Capital expenditure

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a.irfan
a.irfan Registered Posts: 1
edited July 2015 in AAT Level 3 (Level 6 in Scotland)
I was just wondering whether software would come under capital expenditure? Because I know that the installation of a computer in the office is included with the actual price of the computer? But would you add the cost of the software on too ?

Many thanks

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  • CeeJaySix
    CeeJaySix Registered Posts: 645
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    It depends on the useful life of the software, and the license terms.

    A simple example:
    The new MS Office suite will probably be current for say 3 years. Therefore if paid upfront, it would be appropriate to capitalise and depreciate over three years (ignoring the possibility that the amount would be too small to bother capitalising anyway).

    However, MS now offer the facility to pay monthly or annual subscriptions rather than purchasing the software outright - in this case it wouldn't be capital as the useful life ends as soon as you stop paying it.

    Likewise, any software which has a useful life shorter than a year anyway would not be capital.

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