This is a difficult question to answer definitively because it depends on the type of license being discussed. Some licenses may be considered inventory, while others may be considered operating expenses. The best way to determine which category is correct for your business is to speak with your accountant or financial advisor.
Possible Expense Categories for Licenses
- Operating Expenses
Some licenses may be considered inventory if they are for products that will be resold. For example, if you have a license for a piece of software that you will include with every computer you sell, then the license cost would be considered part of the cost of goods sold (COGS).
Other licenses may be considered operating expenses, such as a license for using a certain type of software in your business. These types of licenses are typically recurring costs, and are often included in the category of general and administrative expenses (G&A).
Which Category is Correct for Your Business?
As mentioned above, the correct expense category for licenses depends on the type of license being discussed. The best way to determine which category is correct for your business is to speak with your accountant or financial advisor.