068 Information Technology Services

Expenses

Semi-Fixed

Synopsis

The cost of computer services is recorded in Account 068, Information Technology Services. Primarily, this includes the cost of hardware leases, software licensing and service fees from the dealerships computer service provider. Professional tax and accounting advice should be obtained regarding which Information Technology Services can be expensed to this account and which should be capitalized as Fixed Assets (and depreciated accordingly to Account 091, Depreciation - Equipment).

Debits

Credits

Cost of outside data processing services including:

a. Hardware leases

b. Software licenses

c. Service contract fees

The cost of computer services, provided by software help desks and outside computer companies (service bureaus), such as off-site data storage, specialized computer programming and other computer related services

Example 1

Record the monthly lease payment of $7,836 for the computer system. The expense is distributed to each department as shown in the example below.

Journal: Purchase

Entry:		Debit	Credit
Account 068-01	Information Technology Services – New Vehicles Department	$1,646
Account 068-02	Information Technology Services – Used Vehicles Department	$1,175
Account 068-03	Information Technology Services – Lease & Rental Department	$157
Account 068-05	Information Technology Services – Mechanical Department	$1,489
Account 068-06	Information Technology Services – Body Shop Department	$784
Account 068-07	Information Technology Services – Parts & Accessories Department	$1,410
Account 068-09	Information Technology Services – General & Administrative	$1,175
Account 300	Accounts Payable Trade Creditors		$7,836

Example 2

Record the monthly support of the computer system in the amount of $13,227. The expense is distributed to each department as shown in the example below.

Journal: Purchase

Entry:		Debit	Credit
Account 068-01	Information Technology Services – New Vehicles Department	$2,777
Account 068-02	Information Technology Services – Used Vehicles Department	$1,984
Account 068-03	Information Technology Services – Lease & Rental Department	$265
Account 068-05	Information Technology Services – Mechanical Department	$2,513
Account 068-06	Information Technology Services – Body Shop Department	$1,323
Account 068-07	Information Technology Services – Parts & Accessories Department	$2,381
Account 068-09	Information Technology Services – General & Administrative	$1,984
Account 300	Accounts Payable Trade Creditors		$13,227

Distribution of Expenses

	Departmental Distribution
068 Information Technology Services	New Veh.	Used Veh.	Lease & Rental	Mechanical	Body Shop	Parts & Access.	Gen & Admin.
	01	02	03	05	06	07	09
General accounting system							Total expense
Lease and rental accounting system			Total expense
Parts and accessories inventory system						Total expense
Payroll system	Employees	Employees	Employees	Employees	Employees	Employees	Employees
Parts ordering system						Total expense
Warranty claim system				Usage	Usage	Usage
Accounts receivable system							Total expense

Comments

Computer costs should be distributed to each Department as indicated in the table above. The reason for recommending professional tax and accounting advice in this area is due to the fact that some computer hardware and software must be capitalized and depreciated. A professional advisor is in the best position to counsel the dealership about these matters.

Departmental Distribution