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Should development costs (assets) also be shown in the Income statement?

 
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techie

posts: 7

Jan 14, 2009 8:07 AM ET    Quote  Report Abuse
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My software startup is creating an application and the development costs were taken as assets on the balance sheet to be able to match future revenues against input costs. So the balance sheet now shows the Development costs as assets.


My doubt is, should the same development cost also be reflected in the Income Statement (Expense: Development charges paid and Income: Work in Progress of the same amount) or is this step not required?
techie1/14/2009 8:05 AM
MCrosby

posts: 7

Mar 14, 2009 10:56 PM ET    Quote  Report Abuse
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Until your software is fully developed, you record it on your balance sheet as work-in-progress.  Once the software is in-service, the total costs are reclassified to an intangible asset account.  Intangibles are then amortized over their estimated useful lives.  When you amortize the costs, you will post to Amortization Expenses, thus affecting the balance sheet.


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Michael W. Crosby, CPA
(832) 693-2711
http://www.michaelwcrosbycpa.com
passion09

posts: 18

Apr 08, 2009 6:57 AM ET    Quote  Report Abuse
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I completely agree to what Mcrosby has to say. Infact how can such an important entry be not listed? WIP plays a major role in your statements, which when converts into finished products have some value which would affect your Balance sheet. I am so glad, you put this doubt accross. It is always suggested to clarify your doubts than going wrong , right?
 
cheers!!


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Rebelpreneur
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