288 Information Technology - Software

Assets

Fixed

Synopsis

Account 288 is established to record the acquisition price or license cost of Information Technology computer Software purchased by the dealership and used in the automobile business.

Debits

Credits

  1. The Cost to acquire or license IT Software

 

  1. The final value of IT Software when removed from service or otherwise disposed

 

Example 1

Record the purchase of antivirus software for all of the personal computers at the dealership in the amount of $3,300.

Journal: Cash Disbursements and Purchase

Entry:

 

Debit

Credit

Account 288

IT – Software

$3,300

 

Account 300

Accounts Payable – Trade Creditors

 

$3,300

Comments

IT Software is typically acquired under a license from the Software supplier.  The acquisition cost is capitalized as a Fixed Asset while it used on a computer owned or operated by the dealership.  This applies to Software used on personal computers as well as larger network systems connecting various departments within the entire dealership.

Note:

ONLY ASSETS USED IN THE OPERATION OF THE DEALERSHIP BUSINESS SHOULD BE INCLUDED IN THESE ACCOUNTS.

 

Cost of assets should include additional items such as:

 

  1. Expenses incidental to securing title
  2. Installation and construction costs, including interest during construction
  3. Accessories and optional equipment
  4. Freight
  5. Sales Tax