Accounting for Software Geeks pt 1.
Software developers are often stymied by the word "Captialization" of software. This and other accounting concepts inside.
When I first heard the phrase “Capitalize some software costs”, I kind of pretended I knew what it meant. Then I learned some accounting stuff in an MBA course that I'm going to share in this post. The main point is that Capitalization gives the company quite a few financial benefits.
Keep in mind that I'm not an accountant and I'm just sharing something I learned. This isn't financial advice or anything like that. You'll need to talk to an accountant or CPA if you need to put any of this into effect. It's just to give you a basic understanding of Capitalization.
Financial Reports
First, you'll need to understand a few financial reports that most companies are required to produce every year. These three reports are the Income Statement, the Cash Flow Statement, and the Balance Sheet. Public companies like Pepsi, Alphabet Inc., and Tesla are required to submit these quarterly and yearly. The annual version has to be audited (verified) by a professional CPA firm.
What's in these reports you ask? Glad you did!
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