Which accounting expense account for a SaaS cloud software subscription?

A question for accountants: which expense account should we declare the software purchased by the company? While the answer was rather simple in the 1990s and 2000s, the advent of online solutions such as SaaS or cloud change the way these expenses are recorded.

Purchase, subscription, rental or maintenance, the use of software is not accounted for in the same way, depending on whether it is purchased with a computer, except for the PC or as part of a service contract that defines the length of time the online software will be available (mode SaaS ) or on the computer (Adobe Creative Cloud, for example).

These responses are based on the Compendium of Accounting Standards, dated 16 February 2017, by theANC (Accounting Standards Authority). The accounts indicated are those of the General Chart of Accounts (PC G), the bible of every accountant.

To simplify, the purchase of software is an asset while a cloud subscription is a charge.

Purchase of stand-alone software

Standalone software is defined as a software license that is independent of the hardware acquired by the company. For example, the purchase of a laptop computer and an antivirus license, sold in a box, for internal use ( on-premise ). In this case, it is necessary to record the purchase of the standalone software in the 205 account . And of course account 44562 ” TVA on fixed assets” if the company can recover the TVA .

Purchase of software with hardware

The acquisition of a software that is pre-installed with the machine and therefore cannot be separated from the hardware, is recorded as computer equipment in the account 2183 . The most common example is the Microsoft Windows operating system which is preinstalled in OEM by computer manufacturers ( Dell , Asus , Toshiba …).

Using cloud software or SaaS

The mode SaaS (to be distinguished from a platform IaaS or PaaS ) is not a purchase of an operating license. It is a question of a right to use software hosted on the publisher’s platform who remains the owner of the software in question (subscription Microsoft Office 365 Google Apps for Work G Suite, Dropbox Business …). This right of use is similar to a rental or the account 613 . A burden, since the company does not buy any goods.

Free open source software

Open source does not necessarily mean free, but when it does, there is nothing to enter into accounting. However, these software programs can be accompanied by training or paid options, expenses to be taken into account.