When it comes to accounting, there are two main types of assets: current and non-current. Current assets are those that can be easily converted into cash within one year or less, while non-current assets are typically held for longer periods of time. In this article, we will explore whether computer software falls under the category of current assets or not.
What is Computer Software?
Before we dive into the question at hand, let’s first define what we mean by computer software. Computer software refers to any set of instructions that tell a computer what to do.
It is intangible and cannot be touched or seen physically. Examples of computer software include operating systems like Windows or macOS, productivity software like Microsoft Office, and specialized applications like Photoshop.
Is Computer Software a Current Asset?
Now that we know what computer software is, let’s examine whether it is considered a current asset. The answer is: it depends.
If the computer software is purchased with the intention of being used for less than a year, then it would be considered a current asset. This means that it can be easily converted into cash within one year or less and therefore fits the definition of a current asset.
On the other hand, if the computer software is purchased with the intention of being used for more than one year, then it would be considered a non-current asset. This means that it cannot be easily converted into cash within one year or less and therefore does not fit the definition of a current asset.
Depreciation
It’s important to note that even if computer software is considered a current asset because it will be used for less than one year, it may still need to be depreciated over its useful life. Depreciation refers to the gradual decrease in value of an asset over time due to wear and tear or obsolescence.
Conclusion
In conclusion, whether computer software is considered a current asset or not depends on the intended use of the software. If it is purchased with the intention of being used for less than one year, then it would be considered a current asset. However, it may still need to be depreciated over its useful life.
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