Website and mobile application in accounting

We continue to answer questions related to online trading. In this article, we will address the following issues development and maintenance of websites and mobile applications in terms of accounting and taxation.

Website and mobile application development

Regardless of whether you paid for the creation of a website or a mobile application, the costs of their development are accounted for in the same way. Both the website and the application are subject to copyright.

For accounting purposes, a website or mobile application is considered intangible assets (hereinafter referred to as IA) if:

• they can be sold or utilized in a way that generates economic benefits;
• the company will be able to bring the website or application to a state where it can be sold or used;
• you can accurately calculate the costs of their creation.

If the copyrighted work is used only for advertising, the costs of its creation are recognized in accounting as sales expenses in the period in which such development is carried out. In this case, the website or application will not be considered intangible assets.

Considering that a website or mobile application directly affects the sale of your product, it is obvious that the criterion of economic benefit is met.

When a copyrighted object is placed on the balance sheet, it is recorded at its original cost.

Strangely enough, both the website and the mobile application are subject to amortization over their useful life after being registered. You determine the method of amortization and the term of use of your copyrighted work yourself.

After the website or application is developed, you need to register a domain name and pay for hosting to launch your project.
A domain name or domain is the "name" of a website. Do not confuse "site" and "domain." A website is a web page that is displayed on the Internet, and a website domain is its unique "address".

Hosting is a paid service. It includes the rental of server space and capacity. Companies that provide hosting are called hosting providers, and their task is to make sure that your website or application is available to your customers around the clock.

Tax authorities believe that domain and hosting costs should be included in the initial cost of a website or application.

Maintenance of a website or mobile application

The costs of updating a website or application, customizing them, eliminating inaccuracies, and other costs associated with maintaining the product in working order do not affect the main characteristics of the website or application. Therefore, such expenses should be written off in the period in which they are incurred. Such costs are included in sales expenses.

Website and mobile application in the accounting of sole proprietorship

For sole proprietorship that are subject to simplified taxation (single tax), the existence or development of a website and mobile application does not affect their accounting.

Sole proprietors on the general taxation system may include depreciation deductions in expenses, thereby reducing their income, but this is not mandatory, the sole proprietor decides this issue for himself.

In the next article, we will talk about the costs associated with online trading.