP delays until feasibility

❓ Frequently Asked Questions

Q: How are internally developed software costs treated?

A: Research phase expensed immediately. Development phase capitalized if specific criteria are met (e.g., technical feasibility, resource availability, ability to measure costs).

Q: What is the accounting difference between purchasing a ready-made software and developing it internally?

A: Purchased software is fully capitalized (purchase price + installation and customization costs). Internally developed software expenses research costs and capitalizes development costs.