Hi,
UK Ltd micro-entity here.
I work in CG and sometimes purchase snippets of code to deliver specific projects.
The useful life of such snippets is usually less than one year, and the price might be anything between 5 and 50 GBP.
For the last accounting period I have had only one such expense, worth about 50gbp.
In quickfile, I registered it as intangible asset, and because of the short lifespan I do not plan to calculate any depreciation on it.
However, upon checking my books, my accountant said that because the expense is so little, it’s better not to register it as intangible asset. They said that it is better to move it to the profit and loss item, as the amount is very small.
I am confused because in my admittedly limited understanding of accounting I always thought that software usually is recorded as intangible asset.
Is there anything that I am not considering?
Thank you very much for any pointers.
Hello @Amedeo_Beretta
The support team are not registered accountants and as such we are unable to answer your query on this occasion.
I would reccomend speaking to your accountant as the will be able to provide professional tailored advice on your query.
I will leave this thread open for now as there are some accountants on the forum who may wish to comment.
Not an accountant here either.
But I think you may have answered your own question. You say that you do not intend to depreciate the asset as it will be consumed within the year. Therefore, for it to be removed from being an asset it would need to be fully depreciated so that it no longer sits as an asset on the Balance Sheet.
Therefore, I think your accountant is suggesting putting it through as a Profit and Loss item so you don’t need to register it as an asset or then depreciate it at the end of the accounting period.
Not sure if that makes sense, but that is my understanding as a simple business user.
Software is not usually an asset, it would be treated as an expense even if it’s quite expensive. The exception would be if you were developing the software yourself (rather than buying off-the-shelf) for sale, or for use in-house.
In my working life we decided on a policy of “Less than £1,000 for something”
(eg printers, chairs) put straight into P&L.